The Employees’ Provident Fund (EPF) is a social security scheme managed by the Employees’ Provident Fund Organisation (EPFO) under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. It is designed to provide financial security to employees after retirement or in the event of their untimely death. EPF is a retirement benefit scheme where both the employee and employer contribute a portion of the employee’s salary every month, which accumulates over time to provide a lump sum amount upon retirement or resignation.
Key Features of EPF:
- Employee Contribution: The employee contributes a fixed percentage of their basic salary (typically 12%).
- Employer Contribution: The employer also contributes a fixed percentage of the employee’s salary (typically 12%).
- Interest on EPF: The EPF balance earns interest, which is decided annually by the EPFO.
- Withdrawal: Employees can withdraw their EPF balance upon retirement, resignation, or under specific circumstances like illness, home purchase, etc.
Applicability of EPF
EPF applies to organizations and establishments that meet the following criteria:
- Number of Employees:
- EPF is applicable to factories and establishments employing 20 or more employees.
- Wages:
- EPF is mandatory for employees whose monthly wages (basic salary + dearness allowance) do not exceed ₹15,000. Employees earning more than ₹15,000 can still opt for EPF coverage if the employer agrees.
- Types of Establishments:
- Factories (with 20 or more employees).
- Shops and commercial establishments (with 20 or more employees).
- Establishments such as educational institutions, hospitals, and others that meet the employee threshold.
Key Points:
- Mandatory for Certain Employers: EPF is compulsory for establishments with 20 or more employees.
- Contribution: The total contribution to EPF is 24% of the employee’s basic salary (12% from the employer and 12% from the employee). This amount includes contributions to the Employees’ Pension Scheme (EPS) and Employees’ Deposit Linked Insurance (EDLI), apart from the provident fund.
- Withdrawal: Employees can withdraw their EPF balance under certain conditions like retirement, resignation, or medical emergency.
- Portability: EPF is portable, meaning the account can be transferred from one job to another without losing the benefits.
FAQ on EPF
1. What is EPF?
The Employees’ Provident Fund (EPF) is a savings scheme that provides retirement benefits to employees. It is managed by the Employees’ Provident Fund Organisation (EPFO), where both the employee and employer contribute a fixed percentage of the employee’s salary.
2. Who is eligible for EPF?
EPF is applicable to employees working in organizations with 20 or more employees and earning a monthly salary up to ₹15,000. Employees earning more than ₹15,000 can opt for EPF if both the employer and employee agree.
3. How much is the contribution to EPF?
- Employee Contribution: 12% of basic salary + dearness allowance.
- Employer Contribution: 12% of basic salary + dearness allowance. Out of this, a portion goes toward the Employees’ Pension Scheme (EPS) and Employees’ Deposit Linked Insurance (EDLI).
4. What happens if the employee’s salary exceeds ₹15,000?
If an employee’s salary exceeds ₹15,000, EPF is not mandatory. However, if both the employee and employer agree, the employee can continue contributing to the EPF scheme.
5. How can an employer register for EPF?
Employers can register for EPF through the EPFO portal (www.epfindia.gov.in) and obtain an EPF code number for the organization. After registration, the employer must contribute the required amount on behalf of their employees every month.
6. Can employees withdraw their EPF balance before retirement?
Yes, employees can withdraw their EPF balance if they resign, retire, or under certain conditions like medical emergencies, purchasing a house, or higher education. However, withdrawing before 5 years of service may lead to tax implications.
7. How is EPF interest calculated?
The EPF balance earns interest, which is decided annually by the EPFO. The interest is added to the account at the end of each financial year and is compounded yearly.
8. What is the Employees’ Pension Scheme (EPS)?
EPS is a part of the employer’s contribution to EPF. It provides pension benefits to employees upon retirement or in case of premature death or disability.
9. What is EDLI (Employees’ Deposit Linked Insurance)?
EDLI is a life insurance scheme that is also funded through the employer’s contribution to the EPF. In the event of an employee’s death, their beneficiaries receive a lump sum insurance benefit.
10. Can an employee transfer their EPF balance if they change jobs?
Yes, EPF accounts are portable. Employees can transfer their EPF balance from their old employer to the new employer by submitting a transfer request through the EPFO portal.
11. What happens if an employer doesn’t contribute to EPF?
If an employer fails to contribute to EPF, they can be penalized and prosecuted under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
12. Can an employee check their EPF balance?
Yes, employees can check their EPF balance online through the EPFO portal or the UMANG app by entering their UAN (Universal Account Number) and other required details.
13. What is the Universal Account Number (UAN)?
UAN is a unique number assigned to each EPF member. It allows employees to manage their EPF accounts across different employers and facilitates easy access to EPF services such as transfers and withdrawals.
14. Can an employee opt-out of EPF?
An employee cannot opt out of EPF if they are working in an establishment covered under the EPF Act and earning less than ₹15,000. However, employees earning more than ₹15,000 can opt out with the employer’s consent.