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How retirement benefits computed for salaried segment?

Provident Fund (PF), Pension Fund and gratuity are components of retirement benefit schemes. The Employees' Provident Fund and Miscellaneous

Provisions Act provides for compulsory contributory fund for the future of an employee after his retirement or for his dependents in case of his untimely death.
Every factory engaged in any industry specified in Schedule I in which 20 or more persons are employed, every establishment employing 20 or more persons or class of such establishments which the Central Government may notify, any other establishment so notified by the Central Government even if employing less than 20 persons is covered.

Both the employee and the employer contribute to the fund at the rate of 12 percent of the basic wages, dearness allowance and retaining allowance, if any, payable to employees per month. The rate of contribution is 10 percent in the case of some establishments which are mentioned in the Act. The rate of interest is fixed by the Central Government in consultation with the Central Board of Trustees, Employees' Provident Fund every year in March, so it can vary from year to year.

The entire amount of the PF along with the accumulated interest can be withdrawn by an employee on retirement, after attaining the age of 58 years. However, in cases of termination, retirement on account of permanent disablement, on immigration from India for a permanent settlement abroad and in cases of retrenchment, the amount can be withdrawn before the completion of 58 years. A person can also withdraw 90 percent of the amount a year before his retirement.

In case a person is going for a job change, his PF account can be transferred for further continuation. For this, he has to file a transfer application on Form 13 and submit it to the PF office concerned. If a person is switching to an organisation that does not come under this Act, he can receive all the accumulated money which is in his PF account till date. In cases of untimely death of the person, his nominee receives the amount.

The Employees' Provident Fund and Miscellaneous Provisions Act 1952 was amended in1971 and was renamed 'The Employees' Provident Fund and Family Pension Act 1952'. It was felt that in case of premature death of the worker or a permanent disablement, the PF was too less an amount to support him and his family. This led to the introduction of another social security benefit - pension.
After the last amendment in 1995, Employees' Pension Scheme 1995 came into effect from November 16, 1995. The assets and liabilities of the erstwhile PF were transferred and merged with the new pension fund. The benefits and entitlements to the members under the old scheme remains protected and continued under the new Employees' Pension Scheme 1995.

The existing members as on November 16, 1995 of PF who did not opt to join the erstwhile Employees' Family Pension Scheme 1971 and the beneficiaries under the erstwhile Employees' Family Pension Scheme 1971 in case of death or exit between April 1, 1993 and November 15, 1995 have the option to join the new scheme.
In case of gratuity, the employer has to contribute to this fund. The amount of gratuity payable is computed at a rate of 17 days' wages based on the rate of wages last drawn, for every completed year of service. The maximum amount of gratuity payable was Rs 1 lakh earlier. After the 11th amendment to the Act in 1998 the amount payable under the scheme has been raised to Rs 3.5 lakhs. Companies have a choice of opting for a higher benefit of gratuity, that is, a higher total amount to be paid.

Completion of at least five years of continuous service is necessary to receive this amount. However, it does not apply in cases where a person has stopped working due to death or disablement.