A Comprehensive Guide On Employees Pension Scheme
Updated On Aug 12, 2022
Table of Contents
Employers and employees both make payments to an employee provident fund. Both the employee and the employer are required to make monthly payments under the EPF plan. If you do that to an employee who stops working partially or completely owing to a handicap of any type, you will receive this money upon retirement.
Every organisation with 20 or more employees is covered by the EPS plan. Organisations with less than 20 workers may, however, be included with specific restrictions and exclusions. The employee receives a lump sum payment upon retirement that combines both their own contributions and the employer's contributions with interest. The employment years are determined at intervals of six months, it should be mentioned. To know more about employees’ pension scheme, read on.
About Employee Pension Scheme (EPF)
The system, which ensures that workers receive a pension once they turn 58, is administered by the Employees' Provident Fund Organisation (EPFO). Both current and future EPF members are eligible for the advantages of the plan. 12% of the employee's base pay and Dearness Allowance (DA) are both contributed by the employee and the employer to the EPF. The company contributes to EPS at a rate of 8.33 per cent, while the employee contributes the whole amount to the EPF. The plan gives the employee a consistent income stream after retirement.
Types Of Employee Pension Scheme
Pensions for widows, children, and orphans fall under numerous categories under EPS. The pensions give the EPF subscriber's family members monetary protection and security.
Following are the types of employee pension schemes -
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Reduced Pension Scheme -
If a member of the Employees' Provident Fund Organisation has clocked ten years of service and is between the ages of 50 and 58, he or she may apply for an early pension. For each year that the age is below the requisite 58 years in this case, the pension payout will be decreased by 4%.
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Child Pension Scheme -
If an employee of the Employees' Provident Fund Organisation passes away while on active duty and leaves a spouse and children, monthly child benefits will apply. Along with the monthly widow pension, the children's pension will also be provided. The children's pension will be provided up until the kid becomes 25 years old. A maximum of two children may receive a children's pension that is calculated at 25% of the widow's pension.
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Orphan Pension Scheme -
The offspring of an Employees' Provident Fund Organisation member who passes away without a surviving spouse is eligible for a monthly orphan pension. 75% of the monthly widow pension's value is used to calculate the orphan pension. Up to the age of 25, the children would be entitled to an orphan pension, which is only available to the oldest two children. In a recent change from 2016, the Labour Ministry expanded the orphan pension over 25 years if the kid has a physical or mental illness.
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Vridha Pension Scheme -
The spouse of an Employees' Provident Fund Organisation member who passes away is entitled to a widow pension. The widow will receive the pension to help her get by till his or her passing or getting remarried. The eldest widow will receive the money if there are many widows.
Availing Pension Under EPS
Under EPS, the employee's pension is calculated for two categories. Anyone who joined EPS before November 15, 1995, goes into the first group, whereas people who entered EPS after that date falls into the second. When the person reaches age 50 or 58 and has completed 10 years of service, they are qualified to apply for a pension.
Endnotes
EPS is a welfare programme implemented to guarantee employees a better future. It is a legal benefit that employees can take advantage of after retirement or after leaving the workforce. Employees who pass away will be able to collect benefits on behalf of their dependents.
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