Provident Fund is a Social Security Benefit to employees. During an employee’s productive life he along with his employer contribute monthly to a PF Fund which then serves as a nest on retirement for his/her old age. This act is an important piece of Labour Welfare legislation enacted by the Parliament to provide social security benefits to the workers. At present, the Act and the Schemes framed there under provide for three types of benefits –
Company which have employee strength of 20 or more are required to be registered with PF Department. The strength of 20 includes contract employees like housekeeping, security or other contractual workers in the business. Those establishments which do not have the prescribed number of employees but willing to register themselves to provide the benefits of Provident Fund to their employees can register voluntarily with the Regional Provident Fund Office. Registration has to be done within One month from the date of reaching 20 employees. Any delay may result in a penalty.
An employee at the time of joining the employment and getting wages up to Rs. 6,500/- is required to become a member. In this act, Wages means and includes Basic + Dearness Allowances, Cash value of food concession and retaining allowances, if any. He/she is eligible for membership of fund from the very first date of joining a covered establishment.
Provident fund contribution is recovered @ 12% of wages from employees who earn up to a maximum wage of Rs.6,500/- p.m. However, employees can contribute more than this statutory maximum which
will be considered as Voluntary Contribution.
– An employee can contribute voluntarily over and above the stipulated rate of PF contribution by opting for Voluntary PF scheme at any rate as he she desires i.e up to 100% of Wages.
– However, the contribution to VPF should be a certain % of wages and not a fixed amount.
– But the employer is not bound to contribute at the enhanced rate.
– It is suggested that the enhancement can be done at the beginning of the financial year for comfort level of calculation.
– Employer is also required to contribute towards provident fund; the deduction rate is same as employee’s contribution i.e. 12% of the wages.
– Of this 12%, 3.67% goes to Provident Fund and the balance of 8.33% goes to Pension Fund.
The employer is required to pay the contribution recovered from employees into the provident fund account on or before 15th of the following month, for example, if the contribution is deducted for the month of October 2008, it should be remitted on or before 15th of November 2008.
Procedure for PF registration
The following forms are to be filed for registering the establishment:
Information required for filling up forms
Documents required for filling up the Forms
Once documents are filed the PF Authorities carry out a physical inspection of the premises and verify all original documents. On satisfaction, the business is granted with a PF allotment letter.
Withdrawal of Provident Fund and Pension Fund
On many occasions, members face problems in withdrawing the provident fund monies. Some of the normal reasons for the problems are quoted here below:
Transfer of Provident Fund monies from previous employer to current employer
A resigned employee who joins another company is left with an option of transferring the PF monies from his previous PF account to the current PF account, by filling the Form 13.
Problem during Transfer of Monies
In the case of transfer and when the previous employer is an exempt establishment (which means, having own PF trust), the procedures is that the current employer should forward the transfer form (Form 13) to the previous employer who will process a cheque (after validation) in favour of PF office of the current employer and it will be sent to the current employer. It becomes the responsibility of the current employer to submit the cheque along with a request letter to the PF office for transferring the monies. Here, the normal problems that might occur are:
Advances from PF Account
The members are eligible to withdraw monies as advances from their PF Account for purposes like marriage, education, medical treatment etc, subject to the prescribed conditions as mentioned here below. Note that the said advance is totally tax-free and interest-free.
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