EPFO: Transforming Social Security for Millions of Indian Workers
The Employees’ Provident Fund Organisation (EPFO) has played a pivotal role in ensuring social security for over 70 million workers in India over the past seven decades. Since its establishment in 1952, EPFO has expanded its services and introduced reforms to benefit employees and employers alike. Let’s take a closer look at its history, recent updates, and future plans.
A Legacy of Social Security
EPFO launched with the aim of providing financial security to employees in the organized sector. Over time, it has introduced three major schemes:
1. Employees' Provident Fund (1952): This scheme enables employees and employers to contribute a portion of wages, ensuring financial savings for the future.
2. Employees' Pension Scheme (1995): This ensures retirement pensions and family pensions in case of the employee’s death.
3. Employees' Deposit Linked Insurance Scheme (1976): Provides life insurance benefits during the service period.
Attractive Returns for Members
In the initial years, EPFO offered an annual interest rate of 3% on deposits, which peaked at 12% in 1989–90. Currently, the interest rate stands at 8.25%. Members have also benefited from occasional bonuses, demonstrating EPFO's commitment to ensuring higher financial returns.
Mandatory Aadhaar Verification for PF Accounts
EPFO has mandated Aadhaar-based verification for linking Universal Account Numbers (UANs) to streamline access to its services. This reform simplifies online claims, transfers, withdrawals, and updates of personal details, enhancing transparency and accessibility.
Expansion of Banking Partnerships
To make transactions more efficient, EPFO plans to add private banks as collectors of PF contributions, aiming to expand its network from 17 to 33 banks. This initiative reduces dependency on aggregators, accelerates fund transfers, and improves ease of doing business for employers.
Tax Amnesty Scheme Under Consideration
EPFO is preparing to introduce a tax amnesty scheme to encourage unregistered companies to join the Provident Fund system. Employers will have the opportunity to register and settle their dues without penalties, benefiting employees through greater social security coverage.
Greater Flexibility in Pension Contributions
The government is exploring reforms to allow employees to decide the percentage of their salary to allocate towards pension. This move could enhance retirement benefits, aligning contributions with individual financial goals.
Widening Coverage and Support
EPFO has introduced initiatives to boost employment, offering financial incentives to employers hiring new employees. For instance, under specific schemes, employers receive subsidies for the first three years of employment.
