How is the employer’s contribution to the EPF determined?

• A. Based on employee’s gross monthly salary
• B. 12% of the employee's basic salary and dearness allowance
• C. Equal to the employee's contribution
• D. Fixed at 10% for all employers

Answer: (B)

The employer's contribution to the Employees' Provident Fund (EPF) is calculated as a percentage of the employee's basic salary and dearness allowance, which is set at 12% in most cases. This method ensures that contributions are aligned with the employee's earnings and provides a more substantial savings fund for retirement as it takes into account the core components of an employee's compensation. The emphasis on basic salary and dearness allowance is important since these are stable components of compensation that reflect the employee's primary earnings framework, ensuring consistency and predictability in contribution amounts.