Employees Provident Fund Organisation of India

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The Employees' Provident Fund Organisation (EPFO) of India is a state sponsored compulsory contributory pension and insurance scheme. It is one of the largest social security organisations in the world in terms of members and volume of financial transactions undertaken.

1 Legal basis
2 Size and contributions
3 structure
4 Challenges facing the Organisation.
5 External links

[edit] Legal basis

Established in 1952 consequent to the enactment of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Organisation is administered by a Central Board of Trustees, comprising of representatives of the Government of India, provincial governments, employers and employees. The Board is chaired by the Union Labour Minister of India. The Chief Executive of the EPFO, the Central Provident Fund Commissioner, reports to the Union Labour Minister through the Permanent Secretary in the ministry. The head office of the Organisation is in New Delhi. [1].

The Constitution of India under "Directive Principles of State Policy" provides that the State shall within the limits of its economic capacity make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved want. The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 14th March, 1952 as part of a series of legislative interventions made in this direction. Presently, the following three schemes are in operation under the Act:

Employees' Provident Fund Scheme, 1952
Employees' Deposit Linked Insurance Scheme, 1976
Employees' Pension Scheme, 1995 (replacing the Employees' Family Pension Scheme, 1971)

[edit] Size and contributions

The total financial corpus managed by the EPFO is in excess of Rs. 2000 billion ($500 billion) and there are a total of about 40 million contributing and non contributing members in about 450,000 covered establishments.

Membership is compulsory for employees in establishments coming under the purview of the statute. As per provisions in force almost any establishment in India is required to have a registration with the basic criterion being employment of 20 or more persons. Contribution is at present 12% employee's share and the employer's share totalling 13.61% of the wages of the employees. Among the many benefits offered in addition to the compulsory Provident Fund (where the present rate of interest is 8.5%) are service Pension on retirement, death or disablement and a lumpsum insurance payout in case of death of the member, to his nominee/family.

[edit] structure

The EPFO has the dual role of being the service provider to the members as well as the enforcement agency to oversee the implementation of the EPF& MP Act throughout the country. To this end the Commissioners of the Organisation are vested with vast powers under the statute conferring quasi- judicial authority for search and seizure of records, assessment of financial liability on the employer, levy of damages, attachment and auction of a defaulter's property, prosecution and arrest and detention in civil prison.

Administratively, the Organisation is Organised into 4 zones at Delhi, Bombay, Calcutta and Madras each of which is headed by an Additional Central Provident Fund Commissioner. The zones are divided into Regions headed by Regional PF Commissioners which are further sub- divided into Sub- Regions headed by junior grade Regional PF Commissioners or Assistant Commissioners. Most of the districts in the country have small district offices where an Enforcement Officer is stationed to inspect the local establishments and attend to member/ employer grievances.

The total manpower of the EPFO is at present almost 20000 including all levels. The Commissioner cadre numbering 650 are recruited directly, competitively, through the Union Public Service Commission of India as well as through promotion from lower ranks. Subordinate Officers (Enforcement Officers/ Accounts Officers) are also recruited directly in addition to promotion from the staff cadre of social security assistants.

[edit] Challenges facing the Organisation.

Corruption by the Enforcement officers has been a serious problem facing the organisation, since joining the scheme is compulsory and the subscription rate being high, many of the smaller companies avoid joining the scheme. The organisation, having legal powers to prosecute such companies, and make ad-hoc assessments and recover past arrears including interest and penalty, many of the field official connive with such companies for consideration. At times, less informed Companies are threatened by such officials. However, there is some check on this malpractice, since mandatory and routine inspections are now avoided and there is lot of restriction on inspection by field staff.

The interest rate being offered to subscribers is still very high and the investment of the corpus of fund by the organisation is not fetching such interest, resulting in drawal from Surplus. This is a major concern for Government and the Organisation. The trustees, represented by the association of subscribers, have strong political affiliations, and do not act like professional trustees, but like interest groups to get maximum interest for those whom they represent. A Pension Scheme, introduced by the Organisation, could also face major fund problems, since the return on investment does not match the offer of pension outgo.

It would appear that the constraint of having to pay higher interest rate on deposit and higher pension as compared to return on investment could be limiting the departments interest to cover more establishments into the fold, and increase the wage ceiling of Rs 6,500 per month (around US $163 per month) for mandatory subscription.