What are the benefits of a provident fund for employees and employers?

A provident fund (PF) is a long-term investment fund to which both employees and employers contribute. The purpose of the PF is to provide employees with a financial cushion in retirement and incentivize them to stay with the company for the long term. In this blog post, we’ll explore the benefits of having a PF for both employees and employers. 

What is a provident fund?

A Provident Fund (PF) is a retirement saving scheme that helps employees save money for their retirement years. Employees contribute a fixed percentage of their salary to their PF account, while their employers match this contribution. The interest earned on the PF account is tax-free, which makes it an attractive savings option for employees. In addition, the withdrawal amount is also tax-free. Employees can withdraw from their PF account when they retire, resign from their job, or become unemployed.

What are the benefits of a provident fund for employees?

The biggest benefit of a PF for employees is that it helps them save for their retirement. Employees can start contributing to their PF account from the day they start working and can continue doing so until they retire. The sooner they start saving, the more money they will have when they retire. Employees can also enjoy peace of mind knowing that their retirement savings are well taken care of.

Another benefit of a PF for employees is that they can get a loan against their PF balance. This can be helpful in times of financial need, such as when buying a house or paying for medical expenses. The loan amount can be up to 50% of the employee’s balance, and the interest rate is usually lower. Repayment of the loan can be done through salary deductions over some time.

What are the benefits of a provident fund for employers?

Offering a provident fund to employees is also beneficial for employers. One of the benefits is that it helps employers attract and retain good talent. This is because employees often consider whether an employer offers a provident fund when deciding whether to accept a job offer, Employers who offer a provident fund also have an advantage for those who do not comes when to recruiting.

Another benefit for employers is that it helps them build good relationships with their employees. This is because employees who feel that their employer cares about their welfare are more likely to be loyal and productive workers.

How much should you contribute to a provident fund?

When it comes to contributing to a provident fund, employees and employers should each contribute at least 12% of the employee’s salary. However, it’s important to remember that the employee’s contribution is tax-deductible.

How does a provident fund work?

A provident fund is a long-term savings account that helps employees save for retirement. Employees contribute a fixed percentage of their salary to the account, and the money is then invested by the fund. over time, the account grows and provides a nest egg for retirement. 

There are two main types of provident funds: 

The first is a defined contribution (DC) fund, where the amount of money you receive at retirement depends on how much you’ve contributed, and how well the investments have performed. 

The second is a defined benefit (DB) fund, where you’re guaranteed a certain level of income at retirement, regardless of how much you’ve contributed or how well the investments have performed. 

DB funds are more common in countries with strong labor laws, such as France and Belgium. 

To qualify for a provident fund, employees must usually work for a certain length of time at their company.  For example, in South Africa, employees must be over the age of 16 and must have worked for their employer for at least five years.  Conditions also vary depending on the country.  

For instance, in India, public and private sector employees are eligible to join a provident fund, but in Malaysia, only private sector employees can join. 
Meanwhile, in Indonesia, only those who earn less than 4 million rupiahs per month (around $400) can join a provident fund – although this is set to change in 2020. 

Provident funds are an important part of many people’s retirement planning. By ensuring that employees can save for the future, they provide valuable financial security in later life.

How can I withdraw my PF?

Employees’ Provident Fund (EPF) is a retirement savings scheme managed by the Employees’ Provident Fund Organisation (EPFO). It is a voluntary savings scheme where employees can contribute a certain percentage of their monthly salary towards their retirement fund. Employees can withdraw their EPF balance for various reasons, such as buying a house, funding their child’s education, etc.

Withdrawing your EPF balance is a simple process, and can be done online through the EPFO portal. You will need to submit your KYC documents, and once your withdrawal request is approved, you will receive your PF balance in your account within 10 days.

Is PF compulsory for all employees?

The PF scheme was introduced in 1952 to provide social security to employees after retirement. The scheme is mandatory for all companies with more than 20 employees. Employees contribute 12% of their salary towards the PF, while employers contribute an equal amount.

The PF accumulates over the years and provides a lump sum payment to employees at retirement. The EPFO also provides loans and advances to employees from their PF balance.

The PF is a major source of retirement income for many employees in India. It provides financial security and peace of mind in old age. The scheme is beneficial for both employees and employers.

Who is not eligible for PF?

If you are an employee who is not earning a basic wage of Rs. 15,000 per month, you are not eligible to join a provident fund. Employers may also choose to exempt specific categories of employees from PF contributions, such as those earning above a certain salary threshold.

What if the company is not paying PF?

If your company is not paying into your provident fund, then you are not receiving the full benefits of this retirement savings plan. Your employer must contribute 12% of your salary into your provident fund account by law. If they are not doing this, then you should speak to HR or your union representative. In some cases, employees may be able to make voluntary contributions to their provident fund, but this will not make up for the missing employer contributions.


In conclusion, both employees and employers can reap many benefits by offering or contributing to a Provident Fund account. For employees, it provides them with an opportunity to save for their retirement and enjoy peace of mind knowing that their retirement savings are well taken care of. For employers, it helps them build good relationships with their employees while also attracting and retaining talent. As you can see, there are many benefits to be had by both parties!