EPFO to cover 400,000 employees in J&K: 5 Key benefits for workers of organized sector

NEW DELHI : Retirement fund manager Employees Provident Fund Organization (EPFO) will cover 400,000 organized sector employees in Jammu and Kashmir and Ladakh, effective 31 October, making them eligible for a series of social security benefits ranging from family and disability pension to higher life insurance, among others. It shall also reduce the employee cost for companies to some extent.

Here are the five key advantages for employees and employers.

1) Reduction in employee cost: Employers in both the Union territories following the abrogation of Article 370 and bifurcation of Jammu and Kashmir into two UTs, shall see a reduction in employee cost as administrative charges of EPFO is fairly low. For example, companies and organizations deploying 20 or more employees will pay 0.5% administrative charges, nearly three times less than what is prevalent in the region. Similarly, employer’s contribution towards employees deposit linked insurance will be half of what is prevalent now in both Jammu and Kashmir and Ladakh - that is only 0.5% of wages against 1% of wages.

2) Pension coverage: So far the state social security act did not have provision for pension. So pension enrolment will be a new feature, benefitting lakhs of workers. The coverage under the scheme will provide pension to members as they attain the age of 58, provided they made regular PF contributions for 10 years. As per EPFO rules, such members will also be eligible for family/orphan pension in case of the death of the member, and disablement pension incase a member becomes disable during his or her service period.

3) Higher PF interest rate: EPFO is now paying one of the highest interest rates as its earnings are higher. EPFO officials said while the state so far was paying around 8% interest rate, EPFO has been paying a higher interest rate. For 2018-19, it paid 8.65% rate of interest to its subscribers 10 basis points higher than 2017-18, but same as the rate paid in 2016-17.

4) Electronic transactions: EPFO coverage in both the UTs will help companies to register with the retirement body online, file returns online thus reduce administrative hassles. It shall also provide online name corrections of employees. It shall also give members access to online EPF account and passbook, facilitate claim settlement process and completion of KYC through online mode.

5) Higher Insurance: Under the employees deposit linked insurance (EDLI) scheme, workers in both the UTs will get “higher life insurance benefit – from a min of Rs.250,000 to a highest Rs.600,000 under EPF Act". Mint could not immediately ascertain the current insurance amount in J&K as part of their EDLI scheme.

Workers in Jammu and Kashmir were governed by its EPF scheme of 1961 and the Employees’ Deposit Linked Insurance (EDLI) scheme of 2000 so far. Following the abrogation of Article 370 of the Constitution and the bifurcation of Jammu and Kashmir into two Union territories (UTs), the EPFO will extend its coverage to both the UTs.