EPFO coming in unorganized sector
The Employees’ Provident Fund Organisation (EPFO) is planning to increase enrollments by making inroads into the unorganised sector — a segment where it has no presence and which is dominated by the National Pension System (NPS).
The move comes at a time when the government is redoubling efforts to push NPS and bring it on par with EPF, at least with respect to a favourable tax status.
“We are looking to improve our delivery… Once we achieve that, we will look to offer our services to workers in the unorganised sector,” said V P Joy, Central Provident Fund Commissioner.
At present, the EPFO, which manages a corpus of over Rs 8.5 lakh crore under the fund, caters almost entirely to workers engaged in the organised sector through a contributory provident fund, pension scheme and an insurance scheme.
While 12 per cent of basic salary and dearness allowance have to be contributed by all employees earning up to Rs 15,000 per month (not mandatory for others), the employer component (12 per cent) is mandatory in case of all employees.
The EPF, which is administered by the Ministry of Labour and Employment, recently also announced plans to bring contract workers under its ambit.
“EPF is targeting more enrollments under its scheme,” Joy told The Sunday Express, adding that the government has already improved EPF products “reasonably” and would focus on improving the delivery of its services.
The NPS, on the other hand, is a voluntary retirement savings scheme wherein individual savings are pooled in a pension fund, which is invested by Pension Fund Regulatory and Development Authority (PFRDA)-regulated professional fund managers into diversified portfolios comprising government bonds, bills, corporate debentures and shares.
The NPS is available for everybody; several companies are now providing this option to employees. At the time of normal exit from NPS, the subscribers may use the accumulated pension wealth to purchase a life annuity from a PFRDA-empanelled life insurance company, apart from withdrawing a part of the accumulated pension wealth as a lump sum, if they choose so. NPS provides seamless portability across jobs and across locations, unlike all current pension plans, including that of EPFO.
In Budget 2016-17, Finance Minister Arun Jaitley had proposed imposing a tax on 60 per cent of the withdrawal amount from EPF in order to bring greater parity in the tax treatment of different types of pension plans. While that proposal was later withdrawn after a series of protests from trade unions and workers, the government also proposed tax exemption on withdrawal of 40 per cent of the NPS corpus at the time of retirement to bring it on par with EPF.
While the government’s budget proposals were aimed at having a uniform tax treatment for pension plans, Joy dismissed the possibility of growing competition with NPS.
“Let there be choice. Let people choose between whatever systems are operating for the benefit of the public. So let those systems run and as far as we are concerned, we have to worry about our products… what is good or bad for our workers, our clientele. If we are bad, we will improve so that people come to us,” Joy said. more
The move comes at a time when the government is redoubling efforts to push NPS and bring it on par with EPF, at least with respect to a favourable tax status.
“We are looking to improve our delivery… Once we achieve that, we will look to offer our services to workers in the unorganised sector,” said V P Joy, Central Provident Fund Commissioner.
At present, the EPFO, which manages a corpus of over Rs 8.5 lakh crore under the fund, caters almost entirely to workers engaged in the organised sector through a contributory provident fund, pension scheme and an insurance scheme.
While 12 per cent of basic salary and dearness allowance have to be contributed by all employees earning up to Rs 15,000 per month (not mandatory for others), the employer component (12 per cent) is mandatory in case of all employees.
The EPF, which is administered by the Ministry of Labour and Employment, recently also announced plans to bring contract workers under its ambit.
“EPF is targeting more enrollments under its scheme,” Joy told The Sunday Express, adding that the government has already improved EPF products “reasonably” and would focus on improving the delivery of its services.
The NPS, on the other hand, is a voluntary retirement savings scheme wherein individual savings are pooled in a pension fund, which is invested by Pension Fund Regulatory and Development Authority (PFRDA)-regulated professional fund managers into diversified portfolios comprising government bonds, bills, corporate debentures and shares.
The NPS is available for everybody; several companies are now providing this option to employees. At the time of normal exit from NPS, the subscribers may use the accumulated pension wealth to purchase a life annuity from a PFRDA-empanelled life insurance company, apart from withdrawing a part of the accumulated pension wealth as a lump sum, if they choose so. NPS provides seamless portability across jobs and across locations, unlike all current pension plans, including that of EPFO.
In Budget 2016-17, Finance Minister Arun Jaitley had proposed imposing a tax on 60 per cent of the withdrawal amount from EPF in order to bring greater parity in the tax treatment of different types of pension plans. While that proposal was later withdrawn after a series of protests from trade unions and workers, the government also proposed tax exemption on withdrawal of 40 per cent of the NPS corpus at the time of retirement to bring it on par with EPF.
While the government’s budget proposals were aimed at having a uniform tax treatment for pension plans, Joy dismissed the possibility of growing competition with NPS.
“Let there be choice. Let people choose between whatever systems are operating for the benefit of the public. So let those systems run and as far as we are concerned, we have to worry about our products… what is good or bad for our workers, our clientele. If we are bad, we will improve so that people come to us,” Joy said. more
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We are seeing lots of issues dealing with EPF. Looks like the Government intentionally not streamlining the issues, as the EPF funds are being used as per Government's wishes. Many people give up to make use of their own EPF money, as the timeline is more and formalities are tedious. If the Government want to take good measures to handle the issue, I would suggest to incorporate EPF related topics to be included as part of School Social studies curriculum. In that way there will be a need to keep up the standard to deal with people's money. In this forum also many people have brought up good improvement suggestions, but no one has any clue on their actions.. more
Jun 21
EPFO has been a highly corrupt organisation previously. All EMPLoyers pay money to officers sometime or other to get rid of harassment generated by EPFO staff purposefully to entangle employers, specially small employers who don't know the Law..Many litigations take place.. Also running business is doomed..Everyone from labour consultants to EPFO staff get money and settle the disputes.. or Employers face stringent legal harassment..Newspapers have reported so many cases of top officers caught taking bribes to settle disputes by innocent Employers who can't keep HR people to handle the work...The entire EPFO should be Employer and Employee friendly..User friendly ..transparent..powers of officers and staff should be curtailed..A NEW LAW IN EPFO SHOULD BE CREATED.. more
Jun 15
EPFO needs to work a on further maximizing benefits and make the website more user-friendly. more
Jun 14
Dear Sir, A good move but before that you make your system prob;lem free. Even now when an organization comes to register with PF, they need a consultant, also pay money. You ensure even small organization voluntarily does the work of registration. Once it is Popular, any move is welcome. Same should be for withdrawal, I was paid after one year that too when I had all papers. They say payment details not available. When shown receipted acknowledgement of dept, then asked for copy on pretext not available in office. So, first make your system hassel free . more
Jun 14
It is nice that the unorganised sector is also likely to be covered by EPFO. Particularly the benefit under EDLI is incased up to 6.00 laksh, this is in fact a welcome move by EPFO to cover unorganised sector. As most of the people working in unorganised sector are illiterates or little education, the procedure for remittances and withdrawal can be linked to aadhar so that there will not be any problem of rejection of cases due to mismatch of name, father's name, date of birth etc. This will also facilitate in finalising the cases within a short and to the utmost satisfaction of the members. Further operation of EPFO account may also be entrusted to SBI and other Banks on similar lines of PPF. This will be transparent and user friendly. more
Jun 13
