Employees’ Provident Funds (EPF) Scheme

In Context 

• More subscribers left the Employees’ Provident Funds (EPF) scheme than the number of new people who joined in the past two years, suggested the latest numbers released by the Union Ministry of Statistics & Programme Implementation.

About 

• In 2020-21, 8.55 million new subscribers were added to the scheme, while 9.78 million subscribers exited it. 
• The trend continued in 2021-22 (till December 2021), with 7.9 million new subscribers and 8.18 million exits. 
  • The number of members subscribing to this scheme gives an idea of the level of employment in the formal sector.

About Employees’ Provident Funds (EPF) scheme

• EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. 
• It is managed under the aegis of Employees’ Provident Fund Organisation (EPFO).
• It covers every establishment in which 20 or more persons are employed (and certain other establishments which may be notified by the Central Government even if they employ less than 20 persons each).
• The employee has to pay a certain contribution towards the provident fund and the same amount is paid by the employer on a monthly basis. 
  • At the end of retirement or during the service (under some circumstances), the employee gets the lump sum amount including the interest on PF contributed which gets accrued
• The Central Board of Trustee, which is a key decision making body for EPFO, takes a call on the interest rates that have to be provided on the provident fund deposits, every year.
  •  Once CBT decides an interest rate on EPF deposits for a fiscal year, it is sent to the Ministry of Finance for concurrence.
  • EPFO provides a rate of interest only after it is ratified by the government through the finance ministry.
• In 2021, the interest rates on deposits were set at 8.5% and the rates for the current financial year will depend on the income projections for the year.

Source:LM