Question

Gaurav is a new joinee in an organization and he has certain queries with respect to employee related laws. He has been directed to reach out to you with the queries. Kindly advise him: a. As the organization deducts Provident Fund from the salary, can you please explain applicability of the schemes under Provident Fund and how is the calculation and apportionment of the Provident Fund done against various schemes? b. Who is entitled for Gratuity and how is the payout of gratuity calculated?

Answer 1

a. The Employee Provident Fund (EPF) scheme deducts a certain percentage of the employee's salary, and the calculation of the EPF is based on a fixed rate.

b. Gratuity is a benefit provided to employees upon completing five years of continuous service, and the payout is calculated based on the employee's last drawn monthly salary and the number of years of service.

Step-by-step explanation:

a. The Employee Provident Fund (EPF) is a mandatory social security scheme in India that provides financial security and retirement benefits to employees. Under this scheme, a certain percentage of the employee's salary is deducted to contribute to the EPF.

The calculation of the EPF is based on a fixed rate, which is currently set at 12% of the employee's basic salary plus dearness allowance. This amount is contributed by both the employer and the employee.

• The employee's contribution is deducted from their salary and is apportioned to the EPF account.
• The employer's contribution is also added to the EPF account.

b. Gratuity is a benefit provided to employees as a form of appreciation for their long-term service. It is governed by the Payment of Gratuity Act, 1972. An employee becomes eligible for gratuity upon completing five years of continuous service with an organization.

The amount of gratuity is calculated based on the employee's last drawn monthly salary and the number of years of service. The formula for gratuity calculation is: (last drawn salary / 26) * number of completed years of service.