Employee Provident Fund

A provident fund is created with a purpose of providing financial security and stability to elderly people. Generally one contributes in these funds when one starts as employee, the contributions are made on a regular basis (monthly in most cases). It’s purpose is to help employees save a fraction of their salary every month, to be used in an event that the employee is temporarily or no longer fit to work or at retirement. The investments made by a number of people / employees are pooled together and invested by a trust.

Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation (EPFO) of India. An establishment with 20 or more workers working in any one of the 180+ industries ( given here) should register with EPFO. Typically 12% of the Basic, DA, and cash value of food allowances has to be contributed to the EPF account. EPFO is a statutory body of the Indian Government under Labour and Employment Ministry. It is one of the largest social security organisations in the world in terms of members and volume of financial transactions undertaken.

PF is a short form for Provident Fund. This is a statutory deduction and is applicable to most employees (with some exceptions). The Government of India has specified the rules for this. According to PF rules, an employee is supposed to contribute a certain percentage of basic salary as PF. This is normally called as PF or Employee PF. Just like an employee, the employer also makes a contribution toward PF in the employee’s name. This is called as Employer PF.

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