New Delhi: The labour ministry may alter its plan to provide a new centralized unique provident fund (PF) account number by designating the one that an employee gets at the start of his or her career as fixed for a lifetime.
The change has been proposed by the Employees’ Provident Fund Organisation (EPFO), which manages the private sector employees’ retirement fund. The proposal has been reviewed by Mint. The previous proposal was to allot a unique centralized number to each account holder afresh.
The current practice is for the employee to be assigned a new PF account number every time there’s a job change.
The new proposal can be implemented without “having any major changes in the business rules as well as without any requirement of hardware”, said a labour ministry official with knowledge of the development. The aim is the same—more efficient service through a single number.
While this could be less costly than the original plan, employers may end up having to deal with more paperwork as the proposal envisages a separate register for new employees with existing PF accounts.
Also, the money that goes into the account will be managed by the original regional PF office. This will mean that, when it comes to withdrawing their PF money, employees will have to approach the regional office their account came under at the start of their working life.
“A permanent account number is crucial for millions of employees. However, it should be done in a centralized way. Any bottleneck or effort that could increase paperwork for the organization or hassle for the worker (while withdrawing money), will not achieve the desired result,” said Ravi Wig, chairman of the industrial relations committee of the PHD Chamber of Commerce and Industry lobby group and a member of the EPFO’s Central Board of Trustees, an apex body comprising government, experts, labour unions and employers’ representatives.
Wig said the system should be made seamless so that a worker can withdraw money parked in the retirement fund from anywhere in the country. EPFO has told CBT that it will implement the permanent account scheme by 1 April next year.
“If the permanent number is implemented through a centralized way, we feel that some Rs.24,000 crore more can go to the retirement fund every year from casual workers,” Wig said.
EPFO manages at least 95.31 million accounts, out of which only 44 million are active.
Inactive accounts stop earning interest three years after the last contribution but add to the paperwork and maintenance load of the fund managers. The fund has an overall corpus of more thanRs.3.3 trillion.