EPF and ETF Compliance for Pvt Ltd Companies in Sri Lanka

Keywords: EPF ETF Sri Lanka, employee contributions, employer compliance, Pvt Ltd company, Sri Lanka labor law

If you plan to hire employees in Sri Lanka, it’s essential to understand Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) compliance. These are mandatory employee benefits under Sri Lankan law, and failure to comply can result in penalties, fines, or even legal action.

This blog provides a complete guide on EPF and ETF compliance for Private Limited (Pvt Ltd) companies, including rates, calculations, filing, and best practices.

What is EPF and ETF?

Employees’ Provident Fund (EPF):

• A retirement savings scheme for employees
• Contributions are made by both the employee and employer
• Administered by the Central Bank of Sri Lanka

Employees’ Trust Fund (ETF):

• A benefit fund for employees, designed to supplement EPF
• Contributions are made only by the employer
• Supports employees in times of retirement, medical, or unemployment

💡 Pro Tip: EPF and ETF compliance is legally mandatory for all companies with employees, regardless of size.

Contribution Rates

1. Employees’ Provident Fund (EPF)

• Employee contribution: 12% of gross salary
• Employer contribution: 8% of gross salary

2. Employees’ Trust Fund (ETF)

• Employer contribution: 3% of gross salary
• Employee does not contribute to ETF

Example Calculation:

If an employee earns LKR 50,000 per month:

• EPF Employee: 50,000 × 12% = LKR 6,000
• EPF Employer: 50,000 × 8% = LKR 4,000
• ETF Employer: 50,000 × 3% = LKR 1,500

Total monthly contributions: 6,000 + 4,000 + 1,500 = LKR 11,500

💡 Tip: Always calculate contributions based on gross salary, including allowances, overtime, and bonuses if applicable.

Step 1: Register with the EPF and ETF Department

Before making contributions:

1. Register your company with the Department of Labor and the EPF/ETF Office
2. Obtain a company EPF number for all registered employees
3. Register each employee to ensure proper tracking

💡 Pro Tip: Foreign investors can appoint a local company secretary or HR professional to manage registrations and filings.

Step 2: Monthly Contributions

• EPF and ETF contributions must be paid monthly, typically before the 15th of the following month
• Payments can be made online through the EPF/ETF portal or via authorized banks
• Late payments may incur fines, penalties, or legal action

💡 Pro Tip: Set up automated reminders or payroll software to avoid late submissions.

Step 3: Maintaining Accurate Records

Companies must maintain proper employee records for compliance and audits:

• Employee name, NIC, and designation
• Monthly salary, EPF, and ETF contributions
• Payment receipts and acknowledgment from EPF/ETF

💡 Pro Tip: Organized record-keeping ensures easy audits and smooth government inspections.

Step 4: Filing Returns

• EPF and ETF returns are filed monthly or quarterly, depending on the fund requirements
• Include employee contribution, employer contribution, and total salary paid
• Use the official online portals to submit returns and download payment receipts

💡 Pro Tip: Always verify contributions match payroll records to avoid discrepancies.

Step 5: Consequences of Non-Compliance

Failing to comply with EPF and ETF regulations may result in:

• Fines and penalties from the Department of Labor
• Legal notices or potential litigation from employees
• Suspension or legal issues for directors of the company
• Reputational damage and difficulty obtaining bank loans or permits

💡 Pro Tip: Treat EPF and ETF compliance as an integral part of your HR and payroll operations, not a secondary task.

Step 6: Best Practices for Employers

1. Automate payroll processing and contributions to minimize errors
2. Appoint a dedicated HR officer or company secretary to handle filings
3. Maintain up-to-date records for all employees, including foreign staff
4. Regularly reconcile payroll and contribution statements to ensure accuracy
5. Educate employees about their EPF/ETF rights and benefits

💡 Pro Tip: Companies that comply efficiently build trust with employees and government authorities while reducing administrative stress.

Conclusion

EPF and ETF compliance is mandatory for all Pvt Ltd companies in Sri Lanka with employees.

Key takeaways:

• EPF contributions: 12% employee + 8% employer
• ETF contributions: 3% employer only
• Register your company and employees with EPF/ETF department
• Make timely monthly contributions and maintain accurate records
• Avoid penalties by staying compliant and up-to-date with labor regulations

By following these steps, entrepreneurs and foreign investors can ensure their company operates legally, protects employees’ rights, and maintains smooth HR and payroll operations.