Guide · Payroll compliance
PF and ESIC calculation in India — rates, ceilings and worked examples (2026)
Provident Fund is 12% of an employee's basic wages plus DA from the employee and 12% from the employer, of which 8.33% (on wages up to the ceiling) goes to the pension scheme. ESIC is 0.75% of gross wages from the employee and 3.25% from the employer, for employees earning up to ₹21,000 a month (₹25,000 for persons with disability). The EPFO wage ceiling was raised from ₹15,000 to ₹25,000 a month — approved by the Union Cabinet on 16 September 2026 and notified on 17 September 2026.
Automate PF & ESIC in payroll · Compliance service
PF: who contributes what
PF wages are basic pay plus dearness allowance (and retaining allowance, if any). Under the Code on Social Security's definition of wages, in force since 21 November 2025, excluded allowances beyond 50% of total remuneration are added back — so structures with a very low basic may need a second look.
| Component | Paid by | Rate |
|---|---|---|
| Employees' Provident Fund (EPF) | Employee | 12% |
| Employees' Pension Scheme (EPS) | Employer | 8.33% of wages up to the pension ceiling |
| EPF (employer's balance) | Employer | 12% minus the EPS amount |
| EDLI (insurance) | Employer | 0.5% |
| EPF administrative charges | Employer | 0.5% (EDLI administrative charges waived) |
The wage ceiling — and the 2026 change
Mandatory PF coverage and the pension calculation used a wage ceiling of ₹15,000 per month from September 2014. On 16 September 2026 the Union Cabinet approved raising the EPFO wage ceiling to ₹25,000 per month, expected to bring over 51 lakh more employees under mandatory coverage, and the notification (S.O. 5109(E)) was issued on 17 September 2026. Published reports say it applies from publication to EPF, EPS and EDLI.
Before changing payroll, read the notification text for its effective date and for how EPS pensionable wages and existing members are treated, then update the PF wage ceiling in your payroll settings from that date. The examples below show both ceilings.
Example 1 — PF wages below the ceiling
Basic + DA = ₹14,000 per month.
| Line | Calculation | Amount |
|---|---|---|
| Employee PF | 12% × 14,000 | ₹1,680 |
| Employer EPS | 8.33% × 14,000 | ₹1,166 |
| Employer EPF | 1,680 − 1,166 | ₹514 |
| Employer EDLI | 0.5% × 14,000 | ₹70 |
| EPF admin charges | 0.5% × 14,000 | ₹70 |
Example 2 — PF wages of ₹20,000: old and new ceiling
Basic + DA = ₹20,000 per month. Under the ₹15,000 ceiling (before 17 September 2026) many employers restricted contributions to the ceiling while others contributed on full wages. Under the ₹25,000 ceiling, ₹20,000 is fully inside the ceiling.
| Line | ₹15,000 ceiling, restricted | ₹25,000 ceiling (if EPS follows the same ceiling — check the notification) |
|---|---|---|
| Employee PF (12%) | ₹1,800 | ₹2,400 |
| Employer EPS (8.33%, capped at the ceiling) | ₹1,250 | ₹1,666 |
| Employer EPF (balance of 12%) | ₹550 | ₹734 |
ESIC: rates and coverage
- Employee: 0.75% of gross wages. Employer: 3.25% of gross wages.
- Coverage: employees whose gross wages are up to ₹21,000 per month (₹25,000 for persons with disability).
- Contribution periods: April–September and October–March. An employee covered at the start of a period stays covered until it ends, even if wages rise above the ceiling mid-period.
- A revision of the ESIC ceiling has been discussed publicly but, as of this review, no change has been notified. Watch esic.gov.in.
Example 3 — ESIC
| Line | Calculation | Amount |
|---|---|---|
| Employee ESIC | 0.75% × 18,000 | ₹135 |
| Employer ESIC | 3.25% × 18,000 | ₹585 |
Common mistakes
- Pro-rating the ceiling for loss-of-pay days. PF is 12% of the lower of earned PF wages and the ceiling — the ceiling itself is not reduced.
- Calculating EPS on full wages for an employee whose wages exceed the pension ceiling.
- Dropping an employee from ESIC mid-period because a raise took them above ₹21,000.
- Keeping basic artificially low; under the new wage definition, excess allowances count back into wages.
How JobMyIndia calculates it
JobMyIndia payroll computes PF and ESIC per employee each month from earned wages, applies EPS membership rules (for example, members who joined after 1 September 2014 with wages above the ceiling), uses the PF wage ceiling configured in payroll settings, and generates the EPF ECR file and ESIC contribution data.
Frequently asked questions
Is PF calculated on gross salary?
No. PF is calculated on PF wages — basic pay plus DA — not on gross. Under the new wage definition, allowances above 50% of total remuneration are added back into wages.
Does the ₹25,000 EPF ceiling apply from September 2026 payroll?
The Cabinet approved it on 16 September 2026 and it was notified on 17 September 2026 (S.O. 5109(E)). Apply it from the effective date in the notification, and confirm how EPS pensionable wages and existing members are treated.
What is the employer's total PF cost?
12% contribution (EPF + EPS) plus 0.5% EDLI and 0.5% administrative charges — about 13% of PF wages.