New EPFO Rule Update: Provident Fund (PF) is one of the finance schemes for most of the employees working in the private sectors of India. This works as an option by which employees invest a part of their salaries every month as savings. They will be secure for the future and also earn some income in the form of pension at some age in his lifetime when he is due for retirement. Under this scheme, EPFO (Employees Provident Fund Organization) gives pension benefits under the Pension Scheme (EPS-95) to employees. However, there are some rules to gain the eligibility for the pension, which the employee has to know and abide by.
What Does EPS Stand For?
EPS stands for Employee Pension Scheme 1995, which was started by EPFO, designed to meet the needs of organized sector employees and ensure a safe, regular pension for them post-retirement. Such employees are required to have at least 10 years’ service to avail the benefits under this scheme.
For being entitled to availing benefits under EPS, an employee is needed to work for 10 years. An employee however will not be entitled to benefit from the pension under EPS if the employment is less than that period. There are some exceptions on the contrary: For instance, if the duration of employment were 9 years and 6 months, it shall be considered equivalent to 10 years of service. If it is below 9 years, the employee will then not obtain any benefit regarding pension but can withdraw the entire corpus of his PF account before retirement.
How Can PF And EPS Be Calculated?
Huge amounts of salaries paid to employees either in private factories or commercial establishments are thrashed into PF, out of which some portions are directly transferred into his/her EPF account and the balance remains into EPS credit. 12% of the basic and dearness allowance (DA) of the employee is deposited each month in his PF account. Out of this, the total employee share goes into EPF, while of the employer’s 8.33%, it goes to EPS and the remaining 3.67% goes into EPF.
In this way, there exists contribution into both PF and EPS and there is the possibility of getting the pension benefits after retirement. Therefore, it becomes very important for such employees to regularly check their PF account and ensure that the amount deposited by them is going to the right account correctly.
What If The Employee Has Worked For less Than 10 Years?
Now the question pertains to whether an employee who has worked five years in two different organizations will get the benefit of pension. According to the EPFO provisions, if an employee works in the two organizations for five years each and has a gap of two years between changing jobs, then according to the extended service period, he will still qualify for the pension.
In this regard, it becomes important that the UAN number of the employee is the same. If the employee does not change his UAN number before leaving the job, his whole PF account’s money continued to be associated with the same UAN and its total value counts as service time for 10 years.
What Is The UAN Number And Its Relevance?
UAN or Universal Account Number is a 12-digit permanent unique identification number allocated by EPFO to every employee. This number can change only when he is no longer with the organization, irrespective of how often he changes jobs. It could have several member IDs but all member IDs would be linked to the same UAN. This makes it even easier for the employee to maintain his PF account.
By doing so, this makes it easy for an employee to link the old and new accounts easily and the entire deposit amount could be viewed. This system has many advantages such that there being an easy withdrawal from the old PF or transfer to the new accounts.
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