Employee Provident Fund & Trust Fund (EPF & ETF) – What you need to know

Managing the Employee Provident Fund and Employee Trust Fund (EPF and ETF) can be challenging for business owners in Sri Lanka. These contributions are vital for employee security, and it’s important to understand the rules, registration, and payment steps to stay compliant. This guide will cover everything you need to know about EPF and ETF Sri Lanka, from registration to making payments.

Employee Provident Fund (EPF) Sri Lanka

Employees Provident Fund (EPF) was established by Act No. 15 of 1958. The contributions are made to this fund on a regular basis. Its purpose is to help employees to save a fraction of salary every month. The fund can be used in the event that the employee is no longer fit to work or at retirement.

Employers have to remit every month to the Central Bank, an amount equal to 20% of the employee’s total earnings to the Fund. The Employee’s contribution is 8% and the Employer has to contribute an amount equal to 12% of the employee’s total earnings. Contributions should be paid on the total earnings of the employee. Total earning includes salary, wages or fees, cost of living allowance, holiday Payments, food allowance, similar allowances, and the cash value of food provided by the employer. But it excludes Overtime payments, Reimbursable Traveling expenses, and Incentive payments/ Bonus Payments.

An employee is entitled to membership in the EPF from the first day of his employment. It is the Employer’s responsibility to enroll the employee in the EPF The nature of the job is irrelevant. All employees should be registered whether they are permanent, temporary, casual, shift workers, apprentice. Employees working on piece rate, contract basis, commission basis, work performed basis or any manner what so ever are eligible for membership.

An employer of even one employee is legally bound to pay contributions to the Fund starting from the first day of employment. All employees should be registered by submitting the relevant registration form called “A”, “B”, and “H”, whether they are permanent, temporary, apprentices, casual or shift workers.

The following steps are required to get registration with EPF.

1. Register the Company: Upon recruiting the first employee, and before the end of 14 days, the employer must register the company with the Labour Department.
2. Submit Documents: The employer should submit the required documents along with the duly completed “Form D” to the Labour Office nearest to their business premises.
3. Receive EPF Registration Certificate: The Commissioner of Labour will issue the EPF Registration Certificate.

Employee Trust Fund (ETF) Sri Lanka

An employee is entitled to ETF from the first day of his/her employment irrespective of whether he/she is permanent, temporary, apprentice, casual, or a shift worker. Similarly, employees working on a piece rate, contract basis, and work performed basis in any manner are also eligible for membership. Employer has to contribute an amount equal to 3% of the employee’s total earnings.

Steps to obtain Employee Trust Fund registration

The ETF does not have a separate registration procedure for making contributions. ETF contributions should also be made through the EPF registration number. For the purpose of ETF payments, Employers having over 15 employees should complete Remittance Advice R1 and employers having less than 15 employees should complete Remittance Advice R4 and make the payments accordingly.

Documents to be maintained by the employer

i. Payroll reports and information related to payroll, payment information,
ii. Attendance information
iii. Proof of payment of benefits (Central bank receipts, Cheque numbers, Registered post receipts, etc.)
iv. Copies of the EPF and ETF monthly remittance forms

Steps to be followed to EPF make EPF Payments

Important Points to Consider

Assign Membership Numbers: Assign EPF/ETF membership numbers to employees in numerical order.

1. Calculate EPF Contributions: Determine the EPF contribution for each employee, which includes 8% from the employee and 12% from the employer, based on their total earnings for the month.
2. Calculate ETF Contributions: Calculate the ETF contribution for each employee, which is 3% from the employer, based on their total earnings for the month.
3. Submit Forms and Payment: Complete and submit the “C” form for EPF and the “R4 or R1” form for ETF along with the monthly contribution payment.

• Update Forms for New Employees:
  • When a new employee (member) is recruited, their details must be included in the “Form C” and “Form R4” or “R1” for the relevant month.
• Submission of Relevant Forms:
  • Contributions submitted without the relevant forms will not be credited to the employee’s accounts, leading to complications and potential penalties.
• Timely Submission of Contributions:
  • Monthly contributions must reach EPF and ETF before the end of the last working day of the following month. Delays will result in surcharges imposed on the employer.
• Surcharges for Late Payments:
  • 1 day – 10 days: 5%
  • 10 days – 1 month: 15%
  • 1 month – 3 months: 20%
  • 3 months – 6 months: 30%
  • 6 months – 12 months: 40%
  • More than 12 months: 50%

Get Free Consultation

Even though everything is laid out here, you may still need help setting up and managing payroll, including EPF and ETF contributions for your staff, this is something we do over at Simplebooks.

Feel free to contact us, one of our team members will get back to your shortly.

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