The Employees’ Provident Fund Organisation (EPFO) is going provide its contributors Universal Account Number (UVN) which will be portable for an employee during his or her entire period of job. According to a Times of India report, the Labour Ministry has also informed the Lok Sabha in a written reply on Monday.
Earlier, Union Finance Minister Arun Jaitley during his Budget speech had made an announcement in this regard and the Labour Ministry is working to seed KYCs like Adhaar/NPR and PAN with the UAN to make it secure.
With this, the employees will not have to apply for transfer of their PF account claim on changing jobs. The report says that the UAN will be provided to members currently contributing to the EPFO by October 15.
According to available data, the total number of EPFO contributors by March 31, 2014, was 11.78 crore. EPFO had in 2013-2014 given 8.75 per cent interest while in the previous year (2012-2013), the interest rate was 8.5 per cent.
There are two saving schemes for the employees under Employees Provident Fund Scheme 1952 and Employees Pension Scheme 1955 under Provident Fund Act 1925. The employees contribute about 12 per cent of their basic pay to EPFO but the workers whose basic pay is above Rs 6500, can opt to not to contribute for this saving scheme.
According to a Business Standard report, if a person earns Rs 6500 a month, he can opt to not to be a contributor to the EPFO. An employee at the beginning of career can ask the employer not to be made a contributor to the EPFO. However, finance experts advise not eto do this because by opting out of the EPFO, an employee would get more money every month but EPFO offers a way for saving on which over eight per cent interest rate is offered.
A person contributes up to 12 per cent of his basic salary to EPFO and his or her employer too contributes same proportion which is divided into two parts. One part of the employer’s share goes to EPFO while rest is contributed to the Employee’s Pension Scheme. However, the employee can voluntarily contribute even more than 12 per cent of his basic pay and EPFO gives interest on the additional contribution but in such cases the employer is not bound to contribute more than that.
If the employer does not provide group insurance cover to its employees, then EPFO provides a small cover (upto Rs 60,000) to the workers. This facility is linked to Employee’s Deposit Linked Insurance Scheme under which an employee has to contribute 0.5 per cent of his or her basic pay. This cover is useful for the workers of small-and medium-size industries.
A proposal is still pending with the Labour Ministry in which the contribution of an employee is to be deducted not on the basic pay but the contribution is to be deducted on in hand salary (basic pay + allowances). However, the Ministry in April in a letter told the EPFO to not to move ahead on the proposal.
If the contribution to the EPFO is deducted on the salary including, allowances, it will substantially increase the saving of employees. EPFO invests the contributions of the workers in profitable Government securities and cannot be used for buying shares. Interest rates are declared according to the Government’s recommendations based on advices of the trustees of the EPFO board.