Employees’ Provident Fund Organization (EPFO)

The Employees’ Provident Fund Organisation (EPFO) is a vital pillar of India’s social security system, providing financial security to the nation’s salaried employees. As one of the world’s largest social security organizations, it operates under the Ministry of Labour and Employment, Government of India.

Its primary mission is to manage a mandatory provident fund, a pension plan, and an insurance scheme for employees in the organized sector.

Established under the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, EPFO aims to leverage technology to deliver better and seamless services to its members.

Governance and Organizational Structure

EPFO’s governance is based on a tripartite model, ensuring that all key stakeholders have a voice in its administration.

• Central Board of Trustees (CBT): The Act and the schemes under it are administered by the Central Board of Trustees, Employees’ Provident Fund. This board comprises representatives from the Central and State Governments, employers, and employees, ensuring a balanced and inclusive approach to decision-making. The Union Minister for Labour and Employment serves as the chairperson of the board.
• EPFO as the Administrative Body: The CBT is supported in its administrative functions by the Employees’ Provident Fund Organization. The EPFO is led by the Central Provident Fund Commissioner (CPFC), who oversees the organization’s daily operations, ensures compliance with regulations, and manages service delivery. The organization has an extensive network of offices across the country to effectively serve its members and employers.

Core Schemes Managed by EPFO

The EPFO administers three principal schemes that together provide a comprehensive social security shield for its members.

1. Employees’ Provident Fund (EPF) Scheme, 1952

This is the cornerstone scheme of the EPFO, serving as a mandatory retirement savings plan for salaried workers.

• Contributions: Both the employee and the employer make monthly contributions to the EPF account. The employee contributes 12% of their basic salary plus dearness allowance. The employer also contributes a similar amount, which is then allocated across the three different schemes. Employer’s Contribution Allocation Percentage of Basic Salary + DA Towards Employees’ Provident Fund (EPF)3.67%Towards Employees’ Pension Scheme (EPS)8.33% (up to a certain wage limit) Towards Employees’ Deposit Linked Insurance (EDLI)0.5%EPF Administrative Charges0.5%
• Interest: The funds in the EPF account grow over time with the addition of interest. The EPFO’s Central Board of Trustees recommends the annual interest rate, which is then approved by the Ministry of Finance.
• Withdrawals: The total accumulated amount, consisting of contributions and interest, becomes available to the employee at the time of retirement. The scheme also allows for partial withdrawals for specific life events, such as building a house, funding education, covering marriage expenses for oneself or children, and managing medical emergencies. In the event of unemployment lasting for one month, a member can withdraw up to 75% of their funds, with the remaining balance available if unemployment continues for more than two months.

2. Employees’ Pension Scheme (EPS), 1995

The EPS is designed to provide a steady stream of income for members after they retire.

• Objective: The primary goal is to offer a monthly pension to members upon reaching the age of superannuation, in case of disability, or to their surviving family members if the member passes away.
• Funding: This scheme is funded by diverting 8.33% of the employer’s monthly contribution into the EPS account. The government also makes a small contribution to the overall pension fund.
• Benefits: It provides a monthly income stream for retirement, disability, as well as pensions for widows, widowers, and children.

3. Employees’ Deposit Linked Insurance (EDLI) Scheme, 1976

The EDLI scheme functions as a life insurance cover for all EPF members.

• Objective: It aims to provide a lump-sum payment to the nominee or legal heir of a member if they die while still in service.
• Funding: This scheme is funded solely by a 0.5% contribution from the employer’s share. Employees do not make any contributions to the EDLI scheme.
• Benefit: The insurance payout is determined based on the employee’s last drawn salary, with a maximum assurance benefit of up to ₹7 lakh.

The Universal Account Number (UAN)

A transformative development in the modernization of EPFO was the introduction of the Universal Account Number (UAN). The UAN is a unique 12-digit number assigned to every employee who contributes to the EPF.

• Portability: The main advantage of the UAN is that it provides a portable identity for employees. It acts as a single, overarching account that links multiple Member IDs an individual may acquire from different employers throughout their career. This has greatly simplified the process of transferring EPF balances when changing jobs.
• Online Access: Activating the UAN is essential as it grants access to a wide array of online services. Members can check their balance, download their passbook, update their personal and KYC details, and submit online claims for withdrawals and transfers through the UAN member portal.

Digital Transformation and Service Enhancement

In recent times, the EPFO has undertaken a significant digital transformation initiative, driven by its mission to provide seamless services in a transparent, contactless, faceless, and paperless manner.

• Unified Portal: A unified online portal has been established for both members and employers, streamlining critical processes such as online registration, monthly return filing, and claim submissions.
• Mobile Application: The EPFO offers a mobile application that allows members and pensioners to access key services like balance inquiries and passbook viewing directly from their smartphones.
• Auto-Claim Settlement: The organization is progressing towards an automated claim settlement system to speed up the delivery of benefits and establish a resilient system with multi-locational processing capabilities.
• SMS Services: Members can receive their account balance and other important details on their mobile phones through a simple SMS service, provided their UAN is activated and linked.

These initiatives are aimed at improving the ease of living for members and pensioners while also enhancing the ease of doing business for employers. By harnessing the power of technology, the EPFO is steadily evolving into a more efficient, transparent, and user-friendly organization dedicated to the economic and social well-being of its members.