If you run a shop, pharmacy or restaurant in Sri Lanka and pay staff, you deal with two contributions every month: EPF (Employees' Provident Fund) and ETF (Employees' Trust Fund). They are easy to mix up, so here is how they work.
This is general information to help you understand the basics. It is not legal or tax advice, so confirm current rules and deadlines with the Department of Labour, the EPF/ETF authorities or your accountant.
The rates
| Contribution | Paid by | Rate |
|---|---|---|
| EPF, employee share | Deducted from the employee's salary | 8% |
| EPF, employer share | The employer, on top of salary | 12% |
| ETF | The employer, on top of salary | 3% |
In total the employer pays 15% (12% EPF + 3% ETF) on top of the salary, and 8% is deducted from the employee's pay.
A worked example
Say a cashier's total earnings for the month are LKR 60,000.
- Employee EPF (8%): LKR 60,000 × 0.08 = LKR 4,800. This is deducted from the cashier's pay.
- Employer EPF (12%): LKR 60,000 × 0.12 = LKR 7,200. You pay this on top.
- Employer ETF (3%): LKR 60,000 × 0.03 = LKR 1,800. You pay this on top.
The cashier's take-home before tax is LKR 60,000 − 4,800 = LKR 55,200. Your total cost for this employee is LKR 60,000 + 7,200 + 1,800 = LKR 69,000. The EPF remittance is LKR 4,800 + 7,200 = LKR 12,000, and the ETF remittance is LKR 1,800.
What counts as “total earnings”?
EPF and ETF are calculated on the employee's total earnings as defined in the EPF Act, which generally includes basic salary and certain regular allowances. Ask your accountant which of your allowances are included, because getting this wrong is a common reason for under-payment.
Where mistakes usually happen
- Calculating on basic salary only when allowances should be included.
- Forgetting part-time or casual staff who are still covered.
- Late remittance. Late payments can attract surcharges, so set a monthly reminder.
- Mixing up the two funds. EPF has an employee share; ETF does not.
How Zyrace payroll helps
Zyrace Cloud POS includes payroll that calculates EPF (8% employee, 12% employer), ETF (3%) and progressive PAYE tax for each employee, then keeps a record for every payroll run. If you already use Zyrace for billing and stock, your payroll sits in the same system as your accounts.
Book a free demo and we will show you payroll with your own staff structure.