When hiring employees on a contract basis in Sri Lanka, many employers wonder whether they are required to pay EPF (Employees’ Provident Fund) and ETF (Employees’ Trust Fund) contributions. The short answer is yes—these contributions are mandatory for all employees, regardless of whether they are permanent, temporary, or on a fixed-term contract.
Are EPF and ETF Mandatory for Contract Employees?
Yes. Under Sri Lankan labor laws:
- EPF applies to every employee in the private and semi-government sectors from the first day of employment.
- ETF applies to all private-sector employees, including those on short-term or casual contracts.
There are no exemptions based on the nature or duration of the contract.
Contribution Rates
- EPF:
- Employer: 12% of total monthly earnings
- Employee: 8% (deducted from salary)
- Total Contribution: 20%
- ETF:
- Employer: 3% of total monthly earnings
Total Earnings include salary, allowances, contract pay, commissions, and other regular payments (excluding overtime and certain reimbursements).
Registration & Compliance
- Employers must register with EPF and ETF within 14 days of hiring any employee.
- Monthly contributions must be remitted on time to avoid penalties.
Non-Compliance Risks
Failure to pay EPF and ETF can lead to:
- Legal action by the Department of Labour
- Penalties and interest on unpaid contributions
- Employee complaints and reputational damage
Key Takeaways for Employers
- Contract employees are not exempt from EPF and ETF.
- Contributions start from day one of employment.
- Ensure proper registration and timely payments to stay compliant.
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