Employees Provident Fund (EPF) is a pension scheme that aims at providing financial support for retirement and other post-retirement benefits for Indian citizens. The social security scheme enables an employee to save a certain portion of their income into an Employees’ Pension Fund, which is managed by the Employees’ Provident Fund Organisation of India. An employee’s EPF contribution includes the amount deducted from the salary that they earn and the employer’s fixed rate of 12% match. This 12% includes basic wage and dearness allowance.
Investing in EPF comes with several benefits, such as tax exemptions on investments made up of a maximum limit of Rs.1.5 Lakhs under Section 80C and an exemption on income generated from interest earned through investment in PF funds under Section 10(11). There are, however, countless issues that employers and employees face with EPFO. In this definitive guide, we will address them all in detail and provide 8 tips to resolve them seamlessly.
Management of Employee Provident Fund (EPF)
This social security fund is managed by the Employee Provident Fund Organisation. However, the extensive nature of this fund can often create confusion regarding operations and services available under the scheme. Under the circumstances, it becomes the responsibility of the Human Resource Department of the organisation to address, process, and resolve the employee’s issues, if any. Also, EPFO has formulated various platforms and robust grievance management systems to assist the department in handling such complaints.
There is a provision for employees to opt out of this scheme at the start of their career, but afterwards, any withdrawal from the fund must be within limits stipulated by EPF rules. However, EPFO offers a provision for partial withdrawal, subject to certain terms and conditions. These rules place restrictions on the amount and time frame within which money can be withdrawn from the fund. On top of employer contribution, employee contribution to this scheme also ensures an income after retirement. Therefore, EPF provides an effective pension system for salaried individuals, allowing them to secure a financial future when they enter retirement.
8 Ways That Can Help Resolve EPF-related Disputes with Employees
As important as the scheme is, there is an equal number of problems that employers and employees face with EPFO. Here are 8 tips to resolve them all:
- Keep Them Informed: All employees should be made aware of the Official website of the Employees’ Provident Fund Organisation, where they can file claims. It includes Email IDs and contact numbers to lodge a grievance and check the grievance status of online claims, etc.
- UAN: Inform the employees about their UAN and PF accounts. It is normally observed that most employees and workers are unaware of their UAN and its importance. UAN is a 12-digit identification number allotted by EPFO and is an acronym for ‘Universal Account Number’. The UAN acts as an umbrella by seamlessly linking multiple Member Identification Numbers (Member IDs). It links all IDs allotted to an employee under a single ID. For instance, employees work with several different organisations throughout his/her professional journey. UAN will link all employee member identification numbers to one single ID.
- Passbook of the PF Balance: While switching jobs, EPF members must get their passbooks updated by their current employers during the exit formalities. On the other hand, employers should update the EPFO about the joining and exit date of the employer. Not ensuring this can cause difficulty in continuing the current provident fund account with the new recruiter, even when the account holder has a legit PF account number and the UAN.
- Merging PF Accounts: Merging multiple PF accounts into a single account saves employees money. It consolidates an employee’s pension and salary payments for seamless transactions in future. It ensures that the past contributions do not get lapsed and continue to get added in subsequent employment.
- Non-linking of Aadhaar with UAN: The Employees’ Provident Fund Organisation (EPFO) permits its members to withdraw money from their EPF corpus to tide over financial emergencies. However, these claims get rejected for several reasons, the most common being the non-linking of Aadhaar with UAN.
- Verifying Bank Details: The employer must instruct the Employee to enter the correct bank and personal details, such as name and date of birth when opening an EPF account. An EPF member’s PAN and Bank account details should match the Aadhar.
- Adding Nominee to the PF Account: If an EPF member does not add a ‘nominee,’ the legal heirs may have to go through a lengthy and complicated process for claiming the EPF corpus or any asset related to the account after the account holder’s death.
- Incomplete KYC: If an account holder fails to update KYC details correctly, there are increased chances of a withdrawal request getting rejected.
The Human Resource Management department should thoroughly read and understand the definition and purpose of the EPF Act. The HR role and responsibility includes educating employees about its eligibility criteria, entitlements and implications.
Latest Amendments in EPF Employers Should be Aware of to Avoid Any Disputes
EPFO has made it mandatory for members to file nominees to get the EDLI (Employees Deposit Linked Insurance Scheme) and pension benefits up to Rs. 7 lakhs. Currently, the scheme offers a rate of interest of 8.15% p.a. After marriage, e-nomination can be done simply by logging into the EPF portal. Self-declaration is the only requirement for filing a nomination.
To help avoid delays and disruptions in payments during one’s tenure, EPFO wants its subscribers to complete their e-nominations as soon as possible, even if they are single. The nominees will remain the same until an individual chooses to alter them using the official website of EPFO. It is also important to keep updating your details on time with your new employer when you switch jobs. Hence, everything proceeds smoothly upon your retirement because it reflects accurately under the maintenance of records tallied up in a centralised fashion.
Summing Up
Managing EPF can be challenging for both employers and employees. HR managers, however, can offer an effective EPF grievance management platform by rising beyond compliance checklists and offering guidance to employees whenever required. When the employees receive the best EPF services, they are more likely to feel confident about how their organisation values them. It is a fact that several issues crop up when an account holder tries to withdraw the EPF corpus or tries to transfer the amount. However, following a few guidelines and procedures can reduce the chances of rejection or disruption.
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