Difference Between EPF and ETFFor many young professionals stepping into the workforce, terms like Employees' Provident Fund (EPF) and Employees' Trust Fund (ETF) might seem unfamiliar or overlooked. Often, newcomers focus solely on their total take-home pay, neglecting to grasp the significance of deductions made from their salary. However, what they may not realize is that over time, these deductions contribute to the accumulation of a valuable fund that can support them in the future. Fundamentally, the EPF is a retirement benefits program administered by the Employee's Trust Fund Organization, while the EPS functions as a long-term investment plan established by employers for the welfare of their employees. Governed by the Ministry of Finance, both EPF and EPS involve contributions from both employers and employees and serve as essential components of retirement planning. What is EPF?The Employee Provident Fund (EPF) is a scheme established to provide financial assistance to employees upon retirement, with contributions from both the employer and the employee. Instituted under the Employees' Provident Act in 1958, the EPF is managed by the Employees' Trust Fund Organization, overseen by the Central Bank of Sri Lanka and the Ministry of Finance. Employers are required to contribute 12% of the basic wage, while employees contribute 8% of their total earnings to this fund. Upon retirement, employees receive both their contributions and the employer's contributions. Contributions to the EPF are made regularly, allowing employees to set aside a portion of their salary each month for future financial security after retirement or when they are unable to work. Employers are mandated to remit a monthly allowance equivalent to 20% of an employee's total earnings to the EPF Fund. Total earnings encompass various components such as salary, fees, wages, allowances, and benefits, excluding overtime payments. Additionally, employees are eligible for EPF contributions from the commencement of their employment, regardless of the nature of their job or employment status. All employees, including permanent, temporary, casual, apprentices, and shift workers, are required to be enrolled in the EPF Fund by their employers. Even employees on a contract or working on a piece-rate, commission, or task basis are eligible for EPF contributions. Employers are legally obligated to contribute to the fund for every employee from the outset of their employment. What is ETF?The Employee Trust Fund (ETF) allowance was established under Act No 46 of 1980 and serves as a long-term savings plan aimed at enhancing the welfare, financial security, and social security of employees. Managed by the Employees' Trust Fund Board under the oversight of Sri Lanka's Ministry of Finance, the ETF provides financial benefits to employees upon their retirement. Eligibility for the ETF Fund begins from the first day of an employee's employment, regardless of their employment status, whether permanent, temporary, casual, apprentice, or shift worker. Similar to the EPF Fund, employees working on piece-rate wages, commission, contract basis, or any other work arrangement are also eligible for the fund. Additionally, both public and private sector employees are eligible for the ETF Fund, and it extends its benefits to migrant workers and self-employed individuals. These workers can voluntarily contribute to the ETF Fund by becoming members of the Employees' Trust Fund Board. Contributions to the ETF Fund come from both the employer and the employee, with the employer required to contribute an amount equivalent to 3% of the employee's total earnings. What is the Difference Between EPF and ETF?The primary distinctions between the ETF and EPF lie in their administration and purpose. The Employee Trust Fund Board oversees the ETF, whereas the Employee Trust Fund Organization manages the EPF. While the EPF serves as a retirement benefits scheme for employees, the ETF functions as a long-term investment or savings plan established by employers for the benefit of employees. EPF is exclusively available to employees in the private and government sectors, whereas the ETF extends its benefits to migrant workers and self-employed individuals. However, both EPF and ETF entitlements apply to employees upon retirement, regardless of whether they are employed in the government or non-government sectors.
ConclusionIn conclusion, while both EPF and ETF serve as important tools for securing employees' financial futures, they differ significantly in administration, purpose, eligibility, and flexibility. EPF primarily focuses on retirement benefits and is typically available to employees in private and government sectors. At the same time, ETFs offer long-term investment options and may extend benefits to a broader range of workers. Understanding these differences can help individuals to make informed decisions regarding their financial planning and retirement goals. Next TopicDifference Between |
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