Can an Employee Resign Just to Withdraw Provident Fund? Seeking HR Insights

This incident happened in our organization during March 2014. One employee, who had been working with us for the past 4 and a half years, submitted a resignation letter. At the bottom of his letter, he specifically mentioned that he is submitting this resignation only for the purpose of withdrawing his Provident Fund amount. He had a perception that the organization would accept his resignation with the same purpose, remove his name from the company payroll for 3 months, and release his PF after 3 months from the date of resignation. Then, the organization would reinstate him in the payroll with a new appointment letter and a new PF account eventually.

Being in HR, I was the first person to respond to him, and based on my knowledge, I informed him that this is not the process. PF amount can only be claimed and withdrawn when a person retires or resigns from a particular organization. Furthermore, in some cases, I have read that a particular percentage of PF amount can be withdrawn in the case of an employee's daughter's wedding.

Hence, I request you all to guide me on this and let me know whether the PF can be withdrawn by submitting such a type of (temporary) resignation.

Employee Resignation for Provident Fund Withdrawal

This is not a new thing. Employees have been practicing such methods for withdrawing their amount when the need arises. Probably, this is due to the fact that people find it difficult to obtain a loan from other sources. However, employers are expected to guide their employees and help them in granting easy welfare resources so that they do not opt for resignation due to the need for lump sum money from provident funds or other such resources.

Regards

Professionalism in Handling Provident Fund Withdrawals

It is not a solution to use resignation as a means to access Provident Fund money. Such practices should not be encouraged. It is unprofessional for any organization to knowingly allow this.

Regards,
Seshadri

Please guide your employees that PF can be withdrawn not only for the purpose of a daughter's wedding but for many other reasons as well. The file attached here contains those details. If they resign like this, they may lose benefits pertaining to gratuity.

Regards,
Gauri

Dear all, It is true that a few workers opt to withdraw their EPF accumulations whenever they face a financial crisis. This should be avoided by educating them and extending possible financial aids. In fact, the purpose of EPF remains unachieved if it is withdrawn before it is required at old age. Such workers are also deprived of long-term benefits like gratuity due to well-established breaks in service.

Regards, PK Sharma

Dear Harsha,

First of all, isn't it easy for employees to exit and rejoin at their convenience in your office? I'm surprised.

Secondly, a 'conditional resignation' is not acceptable in normal circumstances.

Thirdly, from March '14 until today, what actions were taken by your company regarding this resignation? Is this still pending? On the contrary, if your company already accepted the resignation and relieved him, have you settled his PF? Have you reinstated him back on your rolls?

I feel the option exercised by your colleague is an ill-advised solution to his financial problems. As others have pointed out, he should have used the option of 'part final withdrawal' without quitting and closing his PF account. Now, I'm afraid, in the process, he may have lost a substantial amount of gratuity (equivalent to 2 1/2 months' salary) which he would have been eligible for once he completes 5 years of continuous service.

Sorry to see this hasty action.

Dear Harshavardhan,

Incident of Provident Fund Withdrawal Request

This incident happened in our organization during March 2014. One employee, who had been working with us for the past 4 1/2 years, submitted a resignation letter. At the bottom of his letter, he specifically mentioned that he was submitting this resignation only to withdraw his Provident Fund amount. He believed that the organization would accept his resignation for this purpose, remove his name from the company payroll for 3 months, and release his PF after 3 months from the date of resignation. Then, the organization would reinstate him on the payroll with a new appointment letter and a new PF account.

HR Response and Provident Fund Regulations

As an HR professional, I was the first person to respond to him, and based on my knowledge, I informed him that this is not the correct process. The PF amount can only be claimed and withdrawn upon retirement or resignation from a particular organization. In some cases, a specific percentage of the PF amount can be withdrawn for events like an employee's daughter's wedding.

Therefore, I request your guidance on whether PF can be withdrawn by submitting such a (temporary) resignation.

Industry Practices and Employee Behavior

It is regrettable to mention that the PF amount and account are used as a bank FD by employees. Once employees realize that a specific amount has accumulated in their PF account, they become restless until they withdraw it. In the industry, unprofessional employers encourage such practices to avoid liabilities under the gratuity act or retrenchment compensation. If an employee resigns before completing 5 years (or 1 year as the case may be), the employer is relieved of the mentioned liabilities.

