EPFO Needs a Major Overhaul

Twenty years of embracing globalisation and open markets have resulted in significant improvements in the quality of life of urban Indians. A simple thing like getting a phone connection, which used to take several years, now takes only a few hours. Travelling by air was once the preserve of the rich and powerful, but today ordinary middle class Indians like me travel by air several times in a single year.

That said, there are still several areas where things are conducted in the same old socialist India style, with simple tasks taking years to accomplish. The Employees Provident Fund Organisation (EPFO) is one such organisation that continues to be a major source of harassment for the working population in the organised sector in India.

Because if there’s anything one dreads while switching jobs (something which has become very commonplace nowadays), it’s the certain prospect of harassment one has to face while getting one’s PF and Pension transferred from the old company to the new company. It is a well known fact that in a majority of cases, it takes upwards of 1-2 years to get one’s PF transferred, leading many to either forget about their accumulated PF, or else withdraw it instead of transferring it (which is a relatively faster option).

I find this whole process of “transferring” PF accounts every time one changes a job rather cumbersome. It may have been adequate in the pre-1991 days, when people joined one organisation and retired from the same organisation 40 years later, or at most changed one job in their entire career. But in today’s fast-paced workplace, this has turned into a major irritant, creating unnecessary red tape for everyone involved, and reducing dynamism in the supply of workforce.

The EPFO needs to evolve with the times, if it doesn’t want to be despised as a modern-day dinosaur.

My proposal is to have one single EPF account per individual, and keep the account number same as (or linked to) the PAN number of that person. So whenever a person starts their career, their first company will ask them to apply for a PAN card. Upon getting the PAN number (which takes less than two weeks nowadays), the employee can communicate the same to their company. The company will then proceed to create an EPF account for that employee with (or linked to) the same PAN number. And importantly, this EPF account will belong to the employee, just like a bank account. So when they switch jobs, they only need to provide their PAN number to their new company (which is mandatory anyway) and the new company will be able to continue depositing the PF to the same account, without the need for any paperwork for anyone.

Such a system will have the following benefits:

  1. It will ensure that every person joining the workforce registers for a PAN number.
  2. It will eliminate the bureaucracy involved in shifting a job, as an employee only has to open an EPF account once in his/her life
  3. It will benefit everyone involved:
    • Companies no longer have to open fresh EPF accounts for every single employee joining them (including returning employees), resulting in reduced paperwork and hence reduced costs
    • Employees will no longer need to transfer their EPF accounts, thus saving them a LOT of harassment and allowing them to make more productive use of their time
    • It will significantly reduce the workload on the EPFO, and also reduce their interaction with the public, which is great news!

Further, the EPF accounts can also be Internet-enabled, so that employees can check their EPF balance, apply for withdrawals or loans, etc. online without the need to approach the EPF office. The idea is to turn the EPF account into a kind of Internet-enabled bank account, with the same resultant benefits.

I further propose that the EPF should be allowed to invest in equities and thereby give its members the chance to earn higher returns for their money. The New Pension Scheme (NPS) already does this, so why should the EPFO not follow suit? Since it is mandatory for us to deposit a part of our salary into our EPF account, it is only fair and democratic that the EPFO give us a choice of where to invest that money. The EPFO should give its members a choice between investing in fixed return debt schemes or equities with potentially higher returns. And this, again, should be doable online.

Let me know what you feel about this proposal. I am planning to forward the same to the EPFO and the Ministry of Labour & Employment.

UPDATE:

The Ministry of Labour & Employment is unreachable! That’s right – neither their suggestion/feedback form works, nor is their email ID laborweb@nic.in valid.

UPDATE: August, 2010

After my efforts to contact the Ministry of Labour & Employment failed, I forwarded this proposal via email to Mr. Tarun Bajaj, Joint Secretary, Insurance & Pension Reforms, Govt. of India. I also forwarded it to the Central PF Commissioner, EPFO, Govt. of India.



To my pleasant surprise, Mr. Bajaj did revert back to my proposal, saying that the Govt. is planning to do something similar, using UID as the basis, instead of PAN as suggested by me. The reason being that PAN numbers may not be unique, something which I was not aware of.

See his reply below:



From    Tarun Bajaj <xxx.xxx@nic.in>
To    Vijay Padiyar
Date    Thu, Aug 5, 2010 at 2:52 PM
subject    Re: Proposal to reform and speed up the EPFO

PAN Nos may not be unique. This issue will get settled once the UID Nos are there.

Also EPF is looked after by Min of Labour.

Tarun Bajaj

Joint Secretary, Insurance & Pension Reforms
Department of Financial Services,
Room No 4, Jeewan Deep Building
10, Parliament Street,
New Delhi 110001

UPDATE: January, 2011

Indeed, going by the recent news reports that the Govt. is planning to replace the PF account number with the UID, it does look like we are headed in the direction which was mentioned by Mr. Bajaj. I really hope this happens as soon as possible, because this reform really does need to happen urgently.

UPDATE: Online EPFO Grievance Redressal

EPFO has launched a website for online redressal of grievances related to PF matters. The link is http://epfigms.gov.in/.


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2 Comments

  1. PavanPavan09-13-2012

    I see an Indian in you…

  2. BanuBanu11-12-2010

    It is the feasible solution as of today !!!

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