Home > Compensation, Employee Benefits, Labour Law > Provident Fund- common issues faced by employees

Provident Fund- common issues faced by employees

April 8, 2012

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

The object of the provident fund scheme is to secure the future of an employee after his retirement. Therefore employees are willing to contribute to the provident fund scheme so long as they are in employment. This is not to speak of other benefits in the form of income tax relief on contributions as well as on the lump sum amount of provident fund which an employee gets at the time of retirement.

Apart from many issues associated with job change such as relieving, service certificates, notice periods and bonds, that need to be sorted out by the employees at the time of leaving a job, another dilemma that nags their minds is how to protect their provident fund and pension fund which they cherish  to retain till the end of their service.

Common questions that are associated with changing a job

The following questions are commonly asked by people looking for a change in employment

  1. Whether they have to withdraw their PF amount
  2. Whether they can transfer  the PF amount from the PF account with the previous employer to that of the new employer
  3. Whether they are required to put in any minimum service for such withdrawal?
  4. What about their pension amount?

This post attempts to clarify these queries within the frame-work of the provisions of the P F Act 1952 and the P.F Scheme 1952 and the Employees Pension Scheme 1995, framed there under.

What are the relevant provisions of the Employees Provident Fund Scheme 1952 and the Employees Pension Scheme 1995

Sub-para (2) of Para (69) of the Employees Provident Fund Scheme 1952 states that an employee resigning or leaving an establishment covered under P.F Act can withdraw P.F amount standing to his credit if he does not join any other establishment which is also covered under the P.F within two months from the date of his resignation or exit from the previous covered establishment. It implies that if he joins a new establishment to which the P.F Act applies within two months from the date  of resignation or exit from the previous establishment, he cannot withdraw.

At this juncture, Para 57 of the Employees Provident Fund Scheme 1952 comes into picture. It permits an employee to transfer his P.F from his previous employer to the new employer whether located within the same region or in different regions, if one of them is a covered establishment.

However where the employee, after exhausting the waiting period of two months, joins an establishment that is  covered or exempted from the P.F Act, he can either withdraw his provident fund  or pension fund( if he has not put in ten years of service) or alternatively transfer his provident fund.

As regards the pension fund of the employee at the time of leaving an establishment that is covered by the P.F Act, an employee is eligible for drawing pension at the earliest under Para 12(8) of the Pension Scheme 1995 if he has rendered eligible service of  ten years or more and has attained the age of 50 years. Alternatively he can also obtain Scheme Certificate  from the Commissioner of provident Fund, if he subsequently joins a factory or establishment covered by the Pension Scheme 1995.  The Scheme Certificate shows the details of pensionable service and pensionable salary.

If he has not put in the minimum service of ten years at the time of leaving the establishment, he can withdraw the pension contribution as per the formula for calculation specified under Table –D appended to the Scheme in terms of Para 14 of the Pension scheme 1995.

Therefore, the aforesaid criteria of waiting period of two months, the service  put in by an employee and the age of the employee at the time of resigning from a covered establishment are to be borne in mind to explore the options available and the procedure to be followed for dealing with various situations  concerning the Provident fund and pension fund. To avoid being too legalistic in explaining the options and to simplify the understanding of the various situations that are likely to arise with regard to provident fund and pension fund at the time of leaving the service of an employee, a ready reckoner table  is provided below

S.No              Situation Provident Fund- whether can be withdrawn or be transferred Pension fund – whether can be withdrawn or continued u/ Scheme Certificate Relevant Forms to be filled.
1 Employee puts in less than 10 years of service and leaves a covered establishment & joins a covered establishment within the waiting period of two months Cannot be withdrawn – but can only be transferred to new establishment cannot be withdrawn but can be continued  u/Scheme Certificate to be surrendered to the new employer to protect his pensionable past service. 1)Form 13 for transfer if new establishment is located in the same region of P.F office or form 13-A, if new establishment Is located in different region.

