Employees Want to Quit and Rejoin to Avoid Pension: How Can We Address Their Concerns?

We have a few employees in our BPO organization who have completed 10 years of service. They are expressing their desire to quit the company and re-join as new employees to avoid their funds from being migrated towards pension once they complete 10 years of service.

Addressing Employee Concerns

Please provide insights so that we can better address the employees' concerns and assist them accordingly.

EPF & Pension Fund Details

Additionally, if possible, could you outline how I can calculate and show them their EPF & Pension fund details, including the interest amount, accrual, and any other relevant information to support their case?

Thank you in advance for your suggestions and assistance in this matter.

Regards,
Selvi G

According to the EPF Act, once a PF account is opened, it cannot be closed and reopened for an individual. It is only possible when the individual quits employment and does not join any organization where the EPF Act is applicable within two months. Then, they can withdraw their amount. Furthermore, if they again join an organization where the Act is applicable, a new account will be opened.

Secondly, I understand your concern. Many employees attempt to withdraw their funds during their service. Based on my experience, the primary reason for this is insecurity. To counter this, you should issue PF slips to them every year. These slips can be obtained through EPF offices or downloaded online.

Tell me if you require any further assistance.

Thanks,
Manish Gupta

I do not agree with your view that "insecurity is the main reason behind this matter." In the discussion, Mr. Selvi has clearly mentioned that the employees who have completed 10 years are approaching for this. Therefore, insecurity could not be the right reason for this.

In my experience, I would like to say that the employees make this decision themselves after the guidance of their colleagues. They set their minds not to opt for the Pension Scheme as the pension fund is paid to them as a pension only after 50/58 years of age, and the amount is also less. So, they withdraw the EPF Fund before completing 10 years of service.

Counseling Employees on EPF and Pension Options

I would like to suggest to you that here you need to counsel your employees and inform them that if they go for this option, then they cannot re-join the organization before 2 months, to fulfill the unemployment clause for withdrawing the Fund.

I have observed that some members also suggest keeping such employees off-roll for a due period to avail them of this facility, which is wrong.

So, try to convince them and explain the benefits of the EPF Fund and Family Pension Fund. Inform them that the pension fund will work as a security fund for their family, and the pension amount depends on the length of their service. The longer their service, the higher the pension amount. Therefore, just continue with the scheme and try to add more service tenure within the scheme. It will increase their PF Fund due to the higher interest rate, monthly pension amount due to long service tenure, gratuity amount due to long service tenure, and many more benefits. Therefore, inform them that just due to misguidance, they are going to lose so many benefits.

Regards

Please don't do this; if they lose the continuity of service, it would adversely affect the gratuity amount, which means 10 x 15 days' salary as per the Gratuity Act. Not only that, seniority, promotions, leave, and other years of service-related benefits also vanish. Caution them on these dangers.

I agree with the above. There is no use in withdrawing the PF prior to retirement as, upon leaving the company, one may lose the employer's share as well. It is better to transfer the PF to the other company where he is joining.

Regards,
Chander S. Sharma

It gives us the impression that Employees' Pension is available after 10 years of service. However, there is another condition that the pension is receivable only after the age of 50 and above. In short, 10 years of service is a primary condition, and after that, the age requirement is 50 years and above. Please remember that those who have not reached 50 are not eligible for any pension, even if they have completed 10 years of membership.

The idea of withdrawing PF and rejoining the company is not advisable, as it will not provide any additional benefits. Instead, you may lose the continuity of service and the benefits that come with it.

Please let me know if you need any further clarification or assistance.

Best regards

It is not a wise idea. If I stop to be polite, I would say it is foolish.

EPF Pension Scheme Eligibility

First thing, 10 years of minimum contribution towards the EPF pension scheme makes an employee eligible for a pension. But on attaining 58 years of age (50 mentioned by somebody is for reduced pension, and this option also will be withdrawn shortly). No benefit will accrue to an employee by resigning and rejoining. In fact, as pointed out by others in this forum, you stand to lose on many counts. I would say that this will be an injustice to your family because the EPF accumulation is tax-free at entry and exit, and at the end of service, the accumulated amount will be substantial. Don't deprive your family of this. Most of these employees may be needing some tax-saving schemes in any case. Also, remember that the cumulative interest you get on this is good, currently 9.25% or so. There is no tax-saving scheme better than this, except a housing loan.

Pension Calculation

The pension is calculated by Pensionable service x Pensionable salary (limited to Rs 6500) / 70. This is for those who have joined after 16 Nov 1995 (when the pension act came into effect). For others before 1995, somebody else in this forum has given an excellent XL sheet. This means that more years of service will get you a better pension.