Unit 4- RETIREMENT BENEFITS

1. Employee’s Provident Fund and Miscellaneous Provisions Act,1952

• EPF is a welfare scheme brought into force to secure a better future for employees. It is a statutory
benefit available to the employee’s post-retirement or when they leave the services. In case of
deceased employees, their dependents will be entitled for the benefits.
• Under EPF ACT SECTION 6 - MANDATES both employers and employees have to make
their contributions towards the Fund. Interest earned on the amount is credited to the member’s
Provident Fund Account (PF account) and is available to the employee at the time of retirement or
exit from employment as the case may be, provided certain conditions are fulfilled.

• APPLICCABILITY- SECTION 1- The Act is applicable to every factory or industry

mentioned in Schedule 1 of the Act, wherein 20 or more persons are employed or to any other
establishment which the Central Government specifies by notification in the official Gazette, even
when the number of employees is less than 20.

• A UAN- UNIVERSAL ACCOUNT NUMBER MANDATE

i. UAN is a 12-digit number allotted by EPFO to every employee to whom EPF Scheme is applicable.
ii. An employee is supposed to have a single UAN. It is a one-time permanent number which will remain
the same throughout one's career. ( SECTION 17A)

iii. The UAN will show both the PF numbers, the previous employer's as well as that of the new employer,
linked to it.
iv. Contribution under the EPF Scheme S.No. Number of Employees Contribution
v. Percentage of contribution” is calculated on basic 1. More than 20 employees 12%
wages plus dearness allowance plus retaining 2. Less than 20 employees 10%
allowance.

vi. BREAKDOWN OF 12% GIVEN- S.No. Contribution Employees’ Employees

by Pension Provident
Scheme Fund
1 Employer – 8.33% 3.67 %
12%
2 Employee – 0 12% DIRECTLY
12%
• The minimum amount of contribution to be
made by the employer is set at a rate of 12% of Rs. 15,000 although they can voluntarily contribute
more.
• Interest is an additional amount given to employees every month on contribution of PF.
• Interest in EPF is calculated on the basis of monthly running balance on the EPF Account.

• WITHDRAWAL FROM PF-

1. Post Retirement
When an individual retires from employment after attaining the pre- determined retirement age
i.e. 55 years, he can withdraw the entire amount of EPF which includes employer’s and
employee’s contribution along with the interest earned.
 2. Unemployment

75% of fund after the completion of one month of unemployment, and 25% can be transferred to a new EPF
account after gaining new employment.

They can also withdraw their PF contribution directly after two months of unemployment and settle the
account in one go.

SECTION 13- INSPECTIONS- can be conducted prior notice and Inspectors verify employer adherence to
the Act's provisions like-Timely and complete PF registration, Maintaining proper employee records and
accounts and Making mandated contributions for employees.

Section 14- Penalties

• The false representation or statement to avoid payment of PF - punishable with imprisonment for a
term which may extend to one year or with fine of Rs. 5000 or with both.
• Contravention of the provisions related to payment of inspection/ administration charges - punishable
with imprisonment for a term which may extend to three years.
• Default in payment of employees’ contribution which has been deducted from employees’ wages -
punishable with imprisonment of not less than one year and with fine of Rs. 10000.
• In any other cases - punishable with imprisonment of not less than 6 months and with fine of Rs.
5000.

• Management: Administered by the Employees' Provident Fund Organisation (EPFO).

Benefits: Savings for retirement.

Additional social security schemes like pension and deposit-linked insurance may be applicable.

EMPLOYEE PENSION SCHEME 1995 AND FAMILY PENSION SCHEME

• Employees’ Pension Scheme is a social security scheme provided by the Employees’ Provident Fund
Organisation (EPFO).
• The scheme makes provisions for employees working in the organized sector for a pension after
their retirement at the age of 58 years.
• The benefits of the scheme can be availed only if the employee has provided a service for at least
10 years (this does not have to be continuous service). Existing as well as new EPF members can
join the EPF scheme.

ELIGIBILTY--:

• He should be a member of EPFO AND should have completed 10 years of service

• Reached the age of 58 AND can also withdraw his EPS at a reduced rate from the age of 50 years
• HOWEVER CAN also defer his pension for two years (up to 60 years of age) after which he will get
a pension at an additional rate of 4% for each year.
CONTRIBUTIONS:

• Both employers and employees contribute a fixed percentage of the employee's wages (usually 12%
of basic salary and Dearness Allowance).
• However, the contribution pattern is split:
o Employer contributes 8.33% towards EPS.
o Employee's entire contribution goes to the EPF account.

