APPLIED HRM
ASSIGNMENT NAME – Case situation
ASSIGNMENT NUMBER – 02
NAME: Akanksha Verma
CLASS: MBA-HR (Analytics)
UID: 2023-2605-0001-0002
ROLL NO: MBA23J02
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Assignment 1
Case Study on Employee Provident Fund (EPF) Contribution
Context:
Ravi has joined XYZ Ltd., a private company, with a basic monthly salary of ₹25,000. He has questions
regarding the Employee Provident Fund (EPF) contributions—both his own and those from his
employer—and seeks clarity on withdrawal options before retirement.
Understanding EPF Contributions
The Employee Provident Fund (EPF) is a government-backed savings scheme for employees in the
private sector, managed by the Employees’ Provident Fund Organisation (EPFO) of India. It’s a key
element of social security, ensuring a financial safety net for employees post-retirement. Both
employees and employers contribute to this fund every month, creating a cumulative retirement corpus.
EPF Contribution Calculation:
The Employee Provident Fund (EPF) is a mandatory retirement savings scheme for employees working
in the organized sector. Both the employee and employer contribute towards the EPF account, which
earns interest over time. The employee’s contribution is a fixed percentage of the basic salary, while the
employer’s contribution is split between the Employee Provident Fund (EPF) and the Employee Pension
Scheme (EPS).
Ravi’s Salary:
Ravi’s basic monthly salary is ₹25,000. The EPF contribution is calculated on the basic salary.
The Current Wages Ceiling Limit for coverage under the Act is ₹: 15,000/- (Basic + DA) p/m month
Employee Contribution: Will be calculated on 15,000
Employee's Contribution
Basic+DA 25000
PF calculated on 15000
Employees contribution 12%(15,000)
1800
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Employer Contribution: Will be calculated on 15,000
Employers Contribution
EPF 3.67% (15,000) 550.50
EPS 8.33% (15,000) 1249.50
EDLI 0.50% (15,000) 75.00
EPF Admin Charges 0.65% (15,000) 97.50
Total 13.15% 1972.5
Total contribution
Employee = 1,800
Employer = 1,972.5
Total contribution = 3,772.5 (25.15% of PF Wages)
Employee wages in hand = 25,000 – 1800 = 23,200
PF Account = 3,772.5
Employee savings = 1,800 + 550.5 + 1249.5 = 3600
EPF Withdrawal Conditions
Ravi can withdraw money from his EPF account under certain conditions, which are divided into two
categories: partial withdrawal and full withdrawal.
Partial Withdrawal:
Ravi can make a partial withdrawal from your PF account before retirement for specific purposes, such
as:
1. Marriage (of self, siblings, or children)
2. Medical treatment (self or family)
3. Higher education (for self or children)
4. Home purchase or renovation
5. Unemployment (up to 75% of the balance after one month of unemployment)
The eligibility and withdrawal limits vary depending on the purpose and the employee’s years of
service. The employee must have completed 5 years of service in order to be eligible for partial
withdrawal for house renovation.
Full Withdrawal:
Full withdrawal of the EPF balance is allowed only under specific conditions, such as:
Retirement: Ravi can withdraw the full balance once he retires at the age of 58.
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Permanent disability: If Ravi becomes permanently disabled and unable to work, he can withdraw the
full EPF balance.
Migration abroad: If Ravi moves abroad permanently, he can withdraw his entire EPF balance.
Unemployment for more than two months: After two months of unemployment, Ravi can withdraw
the full balance from his EPF account.
Important Considerations:
• Eligibility Criteria: Specific eligibility criteria, documentation requirements, and withdrawal
limits apply to each type of withdrawal.
• EPFO Approval: All withdrawals require approval from the EPFO.
• Tax Implications: Withdrawal of EPF funds may have tax implications, depending on the
specific circumstances.
Consulting with EPFO or HR
For accurate and up-to-date information on withdrawal procedures, eligibility criteria, and tax
implications, it is recommended Ravi to consult with the EPFO or the HR department of your
organization. They can provide detailed guidance and assist with the necessary paperwork.
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Assignment 2:
Impact of Voluntary Provident Fund (VPF) on Retirement Planning
Context:
Priya is already contributing to the Employee Provident Fund (EPF) through her employer but is
considering additional contributions to her retirement savings by opting for the Voluntary Provident
Fund (VPF). With a basic monthly salary of ₹30,000, she plans to contribute an additional 10% of her
basic salary to her VPF. This case study examines the pros and cons of the VPF, its financial impact, and
its significance in long-term retirement planning.
VPF Contribution Calculation
The Voluntary Provident Fund (VPF) allows employees to contribute more than the mandatory 12%
towards their Provident Fund account, thereby increasing their retirement savings. Priya has decided to
contribute an additional 10% of her basic salary to the VPF.
Employee Contribution: Will be calculated on 15,000
Employee's Contribution
Basic+DA 30,000
PF calculated on 15000
Employees contribution 12%(15,000)
EPF 1800
VPF 10% (15000)
1500
Employee's Total contribution (EPF +VPF) 3,300
Employer Contribution: Will be calculated on 15,000
Employers Contribution
EPF 3.67% (15,000) 550.50
EPS 8.33% (15,000) 1249.50
EDLI 0.50% (15,000) 75.00
EPF Admin Charges 0.65% (15,000) 97.50
Total 13.15% 1972.5
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Total contribution
Employee = 3,300
Employer = 1,972.5
Total contribution = 5,272.5 (25.15% of PF Wages +10% VPF)
Employee wages in hand = 30,000 – 3,300 = 26,700
PF Account = 5,272.5
Employee savings = 3,300 + 550.5 + 1249.5 = 5,100
Pros of Investing in VPF
1. Higher Returns: VPF typically offers higher interest rates than traditional savings accounts,
fixed deposits, or even some mutual funds. This can significantly boost your long-term savings.
2. Tax Benefits: Both the principal amount and the interest earned on VPF contributions are tax-
deductible under Section 80C of the Income Tax Act. This helps reduce your taxable income and
save on taxes.
3. Forced Savings: VPF promotes disciplined saving. By automatically deducting the additional
contribution from your salary, it encourages you to save regularly.
4. Liquidity: While VPF is primarily a long-term investment, there are provisions for partial
withdrawals under certain conditions, such as buying a house, medical emergencies, or children's
education.
5. Retirement Security: VPF can significantly enhance your retirement corpus, ensuring a
comfortable and financially secure retirement.
Cons of Investing in VPF
1. Limited Liquidity: VPF is a long-term investment, and premature withdrawals may attract
penalties.
2. Lower Returns Compared to Equity: While VPF offers better returns than traditional savings
options, it may not match the potential returns of equity-based investments over the long term.
3. Lack of Flexibility: Once you opt for VPF, it's difficult to reduce or stop the contributions
without significant paperwork.
Impact on Priya's Long-Term Financial Planning
By opting for VPF, Priya is effectively increasing her monthly savings and investing in a tax-efficient
manner. This can significantly boost her retirement corpus and provide financial security in the long run.
