Section 11: Management and Operation of EPF Accounts

Overview

This section deals with the Employees’ Provident Fund (EPF), a crucial social security benefit designed to provide financial security to employees after retirement or during emergencies. It outlines the procedures for managing EPF accounts, ensuring efficient administration and accessibility of funds for eligible employees.

Who is Covered?

• Generally, all employees working in establishments employing 20 or more persons are covered under the EPF scheme. The Code extends coverage to establishments employing fewer than 20 employees through notification.
• Eligibility typically requires being an employee as defined under the Code, and being employed in a covered establishment. Specific wage ceilings may apply, as determined by the Central Government.

Benefits and Contributions

• Employee Benefit: The primary benefit is a lump sum payment upon retirement, resignation, or termination of employment, comprising accumulated contributions and interest. Funds are also accessible for specific needs like medical expenses, education, or housing.
• Contribution Responsibilities: Both the employer and employee contribute to the EPF. The employer contributes a specified percentage of the employee’s basic wage plus dearness allowance (DA). The employee also contributes a corresponding percentage. The exact percentages are subject to government notification and may be revised periodically. The government may also contribute to certain schemes linked to EPF, such as the Pension Scheme.

Procedure and Compliance

Managing EPF accounts under Section 11 involves several key steps:

1. Account Opening: Employers are responsible for opening EPF accounts for eligible employees, typically through the EPFO portal.
2. UAN Allocation: Employees are assigned a Universal Account Number (UAN), which acts as a unique identifier for their EPF account, regardless of job changes.
3. Digital Records: The Code emphasizes maintaining digital records of all EPF transactions and employee details.
4. KYC Verification: Online KYC verification is used to ensure accurate employee information.
5. Contribution Deposits: Employers must deposit both their and the employee’s contributions to the EPFO within the prescribed timeframe.
6. Interest Crediting: Interest is credited to EPF accounts annually, as per rates declared by the government.
7. Nomination: Employees can nominate beneficiaries to receive the EPF funds in case of their untimely demise.
8. Transfer Protocols: When an employee changes jobs, the EPF account can be seamlessly transferred to the new employer, ensuring portability of benefits.

Practical Examples

• Example 1: Employee Eligibility – Priya joins a company with 25 employees and earns a monthly wage of ₹20,000. As the company employs more than 20 people and her wage is within the applicable limits, she is automatically eligible for EPF membership. Her employer opens an EPF account for her and deposits the required contributions.
• Example 2: Employer Non-Compliance – A small business owner, Rajesh, fails to deposit the EPF contributions deducted from his employees’ salaries for six months. This constitutes a violation of the Code on Social Security, 2020, and can lead to penalties, including interest charges and potential legal action by the EPFO.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. For specific legal guidance, please consult with a qualified legal professional.