Employee provident fund, usually abbreviated as EPF refers to a scheme whereby the employees in the private sector save a percentage of their salary. Usually the employer deducts 12% of the employees’ basic salary each month which he or she contributes to the scheme. In most of the cases, it is the government that decides on the percentage the employees contribute to the scheme.
The provident fund has various benefits. These include:
- Provident fund being sponsored by the government makes it a good investment since the employees contribute a percentage of their basic salary to the savings which in any companies is a whopping 12 percent but it may have variations depending on different companies.
- The total amount the employees have contributed or the company has set side as the employees’ retirement not taxed by the government meaning the employees get to enjoy the full fruits of their savings.
- The family members of the employee can access the funds in cases of an emergency of the death or retirement of the employee. These special occurrences or emergencies may include marriage, education, and housing, medical emergency and so on. This however is acceptable under certain limits and some conditions must be met before the funds can be transferred or withdrawn.
- The employers can be in a position to retain their valuable employees. This helps the company in reducing their cost of operation as well as their total expense. On the other hand, the burden on the company is ease and since it is the government that takes care of the employees fund on their behalf.
- The employee provident fund also helped in the cases of the death of the employee or a member of the EPF scheme. The family members can access the funds to help them reduce the financial burden they are most likely to experience in case the member of the scheme who is their family member gets incapacitated or dies. The funds the family members get are not form the members savings account but they come from the EPF savings of the member.
- The benefits of the employee provident fund also include the flexibility where he funds can be transferred from one company to another in case the employee decides to change from one company to another due to the various reasons where he or she could not remain in the same old company. The employees get the chance to enjoy the accumulation of the funds.
- Payment of the funds in the case of an early resignation or retirement regardless of which comes first is the other benefit the employees get. In many cases due to the working conditions or cases of health of termination of the contract may lead to a resignation of the employee and others work all through until retirement. The fund does not discriminate. Whichever comes first, the employee gets their savings.
Last but not least, the employees savings gain an interest of about 8.75% every year. This interest does not get taxed meaning the employee gets the full amount.