Saturday, October 12, 2013

Employees Provident Fund and related Schemes

Employees Provident Fund is in existence, as a Social Security benefit, from 15th November 1951. At first, it was implemented through an ordinance and later on through an enactment now known as Employees Provident Funds and Miscellaneous Provisions Act 1951.

The Act and the Schemes are administered by a Tri-partite Board, known as Central Board of Trustees. CBT has representatives from Central and State Governments, Employers and Employees.

The schemes under the EPF are – Employees Provident Fund Scheme (EPF), Employees Pension Scheme 1995 (EPS) and Employees Deposit linked Insurance Scheme 1976 (EDLI). These Schemes are administered by the offices of EPF. At present there are 120 EPF offices all over the country.

The Act now extends to 187 categories of establishments. Any of these establishments employing more than 19 persons automatically comes under the purview of the Act.

For any worker, enrolled as a subscriber to EPF, the employer has to contribute 12% of wage – basic pay and Dearness Allowance – and the worker also will contribute an equal amount. More than this, employers will have to pay 1.61% as administrative expenses. Jute, Beedi, Brick, Coir and Guar Gum factory establishments the rate of contribution is 10%. On what constitutes Wage and Allowance for calculating contribution, there are some differences of opinion and is under discussion. The contributions are statutorily payable upto a prescribed wage ceiling which is Rs.6500 per month. This ceiling is continuing from the year 2001.

From the contributions, the employees portion (12%) and 3.67% from employer is accounted to EPF. The balance amount of 8.67% is credited to the Pension Scheme. Govt. of India pays 1.16% to the pension fund.

From EPF, the total accumulation plus interest is paid upon retirement, resignation or death.

Partial withdrawals are allowed for specific expenses such as house construction, higher education, marriage, serious illness etc.

A worker, who is already a number of the scheme, on the event of joining another establishment can transfer his account and ensure continuity of service in the Scheme and obtain consequential benefits.

All members in EPF and for EPS have to submit nomination forms. A number can nominate one or more family members. For Pension Schemes, all details about spouse and children have to given.

Employees Pension Scheme gives monthly pension on superannuation, retirement, disability, survivor, widow(es) and children. These pensions are calculated on the basis of average salary during the preceding 12 months from date of exist from scheme and also on total years of employment. The amount is very meager and struggles are going on to ensure at least Rs.1000 per month as pension. It is estimated that if the Central Govt.’s contribution to pension fund, is raised from 1.16% to 1.79 % minimum pension of Rs.1000 can be ensured.

Employees Deposit linked Insurance Scheme is a benefit provided in case of death of an employee who was a member of the Scheme at the time of death. Family will get 20 times the average wage of the last 12 months of member. With the ceiling of R.6500 for eligibility, the maximum amount payable is 1.3 lakhs.

With computerization of accounts, a member can now view on line, status of his application, the transaction and account details.

Though considered to be one of the largest Social Security Schemes in the world, there are many a hurdles in proper implementation of schemes and ensuring benefits to workers. Many changes are required in the Schemes and also in benefits.

The demands for raising wage ceiling of Rs.6500 to at least 10,000, increase in the interest rate, and pension benefits are long pending. In the Pension Scheme, many unilateral changes taking away some benefits have been made by the Govt. Without even discussions in CBT, which is suppsed to be the administering authority. Actually, policy decisions are made by the Govt. of India though Finance Department.

It is a fact that many apprehensions raised by CITU at the time of introduction of Pension Scheme in 1995 has come true and it required more united struggles to make it a beneficial scheme.


Some EPF Statistics

¨ 855 lakhs of workers from 6.91 lakhs of establishments are members;
¨ There are 41 lakh pensioners under the Scheme;
¨ In the year 2011-12, EPFO received Rs.70,889 crores as contributions and Rs.26,914 crores were paid as benefits;
¨ As on 31.3.2012, a total of Rs.3583 crores was pending for recovery from employers!
¨ As on 31.3.2012, only 19828 werein employment, with 5263 existing vacancies in EPFO.

Unclaimed Dividends!

We heard about unclaimed money in Provident Fund accounts and also in the bank accounts.

Now, there are reports about huge amounts of unclaimed and unpaid dividends. 1406 companies have an amount of Rs.1101.35 crores in this heading.

The largest ten companies are Reliance Industries (112.88 crores), ITC (74.34 crores), Hindustan Unilever (49.05 crores), Hero Motor Corp. (40.22 crores), Tata Steel (38.53 crores), Lakshmi Vilas Bank (34.14 crores), ICICI Bank (19.17 crores), L&T (18.69 crores), Mangalore Refinery (14.23 Crores), IDBI Bank (13.59 crores).

Money lying in these unclaimed accounts gets transferred to Investor Education and Protection fund after 7 years and can not be claimed if transferred, says a report in an economic daily.
courtesy: Working Class, September 2013

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