Employee Pension Scheme (EPS)
11 minutes read

Employee Pension Scheme (EPS)

In this blog, we will discuss the following points of employee pension scheme or EPS.



What is Employee Pension Scheme or EPS?

EPS is a social security scheme that offers a monthly pension to employees working in the organized sector after their retirement. The scheme is administered by the Employees’ Provident Fund Organisation (EPFO) and is sponsored by the Indian Government.

Employers’ Responsibilities

The following are the responsibilities of the employer –

  • For salaried employees, the employer will make contributions towards EPS in addition to those made towards EPF.
  • Each month, the employer must pay a portion of the Contribution, which is equal to 8.33% of the employee’s basic pay and dearness or 8.33% of Rs 15000 whichever is the least, to the employee pension fund. This payment must be made within 15 days of the end of each month.
  • The principal employer must make contributions for all employees working directly or under a contract.
  • If an employee becomes totally or permanently disabled during their service. In that case, the employer must deposit funds into the basic EPS account for at least one month, making them eligible for a pension.


Types of Pensions under the Employees’ Pension Scheme

There are different types of pensions under the Employees’ Pension Scheme (EPS), which is a social security scheme for Indian citizens who are members of the Employees’ Provident Fund Organisation (EPFO).

  • Widow Pension

Under the Widow pension, the widow of a member is eligible to receive a pension. The pension amount will be paid until the widow passes away or gets remarried. If there are multiple widows, the eldest widow will receive the pension amount. The amount paid will be 50% of the Member’s Pension per month.

  • Orphan Pension

If a member passes away and has no surviving spouse, their children will be entitled to a monthly orphan pension that is 75% of the monthly widow pension till they attain the age of 25 years.

  • Child Pension

If a family member passes away, their surviving children are entitled to receive a monthly Widow Pension and a Child Pension. The Child Pension payments will continue until the child reaches the age of 25. The amount paid will be 25% of the Widow’s Pension,

  • Reduced Pension

A member of the Employees’ Provident Fund Organisation (EPFO) is eligible for an early pension withdrawal if they have completed a minimum of 10 years of service and are between the ages of 50 and 58 years. However, if the age is less than 58 years, the pension amount is reduced by 4% for every year until the age of 58.

  1. Dependent Parent Pension: Pension can be claimed by the dependent parented of the deceases member where the employee dies without a family (spouse or children) or a nominee.
  2. Nominee Pension: Nominee as nominated by the employee can received the pension after the employee death in case there are no other direct family members (spouse, children or dependent parents)


Difference Between EPF and EPS

Following are the differences between EPS and EPS –





Both the employer and employee contribute a certain percentage of the employee’s basic salary and dearness allowance (DA) to the EPF account. As per latest update on 2023, the contribution rate for both parties is12% of the basic salary and DA.Only the employer contributes 8.33% of the employee’s basic salary and DA to the EPS account, subject to a maximum limit, while the employee does not make any direct contribution.

Purpose & Benefits

EPF is a savings program that enables employers and employees to contribute to a savings account that earns interest over time, providing financial security in retirement. Adhering to EPF rules helps employers avoid legal issues and penalties while showing commitment to the financial well-being of their workforce.This is a retirement pension scheme enabling the employer to be commitment towards employee welfare, provides financial security to retirees, and offers tax benefits. EPS is a valuable employee benefit that attracts and retains skilled workers and fosters employee loyalty.

Contribution limit

There is no maximum limit on the EPF contribution. However, the contribution is calculated based on a percentage of the employee’s basic salary and DA.The employer’s contribution to the EPS is capped at 8.33% of Rs. 15,000, or Rs. 1,250 monthly, whichever is the least


When employees change jobs, they can transfer their EPF account to the new employer by submitting Form 13. The new employer verifies the details and submits the form to EPFO, which transfers the funds from the previous employer’s account to the new one. The transferred funds continue to accumulate, and the previous service period counts towards the employee’s total years of service.EPS benefits are alsoportable, i.e., they can be transferred to a new employer. Benefits are calculated based on pensionable service and salary with the current employer. When an employee retires, they can withdraw the EPS amount (if the service period is less than 10 years) or receive a monthly pension based on pensionable service and salary history.


Penalty on Default in EPS Contribution by Employers

If an employer fails to pay their contribution towards their employee’s pension scheme. The Central Provident Fund Commissioner or a designated officer is authorized to impose penalties at the following rates –

– For a default period of less than 2 months, the penalty rate of interest is 5%.

– For a default period of 2 to 4 months, the penalty rate of interest is 10%.

– A default period of 4 to 6 months, the penalty rate of interest is 15%.

– The default period of over 6 months, and the penalty rate of interest is 25%.

This is the end of our discussion on the Employee Pension Scheme. Please mention below the comment box your other questions and opinions on this topic.


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