The NDA government’s decision to make Employees’ Provident Fund (EPF) accounts portable by allotting unique identification numbers to its subscribers will bring cheer to lakhs of organised sector employees. The EPF is the default retirement vehicle for employees and contributions to it are deducted from one’s salary and matched by the employer. Yet, due to archaic administration and operation of the scheme, it mostly fails to function as an adequate social security net for workers at retirement. Though PF balances essentially belong to employees, they are forced to access these accounts primarily through the organisations which employ them. Whenever an employee switches jobs, transferring the funds from one firm to another is quite a cumbersome task. With many employees either choosing to skip the transfer or simply unaware of the procedure, the EPFO has become saddled with an enormous number of inoperative accounts.
According to its last annual report, as many as 5.8 crore out of the 8.9 crore accounts managed by the EPFO were inoperative, with sums idling in them at `27,000 crore. Apart from creating needless workload for the EPFO, inoperative accounts represent a significant loss of opportunity for the employees, as these earn no interest after three years. The idle PF balances have also attracted scamsters, with reports of funds being siphoned off through spurious bank accounts.
It is noteworthy that it has taken a supposedly business-friendly government to implement the pro-worker scheme while its more avowedly left-leaning predecessor didn’t do much. The allocation of a unique number will help the employers as well by enabling them to check the verification claims. Although work on the scheme started in 2001, not much progress could be made in the absence of the requisite level of digitalisation. It was only from 2009-10 that all the data could be digitalised. But, it has to be remembered that the organised workforce in India is below 10 per cent while a vast majority has to fend for itself.