Understanding Provident Funds

Payees who are employed by a company must join a recognized provident fund. The employers category determines which provident fund the employees should join. For instance, all government employees will be covered under Government Provident Fund (GPF). Private sector employees are generally covered under the recognized provident fund. Organizations have a choice to be covered under the Regional Provident Fund Commissioner (RPFC) or have their own setup, formed under a trust, which will report to the RPFC periodically. Generally large employers have their own trusts, and the onus of managing the contributions rests on the employer itself, guided by a board of trustees. Note that the PeopleSoft software does not provide for the compliances of a trust; it provides only for employers covered under the RPFC.

Provident funds work by deducting a fixed percentage from the salary of the employee. The employer also matches the contribution, which is remitted to the account of the employee maintained by the RPFC. Contributions from the employee and the employer are remitted every month by a certain date. Upon an employee's retirement, death, or permanent disability, the accumulated contribution along with interest is paid to the employee or his or her legal heirs.

With Global Payroll for India you can:

• Define the type of provident fund chosen by the company (statutory provident fund or recognized provident fund).

• Ensure that all payees are registered with a provident fund and capture the personal information for the payee and their beneficiaries.

• Define the three programs under the provident fund and the calculation methodology for each (Employees Provident Fund Scheme, Employees Pension Scheme, and Employees Deposit-Linked Insurance Scheme).

• Ensure that the deductions for payee contributions are properly calculated and deducted on a monthly basis.

• Ensure that the employer contribution is properly calculated.

• Ensure that the monthly contributions are correctly deposited with the proper provident fund authority.