Provident Fund for the Financial Security of the Employees

Published by The Daily Observer,  May 11, 2019(link Here)

Law Column is authored by the associates of Legal Counsel which is one of the leading full-service corporate law chambers of Bangladesh having core expertise in corporate and commercial law, employment and labor law, family law, property law, corporate taxation and so forth. (www.legalcounselbd.com or email at [email protected]) Provident fund for the financial security of employees Farhia Silvana Haque an employee has worked at that mutually agreed by the employer company for a minimum of one and the worker.) The employer year regardless of his rank, s/he has to contribute an equal shall be eligible to be a member of amount to the fund as well. The the provident fund.

cost of maintenance of the provi- The only exception is that the dent fund shall be borne by the owner, partner or members of the employer. Furthermore, the mem board of directors cannot be ber shall nominate a person to members of the provident fund. whom the member’s deposited The provident fund becomes a amount in the fund will go to in trust fund and is held and admin- case of his/her death. If at the istered by a board of trustees. The time of nomination, the member board of trustees shall consist of has a family, the nominee must be secured future is a prerequisite of the educated working class to be employed in any established organization. Hence, even after an employee retires or resigns, s/he usually looks forward to entering into some scheme for future security. Saving for retirement or separation is the ultimate goal on the financial road for salaried employees. In the absence of any pension scheme in the private sector, that is where the establishment of the Employee Provident Fund comes into the picture. A provident fund is a fund accumulated by salaried employees for enjoying retirement benefits or post-separation savings.

It is important to understand what a provident fund is, in order to get a clearer picture of its functions. Simply termed, the provident fund is a type of savings scheme constituted by private companies for the benefit of its employees. The fund is constituted in accordance with guidelines set by the labour laws of Bangladesh. Nevertheless, a com- pany may make its own rules for the development and management of the provident fund, given that the rules are not disadvantageous to the worker than the legal guidelines that are provided.

Although the establishment of a provident fund is not mandatory for companies, if three-fourths of the total number of employees of a company demand to establish a provident fund, by an application in writing, a company shall be bound to establish such a fund. If
the member deposited and the interest on the same. On the other hand, any member shall be able to withdraw his/her membership from the fund by applying in writing to the board, and if such withdrawal of membership happens after completing two years of service in the company, then s/he will receive all his deposited money in his name together with the amount the company deposited in the fund.

If the service of any member in the company is of less than two years, s/he will receive only the amount he had deposited in the fund, in the event he/she leaves the company. If before completion of two years of service, the member dies or the company is dissolved, the nominee of the member will receive both the amount deposited by the member and the amount deposited by the company along with the interest. In a situation where the fund is recognized by the National Board of Revenue (NBR), both the employee and the employer will get an income tax exemption on the fund amount.

To conclude, it can be said that although management of the Provident Fund includes some administrative formalities for employers, it has long-run benefits for both the employer and employees, with the employer benefitting from being able to invest the fund in particular sectors (as per the legal guidelines) and with the employee being able to save fractions of their salary every month and to be able to use that in the event of the employee’s separation or retirement.
an equal number of representa- tives of the employer and employ- ees who are employed in a compa- ny. Furthermore, a chairman shall n shall be nominated by the government though in practice such nomination by the government is rare.

Every permanent employee, after completion of one year of service in the company, shall contribute to the fund every month, an amount, not less than 7% and not more than 8% of his monthly basic wages. (The percentage may be different, but not less if it is
one or more members of his/her family. The nominee may also be changed at any time by written notice from the member. Such notice from the member. Such nomination shall be given at the time of the member’s joining the fund.

If a member leaves the company for any reason after two years of working at that company, he/she will receive the amount of money s/he deposited in the provident fund, together with the amount the company deposited in the fund to match the amount.