What is the Employees' Pension Scheme?

The Employees' Pension Scheme, 1995 is a pension scheme run by EPFO for employees covered by the Employees' Provident Fund. It is funded by 8.33% of wages from the employer's contribution and 1.16% from the Central Government, both on wages up to ₹15,000 a month.

How many years of service are needed for an EPS pension?

A member needs at least 10 years of eligible service. The regular pension starts at age 58, and a reduced pension can be taken from age 50 subject to conditions. With less than 10 years, the member can take a withdrawal benefit or a scheme certificate instead.

Does the employee contribute to EPS?

No. The employee's own provident fund contribution goes entirely to EPF. EPS is funded from the employer's side, with 8.33% of wages diverted to the pension fund, plus a 1.16% contribution from the Central Government, both calculated on wages up to the ₹15,000 ceiling.

What Is Employees' Pension Scheme in India?

Definition

The Employees' Pension Scheme (EPS) is India's pension scheme for members of the Employees' Provident Fund, run by EPFO under the Employees' Pension Scheme, 1995. Employers put 8.33% of wages, up to the wage ceiling, into it, and members with at least 10 years of service receive a monthly pension.

How EPS works

EPS runs alongside the Employees' Provident Fund. Out of the employer's contribution for an EPF member, 8.33% of wages goes into the pension fund, and the Central Government adds 1.16%, both calculated on wages up to ₹15,000 a month. The employee does not contribute to EPS directly. Membership is compulsory for eligible employees, generally those with EPF membership, and continues until age 58, death or settlement of the pension.

EPFO describes eligibility as employees earning up to ₹15,000 a month who contribute to EPF. If you hire someone whose wages are above that ceiling when they join, check EPFO's rules on whether EPS applies before you set up their contributions.

Pension contributions start once someone joins. Before that point, springhire's AI resume screening ranks every applicant against your job description.

When members receive a pension

A member needs at least 10 years of eligible service for a monthly pension. The regular pension starts at 58, and a reduced pension can be drawn from 50, subject to conditions. Members who leave with less than 10 years of service can choose a withdrawal benefit or a scheme certificate, which carries their pension account across when they change employer.

EPS also pays family pensions to a widow or widower, children and orphans, a disablement pension for permanent disability without the 10-year requirement, and in some cases a pension to nominees or dependent parents. Members nominate family members on Form 2, the nomination form prescribed under the Employees' Provident Fund. The pension cannot be surrendered for a lump sum, and it is payable anywhere in India.

How to calculate EPS pension

EPFO's formula is: monthly pension equals pensionable salary multiplied by pensionable service, divided by 70. Pensionable salary is the average of the last 60 months' pay, within the wage ceiling. A member with a pensionable salary of ₹15,000 and 35 years of pensionable service gets ₹15,000 times 35, divided by 70, which is ₹7,500 a month. The scheme also includes a minimum pension guarantee, with the amount set by the government.

What employers need to get right

Employers remit EPF and EPS together each month through EPFO's portal, so the main task is splitting the employer share correctly between the provident fund and the pension fund. Frequent errors are calculating the pension share on the wrong wage base, getting the split wrong for new joiners, and not updating exit dates, which delays withdrawal benefits and scheme certificates for people who leave.