THE AGA KHAN UNIVERSITY HUMAN RESOURCE POLICIES AND PROCEDURES MANUAL PROVIDENT FUND Policy # Issue # Revision

# : : : HR/BN-14 __________________ 03 __________________ __________________ Page Effective Date Effective Date : : : 01 OF 05 _________________ January 01, 2010 _________________ _________________

DISCLAIMER: If there is a discrepancy between the electronic copy of this policy and / or any other copy of this policy, the written copy held by the Policy owner in Human Resources will prevail.

Approved By: ________________________ VICE PRESIDENT HUMAN RESOURCES 1.01 POLICY STATEMENT AKU has established a compulsory contributory Provident Fund for eligible faculty and staff as part of its retirement benefits plan with effect from November 01, 1990. 1.02 DEFINITION
(a)

Contributory refers to the fixed monthly contribution by the employee, which is matched by the institution to the extent permitted by the Provident Fund rules and placed into the employees Provident Fund account. The Provident Fund is managed by the trustees comprising of representatives of employees and the management in accordance with its rules approved by the Commissioner of Income Tax.

(b)

1.03

ELIGIBILITY All full time national faculty and staff of AKU will be members of the Provident Fund as of their date of employment (Annexure HR/BN-14 - 1).

PROVIDENT FUND 1.04 OBSERVATIONS AND LIMITATIONS

(a)

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An employees monthly compulsory contribution is 10% of the Basic Salary which will be deducted directly from his/her salary. The Institution will simultaneously contribute an equivalent amount to the employees provident fund account. (This is the revised contribution amount effective November 01, 1999, which was earlier 8.33% since the time the Fund was established).

(b)

The management of the Fund shall rest with the trustees, headed by the President AKU, as the Chairman Trustee. There shall be six other trustees, three of whom shall represent the employees interests and the other three Management Trustees. The trustees of the Provident Fund will invest the accumulated funds in line with legal provisions to generate profits. The profits earned on these funds will be allocated to individual employees accounts on a pro-rated basis annually. The Provident Fund will be managed in accordance with the Provident Fund Rules. Expatriates, Temporary Employees, Interns, Residents, Medical Officers, and Trainees are not eligible for membership to the Provident Fund. At the time of separation, the employee will be paid the total amount accumulated in his/her provident fund account which will comprise of (i) own contributions (ii) contributions by Institution, and (iii) profits earned on investments made from these amounts. An employee may nominate one or more persons as his/her nominee of the Provident Fund. If a nominee happens to be a minor, a person of full age must be appointed who is capable to give receipt and discharge, to whom payment may be made on behalf of the nominee. In the event of death of the nominee(s) during the life of the employee, the employee will need to nominate another person in place of the deceased nominee(s). Every nomination must be made in writing on the Form of Nomination (Annexure: HR/BN-14 - 2). If the employee wishes to change his/her nominee(s), the previous nomination will need to be revoked in writing by the employee and a revised nomination made.

(c)

(d) (e)

(f)

(g)

(h)

An employees membership of the Fund will cease only on his/her ceasing to be employed by the Institution either on retirement, death, resignation or removal from the service of the Institution.

PROVIDENT FUND
(i)

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In the event of the death of the employee, the accumulated amount in the Provident Fund account will be paid to the nominee, or in the absence of the nominee, only to the Executors or Administrators of the employees fund/ estate or the holder of a Succession or Administrator Generals Certificate. No member shall be entitled to assign, whether by way of security or otherwise, howsoever, his/her interest or any part thereof in the funds of the Fund and no such transfer or assignment shall be valid. The Trustees shall not recognize or be bound by notice of any such transfer or assignment.

