Employees' Provident Fund Organisation: Difference between revisions

EPFO, India
Key people	Samirendra Chatterjee, I.A.S, Central P. F. Commissioner
Website	www.epfindia.gov.in

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Revision as of 19:17, 3 June 2010

The Employees' Provident Fund Organisation (EPFO) (Hindi: कर्मचारी भविष्य निधि संगठन), is a statutory body of the Government of India under Ministry of Labour and Employment. It administers a compulsory contributory Provident fund, pension and a insurance scheme for Indian Work force. It is one of the largest social security organisations in the world in terms of members and volume of financial transactions undertaken^{[citation needed]}.

Mission

"Extend the reach and the quality of publicly managed old-age income security programs through consistent and ever-improving standards of compliance and benefit delivery in a manner that wins the approval and confidence of Indians in our methods, fairness, honesty and integrity, thereby contributing to the economic and social well-being of Indians."

Legal basis

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 came into effect on 4th March 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 01 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:

Size and contributions

The total financial corpus managed by the EPFO is in excess of Rs. 2000 billion ($50 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% of basic salary as employee's share and a matching contribution by the employer, with the total to be 13.61% of the total 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.

Structure

The EPFO has the dual role of being the enforcement agency to oversee the implementation of the EPF& MP Act and as a service provider to the members 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 is headed by an Additional Central Provident Fund Commissioner for each of the political states in the country. The staes have either one or more than one Regional Offices (RO)headed by Regional PF Commissioners Grade I which are further sub- divided into Sub- Regions headed by Regional PF Commissioners Grade II officers. To assist them are the Assistant PF Commissioners. The Assistant PF Commissioners are the frontline officers of the organisation. 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 815 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. 5555

Challenges facing the Organisation

Corruption by the Enforcement officers has been a serious problem facing the organization, since joining the scheme is compulsory and the subscription rate being high, many of the smaller companies avoid joining the scheme. The organization, 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. However, one rule/instruction for employers that helps corrupt EPF officials and scares honest employers into making illegal payments to them is that they (employers) must "enroll all categories of employees including the employees engaged by or through contractors and also piece rated, hourly rated employees" . This is interpreted differently by different people and, according to one interpretation, all people from gardeners working one hour a week, newspaper delivery boys and construction workers employed for a short time to bus drivers and conductors employed by schools and other organisations through bus contractors can come under its purview. Semi-literate, part-time workers do not want this facility as they find it difficult to get back their contribution while small-time contractors refuse to pay their part of the contribution. The duty of filling in the forms and submitting the contribution of such employees of contractors rests with the employer having 20 or more employees which makes compliance difficult and leads to underhand payments to corrupt officials of the department. However to see the other face of the coin as the returns filing and claim filing is all to be done by the employer if an employer engages employees to keep record of all the employees as provided for in the statute and fulfills its responsibility in total all such employees who are receiving just about living wages can get a secured future not only for them but for their families also. Unfortunately employers don't remit full dues and in fact they are the one who try to corrupt the officials. They are helped by numerous consultants whose sole job is to find loopholes in the system and aid the employer in evasion. At times officials who want to work honestly feel targeted and lonely especially when the employer not being able to 'buy' them starts filing false complaints.

Another challenge before the Organisation is a gap on the policy front.There exists a fundamental, structural, administrative, governance and design flaws. After almost 60 years of operations, the scheme has been able to bring under its purview only about 400,000 estab¬lishments (about the same number as Employee Provident Fund of Malaysia with a population of 24 million), and about 40 million members. The EPFO thus services only a small fraction of the labour force. The, operational authority is not clearly defined. While the EPFO is governed by a 45-member Board of Trustees, headed by the Union Minister of Labour, administrative matters are under the control of the Central Provident Fund Commissioner, who is the Chief Executive Officer of EPFO with little effective powers.

While the Board has a bureaucrat at its head, the Central government appoints all the members, and a Cabinet minister has the final authority on all critical retirement related activities diluting the very purpose of the creation of the Board by the statute.

EPFO is run as if it were a welfare organization that does not require professionalism, expertise, and long-term sustainability. Social Security provisioning in India still lacks serious policy discussions and appropriate interventions as per international standards. The policy making still lies with bureaucrats in the permanent ministry who lack any quality exposure to issues related to social security administration or its provisioning.A pre-requisite for reforming the EPFO is a mindset change, with appropriate governance structure and leadership, to transform EPFO conferring to international standards.

The interest rate being offered to subscribers is still very high and the investment of the corpus of fund by the organization is not fetching such interest, resulting in drawing from surplus funds. This is a major concern for the government and the organization. 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 organization, could also face major fund problems, since the return on investment does not match the offer of pension outgo.

The EPFO has created a website and now many offices of EPFO have the facility of checking the balance savings online. The EPFO has launched a massive computerization program with the help of the Indian Government's National Informatic Centre (NIC), and has plans to reduce claims settlement time to 7 days. For getting forms click here for different types of application by its members.

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 6,500.00 per month (around US $163 per month) for mandatory subscription.

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	The total manpower of the EPFO is at present almost 20000 including all levels. The Commissioner cadre numbering 815 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.		The total manpower of the EPFO is at present almost 20000 including all levels. The Commissioner cadre numbering 815 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.
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	==Challenges facing the Organisation==		==Challenges facing the Organisation==