Employees' Pension Scheme (EPS)

The Employees’ Pension Scheme, 2026 (EPS) is the statutory pension component carved out of India’s Employees’ Provident Fund framework. It replaced the Employees’ Pension Scheme, 1995 (EPS-95) and the Employees’ Family Pension Scheme, 1971 on 29 June 2026 under the Code on Social Security, 2020, and members of the 1995 scheme carried over. While the EPF builds a defined-contribution retirement corpus, EPS is a defined-benefit pension paid monthly for life from age 58. Every employer contribution to EPF is silently split, a portion sits in the member’s EPF account, but 8.33% (capped at ₹25,000 wages) is diverted to the EPS pool managed by the Employees’ Provident Fund Organisation (EPFO). For most Indian salaried employees, EPS is the only mandatory pension they will ever have.

How EPS Works

EPS is funded entirely by the employer. There is no separate employee contribution: the employee’s 12% PF deduction goes wholly to EPF. From the employer’s matching 12%, the EPFO redirects 8.33% of “pensionable wages” into the EPS pension pool, with the remaining 3.67% landing in the member’s EPF account.

The catch is the wage ceiling. Pensionable wages are capped at ₹25,000 per month since 17 September 2026, up from ₹15,000, so the maximum monthly EPS contribution per employee is ₹25,000 × 8.33% = ₹2,083. Anything above that ceiling, for an employee with ₹50,000 basic, the additional 8.33% on the excess ₹25,000, flows back into EPF instead of into EPS.

Component	Calculation	Capped at
Employer EPS contribution	8.33% × pensionable wages	₹2,083/month
Employer EPF contribution	12% × wages − EPS amount	Uncapped on actual wages
Government contribution	1.16% on first ₹15,000 (pre-Sep 2014 members only)	Nil for new members

This wage-ceiling architecture is why EPS pensions feel modest relative to total PF contributions on senior salaries.

Eligibility

A member becomes eligible for monthly pension only after completing 10 years of pensionable service. Service across multiple employers under the same UAN counts toward this threshold, provided the EPS portion was transferred (not withdrawn) on each job change. Members with less than 10 years of service receive a one-time withdrawal benefit via Form 10C, calculated on a defined slab based on years of service and last drawn pensionable salary.

Members joining EPS for the first time on or after 1 September 2014 are restricted to pension on the wage ceiling unless they exercised a higher-pension option (see below).

Pension Calculation Formula

For members eligible for monthly pension (the dedicated EPS pension formula entry walks through every variable):

Monthly Pension = (Pensionable Salary × Pensionable Service) ÷ 70

Where:

• Pensionable Salary is the average of the last 60 months of pensionable wages, capped at the wage ceiling (or actual wages if a higher pension option was exercised). The ceiling is ₹25,000 for wages from 17 September 2026 and ₹15,000 for earlier months.
• Pensionable Service is the number of full years of EPS contribution, with weightage of 2 additional years for service over 20 years.

Worked example for a member retiring at 58 with 30 years of service, whose last 60 months were all at the ₹15,000 ceiling:

Monthly Pension = (₹15,000 × 30) ÷ 70 = ₹6,428/month

Even on full service, the standard EPS ceiling produces a modest pension. This is precisely the gap that the higher-pension option attempts to address.

Higher Pension Option

The Supreme Court’s November 2022 order in EPFO v. Sunil Kumar B. reopened a long-running dispute over whether members can contribute EPS on actual salary rather than on the ₹15,000 cap. The court directed the EPFO to allow eligible members and pensioners to opt for higher pension by:

1. Jointly applying with the employer
2. Paying the differential employer EPS contribution (8.33% on actual salary) since the date of joining or 1 September 2014, with interest
3. Recalculating pension on actual average salary

The application window has been extended multiple times. The calculation is genuinely complex, it involves recalibrating decades of contributions, redirecting differential amounts from EPF to EPS, and applying interest at EPFO-declared rates each year. Many employers and members have found the post-opt-in math reduces EPF balance by more than expected, so the option is not universally beneficial.

Types of Pension

EPS provides five categories of pension, covering the member’s full life cycle:

• Member Pension: Monthly pension to the member from age 58 (early option from 50 with reduction).
• Disablement Pension: Pension on permanent total disability during service, regardless of length of service.
• Widow / Widower Pension: Lifelong pension to the spouse on death of the member, equal to 50% of member pension subject to a minimum.
• Children Pension: 25% of widow pension to each child up to two children, payable until age 25.
• Orphan Pension: 75% of widow pension to each child up to two children if both parents die.

Minimum Pension

The minimum monthly pension under EPS is ₹1,000, set in 2014 and unchanged since. Repeated proposals to raise the minimum to ₹3,000 or ₹7,500 have been debated but not implemented. For members with very low pensionable salary or short pensionable service, this floor is the operative pension.

Difference from EPF

EPF and EPS share contributions, members and the EPFO administrator, but they are structurally different products:

Dimension	EPF	EPS
Type	Defined contribution (savings)	Defined benefit (pension)
Employee contribution	12% of basic+DA	None
Employer contribution	~3.67% (post EPS diversion)	8.33% capped at ₹25,000 wages
Payout	Lump sum on retirement / job loss	Monthly pension from 58
Inheritability	Full balance to nominee	Survivor pension formula
Tax	Lump sum tax-free if 5+ years service	Pension taxable as salary income

In practice, EPF is the wealth-building leg and EPS is the longevity-protection leg of the same monthly contribution. EPS is one of three EPFO schemes alongside EPF and EDLI.

Recent Reforms

The most consequential recent shift was the Supreme Court’s 2022 higher-pension opening, which has resulted in meaningful corpus movement from EPF to EPS for opted-in members. The wage ceiling rose from ₹15,000 to ₹25,000 on 17 September 2026, the first revision since 2014. Proposals to liberalise the minimum pension are still pending. The EDLI maximum has been increased to ₹7 lakh, and EPS pensioners can now receive their pension into any bank account through the Centralised Pension Payment System without dispensary visits. See the PF and ESIC India guide for the latest contribution mechanics.

How Omnivoo Handles EPS

Omnivoo splits each employer PF contribution correctly between EPS and EPF every month, 8.33% capped at ₹25,000 wages into EPS, the remainder into EPF, and reports both legs accurately on the monthly ECR. For new joiners, the platform validates whether they are pre- or post-September-2014 EPS members and applies the right wage cap. When an employee retires or transfers, Omnivoo coordinates the EPS pension claim (Form 10D) or the withdrawal benefit (Form 10C) directly with the regional EPFO office, and monitors any pending higher-pension elections that the member chose to make. Foreign employers see a single line item, pension contribution, while the platform handles every regulatory nuance behind it.