(j)

PROVIDENT FUND LOAN Employees will have the facility of availing loans from total amounts accumulated in their Provident Fund account. The loan may be availed to meet expenses for marriages, house building/repairs, life insurance premium, illness in family etc, detailed below. (i) The loan facility will be available to employees who have been members of the Provident Fund for a minimum period of one year. Loans will be granted in accordance with the Provident Fund Rules which are summarized as follows:

(ii)

# CIRCUMSTANCES RULE LIMIT A. PERMANENT WITHDRAWALS (repayment not necessary) 1. Building or purchasing a 19 d. 36 months basic salary or house accumulated balance to the credit of the member, whichever is lower. 2. UPON ATTAINING THE AGE OF 50 YEARS a) Purchase or construction of 19f (I) 24 months basic salary or 80% house of the accumulated balance to the credit of the member, whichever is lower. b) Purchase of agricultural 19f(ii) Same as above land from government c) Repay loans of financial institutions d) Without assigning a reason 3. Proceeding on leave preparatory to retirement. 19f(iii) 19f(iv) 19.g. Same as above 60% of the accumulated balance 90% of the accumulated balance

PROVIDENT FUND

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# CIRCUMSTANCES RULE LIMIT B. TEMPORARY WITHDRAWALS (to be repaid in not more than forty eight equal installments) 1. Pay expenses for illness 19 a. Shall not exceed six months basic salary or accumulated balance, whichever is lower. 2. Overseas passage for health or 19.b. Same as above education 3. Marriage, funeral or religious 19.c. Same as above ceremonies. 4. Repairs, renovation or 19d.d Same as above extension of residential house. 5. Motor cycle/ scooter purchase 19 a.a. Same as above 6. Performance of Haj 19 cc Same as above
(iii)

Temporary loans will be recovered with a mark up @ 1% above the rate at which profit was distributed by the Provident Fund in the year prior to availing of the loan. Employees applying for a Provident Fund loan are requested to confirm the borrowing rate through Human Resources. Provident Fund loan applications must be accompanied by supporting documents, wherever required, e.g. purchase of house (A 1), expenses for illness (B 1) etc. Temporary loans along with mark up, will be recovered from the employees salary in monthly installments, not exceeding 4 years. A member may re-apply for a loan after a minimum period of one year has elapsed since the previous loan was granted, provided the previous loan has been paid off. Loans outstanding at the time of employment conclusion will need to be repaid fully by the employee. AKU will recover these amounts along with the mark up from the employees final settlement of Provident Fund dues.

(iv)

(v)

(vi)

(vii)

(k)

Normally if an employee is on unpaid leave for an extended period, there will be no payments for his/her Provident Fund contribution and similarly no contribution will be made by the Institution during the unpaid leave period. In case of employees having availed the Provident Fund Loan and subsequently proceeding on unpaid study leave, the repayment installments can be deferred until the employee resumes duty if the employee so requests.

PROVIDENT FUND
(l)

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The Institution shall have a first and paramount lien upon the accumulated balance standing to the credit of each member in respect of all dues and loans outstanding and losses, damages, costs, and expenses which the Institution may at any time pay, sustain or be put to, by reason of any act of embezzlement, and/or misappropriation by such member, and in the event of any claim arising by the Institution.

1.05

PROCEDURE (a) Membership of Provident Fund All new employees are required to submit the completed Application for Membership Form (Annexure HR/BN-14 - 1) and the Form of Nomination (Annexure: HR/BN-14 - 2) for membership to the employees Provident Fund, to the Human Resources at the time of joining. (b) Application for Loan (i) Application for a Provident Fund loan must be made on Provident Fund Loan Application Form (Annexure HR/BN-14 - 3) and forwarded to Human Resources by the 15th of the month, for disbursement in the following month. Application for Permanent Withdrawal, Rule (19d) should be accompanied with a duly filled in Undertaking Form (Undertaking Form) along with the Provident Fund Loan Application Form. Applications received by Human Resources after the 15th of the month will be considered in the following month. Loans will be paid out by the Provident Fund office in Finance during the first week of every month. The loan and applicable mark up will be recovered as a direct deduction from the employees salary every month.

(ii)

(iii)

(iv)

(v)