Employees’ Provident Fund (EPF)

The Employees’ Provident Fund (EPF) is a retirement benefit scheme that provides social security to salaried employees in India. It is managed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Purpose

The EPF aims to help employees save a portion of their salary every month towards their retirement. Both the employee and the employer contribute towards this fund monthly at a fixed rate. The corpus built through these contributions provides financial support to an employee when they retire.

Applicability

The EPF is applicable to all establishments in India that employ over 20 people. All employees earning less than ₹15,000 per month are required to mandatorily contribute to the EPF. However, employees earning more than this can voluntarily opt out. Certain establishments are exempt from this scheme such as educational institutions, hospitals etc.

Contribution

The contribution is made monthly by both employer and employee at 12% of the employee’s salary each, making a total of 24%. Of this, 8.33% goes towards the Employees’ Pension Scheme while the balance goes to the employee’s EPF account. Interest accrues on this as per rates declared yearly. The government also contributes 1.16% of the employee’s salary below ₹15,000 into their EPF account.

Withdrawal

The corpus can only be withdrawn by the employee on retirement, for specific expenses such as higher education, medical, housing etc. or under certain circumstances such as leaving the country for good. It cannot be accessed any time at the employee’s discretion. On retirement, they can withdraw either a lumpsum or opt for monthly pension. Nominees can claim the corpus if the employee dies during service.

Management

The EPF organization operates under the Union Ministry of Labour and Employment. It works through various regional offices and processes all registrations, deposits, settlements etc. relating to the EPF. The fund corpus collected is invested in various securities and deposits as per guidelines issued by the Central Government. This includes government securities, bonds, fixed deposits etc. aimed at earning optimum interest. The EPF provides crucial financial security and stability to employees in India especially in the absence of robust pension schemes. By making it mandatory, it promotes a culture of saving for the future.