Provident Fund India Provident Fund India

We are one such species who have an innate fear, which holds root and grows in our system since the time we can decipher what is Safe and what is Dangerous, the reason for this fear isn’t the lack of strength, rather it is over cautiousness that we are bred upon as a kids, and this cautiousness, stays with us till the very end, and at later stages of life we term it as Insecurity. Abraham Maslow in his psychological theory “Hierarchy of Needs” places Security and Safety as the second most important component in an individual’s psychological development in the societal orders.

Companies had a huge problem with, employees walking out of jobs altogether and seeking more pastures pay checks at various organizations, this loosing of employees led the company management to realize employees are leaving due to insecurity regarding their financial future, hence the adoption of various methods to make the employee feel safe, one such method was the adoption Provident Fund, where contributions from the employee as well as the employers are accumulated and are provided to him/her at the end of their tenure or during their retirement.

What is PF?

A fund which is composed of the contributions made by the employee during the time he has worked along with an equal contribution by his employers, calculated, usually at a rate of 12%, which are accumulated by the company and are provided at the end of their tenure or during VRS or termination of an employee. Designed, so as to provide the retiring individual with dignity and security, however, it has, over the years, developed into a broad plan for social security which covers the retirement, buying houses, medical expenses and related expenses.

Why is it Useful?

From an Employer perspective PF is quite important because it is really helps in stopping the migration of employees due to financial insecurity, as well as it builds the confidence and trust amongst the employee when they know that the employer himself is interested in their future well being.

From the Employee perspective it means insecurity less, tension free brain to work with, as well as a guarantee that after retirement to enjoy their time and life in leisure rather than in anxiety.

Applicability:

Applicability of Provident Fund according to the Employees Provident Fund and Miscellaneous Act of 1952 every establishment which is a factory engaged in any industry specified in Schedule 1 and in which 20 or more persons are
employed and any other establishment employing 20 or more persons which
Central Government may, by notification, specify in this behalf.

Provident Fund’s provision is also applicable voluntarily too, even if the company doesn’t have the requisite minimum number of 20 employees.

Can be made applicable by central government to establishments employing less than 20 persons or if the majority of employees agree.

PF is applicable to all persons who are employed directly or indirectly through contractors in any kind of work.

Applicability of PF according to which Law:

Provident Fund is applicable under the Employees Provident Fund and Miscellaneous Act of 1952, where-in it is clearly mentioned in its objective that the act has been passed for the provision of Compulsory Provident Fund for Employees.

Eligibility:

The eligible employees for Provident Fund are those who are drawing pay from the company.

The Deduction is 12% of the basic salary.

Regulatory Body:

Provident Fund is regulated and guided by Employees’ Provident Fund Organization of India, which is a Statutory body under the Ministry of Labor and Employment.

Calculation:

If your Gross Salary i.e. 10500/- the following calculate the allowances, it has to be calculate as the basic 2/3 time i.e. 7000 is basic
balance amount is the following calculation:-
Professional Tax 1% of Gross
P.F 1% of Basic Pay
Medical 9% of Basic Per Month
House Rent 45% of Allowances on balance after Basic salary.