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This article has been modified . Please read the correction at the end.
The Employees' Provident Fund Organisation (EPFO) has a unique problem. It is sitting on a huge amount of money deducted from the wages of contract workers by their employers towards employees provident fund (EPF). However, the accounts are inoperable and, therefore, the beneficiaries have no access to these.
The money, about Rs 25,000 crore, is lying idle with no claimants. The new central provident fund commissioner, K K Jalan, has a plan. Sensitise the contract workers about EPF and simplify the procedures to deal with PF money.
As a first step, EPFO is planning to make it mandatory for all government agencies to have their contract workers' PF numbers written on their office identity cards.
"We hope to gradually include more and more employers till we cover a substantial number of contract workers. We would, then, widen the circle to make it mandatory for agencies which have dealings with the government, then to PSUs and then gradually to the private sector," says Jalan.
How have such a large number of accounts become inactive? It's because of the nature of contract workers' job. They work in one place for two days and a portion of their wages is deducted and put in a provident fund account. When they join a new work place, a new account is opened for them, but the money in the old is never transferred to the new one. Thus, they end up having multiple accounts but none remains active.
Often, it's ignorance about the procedures that precludes contract workers from transferring their old PF money to the new account. Jalan says he wants to create awareness in people about their PF accounts, so that they are conscious of their own savings. EPFO is planning several steps to make PF a real social protection option for the poorest worker. However, many in the industry feel PF, in its present shape, is driving away workers from the organised sector. According to experts, the one thing that could make a big difference to EPF is account portability. However, the EPFO is yet to move towards this direction.
Jalan does not promise an overnight miracle. "What has taken so long is not likely to be achieved at once now."
According to him, faster transfer of funds is the way forward. "We have to urgently cut down the time required to transfer funds from one account to another. If today it takes 30 days in 95 per cent cases to transfer funds, we want it to be reduced to 15 days," says Jalan, who recently kickstarted EPFO's move towards online transfer of funds. "It is these simple changes in the procedure that we want to do as a priority," he says.
However, analysts feel that provident fund has become synonymous with money that one never gets. "The deductions in the name of social protection have got such a bad name that it is keeping contract workers from joining the organised labour market," says Rituparna Chakrabarty, vice president Indian Staffing Federation, which has 30 member companies that employee contract workers.
The best option for contract workers today may be to work in the unorganised sector where there are no deductions. When 24 to 45 per cent of the wages are cut for PF, most workers believe they will never get it back. Or they are not sure if the money is actually going to their PF accounts. If a worker in organised sector earns Rs 10,000 he gets just Rs 7,500 in hand due to deductions. But in unorganised sector, if he earns Rs 8,000 he gets as much in hand, Chakrabarty points out. According to her, even if the fund transfer period is reduced to 21 days, it will work wonders.
A survey by Indian Staffing Federation shows that the number of contract workers in the organised sector could rise to 10 per cent by 2025 without any reforms. If reforms such as portability of PF accounts and faster transfers happen, this number could be achieved faster, says Chakrabarty. She says none really cares for provident fund. It was designed for permanent employees. Also, employer-employee relations have undergone a sea-change as people keep changing jobs and there is no long-term relationship.
According to Chakrabarty, it is not fair to insist that PF is the only form of social security possible. She says minimum wages and medical insurance are the essential social protection for a worker. If these two are there, then PF is redundant, she points out.
Mohit Gupta, director of Team Lease, says that the promise to transfer funds in three days through online processes is the best that could happen for workers. However, it is a tough challenge because in 2012-13, they managed to transfer only 10 per cent of the claims in three days.
THE BRASSTACKS
- Provident fund corpus: Rs 5 lakh crore
- Money in inactive accounts: Rs 25,000 crore
- Total number of accounts: 81.5 million
- Inoperative accounts: 30 million
This article had attributed a survey finding that the number of contract workers in the organised sector could rise to 10 per cent by 2025 without any reforms to Team Lease, which was wrong. The survey was conducted by India Staffing Federation. We regret the error.