2) Form-10-C for Scheme Certificate for pension fund

2 Employee puts in less than 10 years of service and leaves a covered establishment & joins an exempted establishment  whether within the waiting period two months or beyond it Can be withdrawn or alternatively get the P.F transferred to new establishment Can be withdrawn- or alternatively scheme certificate can be obtained to protect past pensionable service, if he joins again a covered establishment. 1)Form 19 for withdrawal or 2)Form 13 for transfer if both the establishment are located in the same region of P.f office or Form 13-A, if located in different regions and  3) Form 10-C for withdrawal of pension fund or for obtaining scheme certificate
3 Employee puts in 10 years or more of service and attains the age of 50 years or more at the time of leaving a covered establishment & joining a covered establishment within a period of two months Cannot be withdrawn – but can only be transferred to new establishment Employee can not withdraw pension fund . To obtain scheme certificate  to be surrendered to the new employer to protect past service for pension purpose 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

2) From-C for scheme Certificate

4 Employee puts in 10 years or more of service and attains the age of 50 years or more at the time of leaving a covered establishment & joining an exempted establishment whether within a period of two months or beyond it Can be withdrawn – but can also be transferred to new employer. Employee can not withdraw pension fund . To obtain scheme certificate  to be surrendered to protect past service for pension purpose, if he joins a covered establishment latter  or can claim reduced pension 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

2) Form-C for scheme Certificate

3) Form 10-D for reduced pension.

5 Employee leaves an exempted establishment and joins a covered establishment He can withdraw pension as per the pension rules of the exempted establishment or alternatively, can get his P.F amount transferred from the previous employer to the new employer(present employer) Not applicable 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

 

For transferring his fund to the new employer, the employee has to fill in Form. 13, if the new employer is located in the same region of P.F office in which his previous employer is also located and Form-13-A, if the new employer is located in a different region and submit it to the new employer (present employer) who will forward it to the  relevant Provident Fund Office which will then take necessary steps to effect the transfer of the P.F amount of the employee to his P.F account under the new employer. The signature of the previous employer is not necessary on Form -13 or Form -13-A.

a)Procedure for transfer of Provident fund

For transferring his fund to the new employer, the employee has to fill in Form. 13, if the new employer is located in the same region of P.F office in which his previous employer is also located and Form-13-A, if the new employer is located in a different region and submit it to the new employer (present employer) who will forward it to the  relevant Provident Fund Office which will then take necessary steps departmentally to effect the transfer of the P.F amount of the employee to his P.F account under the new employer. The signature of the previous employer is not necessary on Form -13 or Form -13-A.

b)Procedure for withdrawal of Provident Fund

The employee shall fill in Form 19 and submit it to the previous employer to enable him to fill in details of contribution etc and forward it to the Regional Office of the Provident Fund under whose jurisdiction, the previous employer falls. The P.F Department shall settle it within 30 days of receipt of the application for withdrawal.

 c)Procedure for withdrawal of pension contributions or obtaining Scheme certificate

The employee can fill in Form 10-C and fill up the relevant column for indicating his option either for withdrawal of pension fund or obtaining Scheme Certificate under Pension Scheme as per his eligibility  and submit it to the Commissioner of Provident fund.

 d)Procedure for claiming  pension

 The employee has to fill in Form-D and send it to the previous employer to enable him to fill in the details by him and attest it and re-transmit it to P.F office concerned for disbursing the appropriate pension.

Important precautions to be taken while filling the forms

1)      Employee to ensure that his signature matches that on the P.F. Dept.’s record.

2)      Fill details correctly such as date of leaving ,P.F code number or bank account number and address etc.

3)      Employee to take the attestation/signature of the employer

PF is a retiral benifit which keeps accumulating and can be utilized for a specific event requiring lump-sum amount or can be encashed in time of need. Contributions to PF are tax deductible within the prescribed limits. This, coupled with the fact that PF accounts earn reasonable interest, PF is a an excellent tool to build a corpus.

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Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc

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  1. May 7, 2013 at 11:44 am

    Fantastic report. Keep writing.

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