How to Calculate Provident Fund (PF) Contribution in Nepal (With a Worked Example)

Provident Fund (PF) is the older retirement contribution system under Nepal's Labor Act — the one SSF was built to eventually replace. Organizations not yet migrated to SSF, and some sectors that fall outside SSF's current scope, still run PF on every payroll cycle.

The formula

PF contribution is calculated as:

• Employee: 10% of basic salary, deducted from pay
• Employer: 10% matching contribution, paid on top of salary

Total contribution: 20% of basic salary, split evenly between employer and employee.

Worked example

Take the same NPR 40,000/month basic salary:

• Employee contribution: NPR 40,000 × 10% = NPR 4,000, deducted from pay
• Employer contribution: NPR 40,000 × 10% = NPR 4,000, matched by the business
• Total monthly PF deposit: NPR 8,000

PF vs SSF: not meant to run together

Once an employer registers with SSF, SSF's 31% contribution already covers what PF and gratuity used to handle separately — running both PF and SSF on the same employee is not how the system is designed to work. PF calculations still matter for employers who haven't migrated yet, or for historical contribution records that predate an employee's move to SSF.

Common calculation mistakes

• Running PF and SSF in parallel on the same employee after SSF registration, instead of transitioning cleanly
• Calculating on gross salary instead of basic salary
• Losing continuity in contribution records when an employee moves between a PF-based employer and an SSF-registered one

Why this is worth automating

Whether an organization is still on PF, has migrated to SSF, or is managing the transition between the two for different employees, having the correct scheme applied automatically per employee — instead of tracked by hand — is exactly the kind of detail Hajir Khata's payroll engine is built to get right.

Contribution rules for PF and the transition to SSF are set by Nepal's Labor Act and the Social Security Fund and can be updated — always confirm current rules against the latest official notice before relying on any figure for compliance purposes.