TYPES OF PENSIONS- ( FAMILY PENSION SCHEME)

1. Child Pension- surviving children receive the child pension, in addition to monthly widow
pension until they turn 25 years. Total- 25% of widow pension + max 2 child pension
2. Widow Pension- eligible under the Widow or Vridha Pension, which continues till their death or
remarriage. If more than 1 widow payable to eldest widow.
3. Orphan Pension- up to 2 children get orphan pension which is 75% of monthly widow pension
value.
4. Reduced Pension- If an EPFO member takes an early retirement between 50-58 years of age
they get an early pension but the amount is reduced by 4% for each year.

2 Approaches-

a. Pensionable Salary- Pensionable salary is the average monthly salary in the last 60 months
before the member exits the Employees’ Pension Scheme.

If there are non-contributory periods in the last 60 months of the employment, the non-contributory days in
the month will not be considered and the benefit of those days would be given to the employee .

b. Pensionable service-

The actual service period of the member is considered as the pensionable service. Service periods under
different employers are added at the time of calculating the pensionable service period. The employee has to
get the EPS Scheme Certificate issued and submit it to the new employer every time he switches a job.

However, If the member withdraws the EPS before completing the service period of 10 years and joins
another company, he will have to restart contributing to the eps account and the service period will be set to
0.

Key Differences between EPF and EPS:

• Purpose: EPF focuses on retirement savings, while EPS focuses on providing a monthly pension.
• Fund Allocation: Employee contributions go entirely to the EPF account, while a portion of the
employer's contribution goes to EPS.
• Withdrawal: EPF funds are generally accessible upon retirement, while EPS benefits are primarily
available as a monthly pension after the specified retirement age (usually 58 years).
 SOCIAL SECURITY FOR UNORGANISED SECTOR

Unorganized Workers constitute about 93% of the total workforce or around 43.7 crore workers in
India. As per the Unorganised Workers’ Social Security Act, 2008, the Government is mandated to provide
Social Security to the workers of unorganized sector by formulating suitable welfare schemes on matters
relating to life and disability cover, health and maternity benefits, old age protection etc.
Unorganised Workers’ Social Security Act, 2008 PROVIDES FOR

▪ Defines unorganized workers as those who work in the informal sector or

households, without any regular employment or social security benefits.
▪ The Act empowers the Central Government and the State Governments to frame schemes
for providing various social security benefits to unorganized workers, such as life and
disability cover, health and maternity benefits, old age protection, education, housing, etc.
Social Security Code, 2020 aims to regulate the organized/unorganized (or any other) sectors and extend
social security benefits, during sickness, maternity, disability, etc. to all employees and workers across
different organizations.

• OTHER INITIATIVES IN RELATION TO SOCIAL SECURITY FOR

UNORGANISED SECTOR
Life and Disability Cover:
o Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): Offers a life cover of Rs. 2.00
Lakh for insured individuals, regardless of the cause of death, at an annual premium of Rs.
436/-.
o Health and Maternity Benefits:
o Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana (AB-PMJAY): Ensures
health insurance coverage of up to Rs. 5.00 lakhs per family for secondary and tertiary
care hospitalization.
o As of July 2023, Verified approx. 24.19 crore beneficiaries and created
Ayushman Cards across the country.
o Old Age Protection:
o Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM): Launched in 2019, provides a
monthly minimum assured pension of Rs. 3000/- for workers aged 60 or above with a
monthly income of Rs. 15000/- or less.
o Beneficiary contributes 50% monthly, matched by equal contribution from the
Central Government.
o Enrolled around 49.47 lakh beneficiaries nationwide.
OTHER INITIATIVES-
o One Nation One Ration Card: Public Distribution System under the National Food Security
Act.
o Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
2005: Provides employment opportunities for minimum of 100 days of work in a year to every
rural household willing to do unskilled manual labour
o MGNREGA prioritizes projects that create durable assets in rural areas, like roads, canals, and water
conservation structures.
o Minimum wages are set by the government and paid directly to workers' bank accounts..