Employees Provident Fund is a contributing social security scheme managed by EPFO department of Govt. of India. EPF scheme is governed by Employees Provident Funds & Miscellaneous Provisions Act 1952.
All private sector employees and employees of Public sector Undertakings are covered by EPF Act. Administrative functions are performed by Central Board of Trustees (CBT) and Ministry of Labour and Employment, Govt. of India.
There are three schemes under EPF & MP Act 1952.
1.Employees’ Provident Fund (EPF) Scheme 1952
2. Employees’ Pension Scheme (EPS) 1995
3. Employees’ Deposit Linked Insurance Scheme 1976
Membership of employee to different schemes depends upon total of his monthly wages (Basic salary and Dearness allowance). Employees of EPFO covered establishments contributes 12% of his wages and equal amount is contributed by employer. Though, employer and employee both may choose to contribute at 15000 PM rate if monthly wages his more than 15000.
Employees Provident Fund Scheme 1952(EPF)
It is a contributory scheme; hence both employer and employee contribute 12% of monthly wages earned. Employee share of contribution form part of Employees Provident Fund only and Employer's share get diverted to two different schemes i.e. Employees Provident Fund (EPF) and Employees Pension Scheme (EPS). Out of Employer's share of 12%, 8.33% goes to Employees Pension Scheme (EPS) and balance share 3.67% (12%-8.33%) goes to EPF Scheme.
An employee will be compulsorily covered in both schemes (EPF, EPS) if his wages at the time of joining is less than 15000 PM. If his wages is more than 15000 PM, both employer and employee may choose to contribute to EPF.
If employee's Wages is more than 15000 PM at the time of joining, and employer and employee choose to contribute in EPF, then he will not be eligible for membership of Pension Scheme (EPS 1995) and whole of Employer's share of contribution i.e. 12% will form part of EPF Scheme and no share will be diverted to Pension scheme (EPS). Thus full 24% share will form part of EPF.
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Present Rates of Contribution |
|||
|
|
EPF |
EPS |
EDLI |
|
Employee Share |
12% |
- |
- |
|
Employer Share |
3.67% |
8.33%# |
0.50% |
# Whole of Employer's share of contribution i.e. 12% will form part of EPF Scheme and no share will be diverted to Pension scheme (EPS), if employee is not covered in Employees Pension Scheme (EPS).
Amount lying in balance in EPF can be withdrawn by employee on retirement or if he have left organization and chooses to withdraw money. Employee cannot withdraw full balance of EPF while continuing his service with EPFO covered establishment, though he may take advance from fund.
Employees Pension Scheme 1995 (EPS)
Employer's Shares 8.33% forms part of Pension fund of employee. At the time of retirement/permanent disablement/or attaining 58 Yrs. (Superannuation age), an employee can claim pension from EPF department if his total service tenure is ten years (not necessarily continuous service) or more.
Since EPF & EPS schemes are contributory schemes, pension amount depends upon length of service period. Non contributory service period is not considered for calculating pensionable service period. 6 month or more is considered a full year, and 2 year of bonus service period is also allowable if employee has rendered service for 20 years or more and has EPS contribution to credit of his account.
Employee can apply for pension after attaining the age of 58.
If employee dies while holding Membership of EPS, his widow and children will get pension from department. Eligibility criteria of 10 years service is not there if an employee dies while holding EPS membership and widow can claim pension.
Employees’ Deposit Linked Insurance Scheme 1976
As soon as an employee gets covered by EPF, he automatically gets covered in EDLI scheme 1976 too. No contribution is paid by employee for this scheme. Whole insurance scheme is sponsored by Employer's Share. Employer contributes 0.50% of wages for premium of this scheme.
In event of death of any EPF covered employee (i.e. he should be in service at the time of death), by any reason, family members/nominees of employee get insurance claim from EPFO department. Claim amount is 30 times of average monthly wages earned in last 12 months. Maximum amount of claim can go up to Rs. 6 Lacs. There is no minimum service period requirement to avail benefits under EDLI scheme. It is worth mentioning here that ESIC dependent benefits can only be claimed by family member of employee if employee dies due to 'Employment injury' but EDLI benefits can be claimed even if death is not arise in 'course of employment' or 'due to employment'.
For calculating EDLI claim-
Average of wages drawn by employee in last 12 month is taken as base. For calculation of average wages, Maximum monthly wages is limited to 15000/-. An additional bonus of 50% of balance lying in his EPF is also given along with 30 times of wages as discussed above. Thus if average monthly wages is 15000, then EDLI claim amount will be 15000 X 30= 450000/- , Plus, Bonus equal to 50% of Balance in EPF. Total claim amount can go up to 6 lacs.
Some other salient features of above three Schemes are as under-
1. Balance lying in credit of EPF account is eligible for interest at the rate declared by Govt. of India. Govt. of India declares rate of interest each year. It is to be noted that EPS balance does not earn any interest.
2. If an employee wish to pay higher contribution at a rate more than 12% of wages, he may do so. Any amount in excess of 12% of wages is called Voluntary Provident Fund (VPF). It earns same rate of interest as EPF. Employer is not required to make matching contribution if employee is contributing in VPF.
3. It is worth mentioning that if an employee is a member in an EPFO covered establishment and he joins another such establishment without withdrawing his previously deposit EPF, he will continue to be a member of EPF and the establishment in which he joins afresh have to provide EPF benefits to that employee. This is so, because membership of a person remains in continuation if he does not withdraw his PF. If employee withdraws EPF he losses EPF membership and if he joins any new organisation he is not required to be enroll as PF member i his wages is more than the statutory limit i.e 15000 PM.
4. Contribution rate is 10% in case no of employees are less than 20 in an establishment. Some other industry are also eligible for 10% contribution rate.