There are certain occasions such as children's weddings, house purchases, LIC premium payments, and medical expenses under which a PF beneficiary can claim a withdrawal. However, a minimum of 5 years of membership under PF is mandatory.

I hope this clarifies the situation. Thank you.

Regards,

Your suggestion to get an advance from the PF department for your daughter's marriage is noted. The employee must have completed seven years of service to be eligible for a PF advance; otherwise, there is no chance to receive the advance payment for the marriage.

Regards,
Yogesh Setia (Sr. HR Executive)
[Phone Number Removed For Privacy Reasons]

Dear Harsh, it is totally unprofessional to think that Form 31 is only applicable after 5 years of employment, and that is only for one case: the purchase and construction of land. After 7 years of his/her employment, he can withdraw 50% of the amount for medical treatment and his daughter's marriage.

However, if your employee has a very good track record and a serious condition that requires immediate financial assistance, you can only proceed with approval from the senior management as part of an Internal Employee orientation program.

Alternatively, if your company has an Advance salary policy, you can suggest that as an option.

Regards.

HR Stance on PF Withdrawal and Reinstatement

As HR managers/executives, we do not encourage such withdrawals of Provident Fund (PF) or the reinstatement of employees after the submission of their resignation.

Regards,

This is very common in industries, particularly in the worker category. The only thing HR can do is guide them on the future benefits of PF. Additionally, the top management should help in employee welfare, which HR should propose to the management with proper documentation.

In a scenario where an employee resigns but is working unregistered in your organization, there is a significant risk involved. To mitigate this risk, it is essential to maintain fair HR practices and educate both employees and employers with supporting documents on the benefits and welfare of PF. If the financial aspect is a concern, the employer can offer assistance.

Regards,
Vihangakash Bhatt

Dear,

Unknown employees are withdrawing their EPF and EPS amounts, but they are lapsing their period of working for 4 1/2 years for EPS. Kindly guide them that in this case, if they want to withdraw their EPF (Form 19), they can do so, but they cannot withdraw Form 10C (EPS).

Thank you.

PF can be withdrawn by an employee when any event occurs, as mentioned in the attached list, OR when the employee becomes unemployed for 60 days (2 months) after resigning (on the last day of the job). However, if an employee is attempting to withdraw PF with the intention to encash PF/PS amount, it is not allowed.

This practice is normally adopted by the consent of the employees and employer, which is incorrect and unlawful with regard to the EPF Act. One can withdraw the PF accumulation after retirement or when unemployed for at least two months after quitting the job. For advances from PF withdrawal allowed before 5 years of contributing to the PF accumulation, only medical treatment for self, spouse, parents, or children is permissible.

I don't think this is a valid reason for resignation, and one should not encourage this. He should have discussed his financial difficulties with the responsible person of the company.

Hello sir, I am Shital. I worked in a pharmaceutical company for over a year. Due to personal problems, I left my job almost 10 months ago with a one-day relieving period. Even though 10 months have passed, the HR Manager has not released my EPF amount. Could you please advise me on what steps I should take?

Dear Sir,

This type of problem commonly arises among middle-class families and small employees because they require money constantly to support their families. If the government changes the rules for PF withdrawals, such as requiring individuals to work for 5 years to be eligible for a loan, those with less than five years of service may face challenges in managing their finances. They may have plans that exceed their financial capacity. In such a scenario, what options will they have?

I may not be very experienced in this matter, but I urge you to consider this issue.

Regards,
Chandu

Good welfare policies and awareness are required to be imparted to employees on PF withdrawal issues. Benevolent funds or other resources, if available, can be opted to help employees. This will not only boost the morale of employees but also instill pride in workplaces, encouraging growth in productivity.

Hi Shital,

First of all, no person other than the PF authority is authorized to reject your PF withdrawal. As far as I know, if the HR person in your previous organization is not ready to release your PF amount, you have an option to fill out Form 10C and Form 19 and get them signed by any Gazetted Officer. Then, submit them to the PF office. This may help you out. Seniors, please correct me if I am wrong.

Regards, Harsh