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EMPLOYEES PROVIDENT FUND
AUTHORED BY - UDIT SHARMA
Abstract
EPF is a type of Pension or
post-retirement benefits. Basically, employees either from construction
background or from service background both have some extent of exposure toward
accidents and death. These scheme not only safeguard their future. But, it also
help them from thinking about post-retirement problems. EPF is a fund made
under a scheme named as EPS (Employment Provident Scheme). EPFO (Employment
Provident Fund Organization) oversee the working and contribution under this
scheme. EPF was launched from the act of 1952 named as THE EMPLOYEES’ PROVIDENT
FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952.
Vision behind bringing this policy
was to safeguarding the interest of employees who are prone to accident and
from sudden stoppage of income. It also, protect employees’ dependent interest
through monetary benefits.
Today in this paper several things
will be discuss about what is EPF and EPFO, and what is Social Security and
what is the status Social Security in India. After that, we will see the
history and evolution of act and scheme related employment provident fund.
After than a detailed process (how and in what amount contribution will be made
by employees and employers both). After that, Relevant judgment related to
special allowance, Actus reus and Mens reus in defaulting the contribution by
employer and, EPS para 11(3). After that, Facilities given by EPFO to their
subscribers.
At the end paper will be concluded by
the writer
Keywords-
·
Employment
Provident Fund
·
Employees’
Provident Fund organization
·
Employment
Provident Scheme
·
the
Employees Provident Fund and Miscellaneous Provisions Act of 1952
·
Aadhar
The task of managing organizations
and ensuring that they remain consistently aligned with the goal for which they
were established is a tough one. Even when the reason for an organization's
existence is stated in detail at the time it is founded, throughout the course
of its existence, the functioning of the organization gradually deviates from
the reason it was founded. This drift is caused by many factors, some of which
are the environment, leadership, organizational structure, processes,
insufficient deployment of ICT infrastructure, employee profile, incentive
structure, organizational culture, bargaining power of customers, and level of
competition.
The Employees' Provident Fund
Organization, also known as EPFO, was established so that economically needy
workers in India would have access to social security and welfare benefits.
Nevertheless, as time went on, the organization began to engage in bureaucratic
processes, documentation that did not add value, insufficient oversight and
accountability, and poor monitoring on compliances.
EPFO (EMPLOYEES’
PROVIDENT FUND ORGANIZATION)-
Employees’ Provident Fund
Organization if Established, Administered and work under Ministry of labour and
Employment, Government of India. The purpose behind established this
organization was ensuring the social security for Industrial Worker and social
security for their dependents. If we see EPFO emerged as India’s one of the
Largest social Security organizations. “According NIRBADH released by
Employees’ Provident Fund Organization it was stated EPFO has on an average 69
million monthly Contributing member and over 7.1 million pensioners who receive
their pension every month.[1]”
“There is provision under this scheme
that any employee who is earning less than Rs. 15,000 is entitled for an
Employment provident scheme 1952, And their employer must Enrol them under this
scheme[2]”.
Whereas, employees who earn above Rs. 15,000 can waive off this deposition at
will.
EPF (EMPLOYMENT
PROVIDENT FUND)-
Employees’ Provident Fund is the
scheme which is flourish by EPFO. EPF got its power for working from The
Employees provident Fund and Miscellaneous provision Act, 1952. In this Scheme
a certain percent of mandatory deduction from their basic salary of employee
and apart from this Employers also need to contribute same amount as much as
deducted from employee to this scheme. All this fund and contribution were
collected and monitored by Employment Provident Fund Organization. Main purpose
behind making these contributions under a scheme regulated by government is to
give post-retirement benefits to the employees. The accumulation of provident
fund is a long-term saving which as stated act as a post-retirement benefit.
Several companies allowed their employees to withdrawn their EPF before
retiring on behalf of giving a security in a face of loan for special reasons
only which can be decided by the company only.
The Employees Provident Fund and
Miscellaneous Provisions Act was constituted in 1952 with the objective of
safeguarding the interest of employees after retirement and in case of death
for the benefits of their dependents. EPF was implemented with the vision that
it will safeguard the interest of the people when they retire or came in the
age where they can’t do any work and due to this or due to some other reason
source of income stopped suddenly. Other than It was planned and implemented
also that after the death of beneficiary their dependent or heirs will get the
monetary benefits and other miscellaneous benefits also.
HISTORY OF EPF-
As part of a series of legislative
initiatives in this direction, the Employees Provident Fund and Miscellaneous
Provisions Act of 1952 was adopted by parliament and went into effect on March
14, 1952. The following three schemes are currently in effect under the law.
• Employees Provident Fund Scheme,
established in 1952
• Employees Deposit Linked Insurance
Scheme, established in 1976
• Employee Pension Scheme (Established
in 1995) (replacing the employees Family Pension Scheme, 1971).
The EPF plan began in 1929 on the
proposal of the Royal Commission of Labour, which emphasised the importance of
establishing a provident fund for employees.
The Indian Labor Conference agreed in
1948 to implement a legal prediction plan for employees.
The Conference of State Labor
Ministers, meeting in January 1951, backed the hearing.
The EPF ordinance was promulgated by
the President of India on November 15, 1951, and it was replaced by the EPF act
on March 4, 1952. Except for the state of Jammu & Kashmir, it stretches
throughout India.
Employers Duty to maintain a Provident Fund
Account-
Employees provident Fund account
proved to be very beneficial for both employers and employees at the time of
contingencies that it not only safe-guard the interest and payment enjoyed by
employees at the time of retirement or superannuation but employees provident
fund account safeguard employers to face the contingencies and minimize the
loss.
According to the Code on Social
Security 2020. Sec 21 Government authorize the employer of certain
establishment to form and maintain an employee provident fund account.
According to sub-section (1) of sec
21- Central Government on the application made to it regarding this by employer
or by majority of employees in a establishment (employing more than 100
employees). Can authorize employer by an order in writing to maintain a
provident fund account which will be related to the establishment. Manner,
condition and terms regarding maintaining the account will be prescribed by the
Central Government only. Prior to giving authorisation Central Government check
whether Employer of such establishment made a default in payment of provident
fund contribution or had committed any other offence under this code
immediately preceding 3 years from the date of authorisation.
After establishment of provident fund
account employer shall maintain such account, submit such return, deposit the
contribution in a manner as prescribed by the Central Government. As mentioned
under sub-section (2) employer shall maintain the account and employer shall
also maintain the records that can help in the inspection of the accounts and
apart from that also employer also need to pay administrative charges for the
same. It is a duty of employer to follow and abide all other terms and
conditions, which is specified in employee provident fund scheme.
As authorisation is given to the
employer it is a duty to abide the rules prescribed by the scheme and it is a
duty of Central Government also that If employer fails to comply with and terms
and condition of the scheme or authorisation or commits any offence provided
under this code then Central Government may cancel the authorisation of the
employer.
EPF Process-
Eligibility-
1. Any person employed directly, through
a contractor, or in connection with the establishment's job is referred to as
an employee. There is no differentiation between regular employees and
contractual/casual/daily wage/temporary/piece rated employees.
2. Either permanent or probationary
employee all employee are eligible.
3. 10% of basic wage for enterprises
with fewer than 10 employees; sick industries declared by authority; Jute,
Beedi, Brick, Coir, and Guar gum Industries/factories.
4. Other industries max. 12% of basic
pay.
Calculation-
1. Employee directly- 12%.
2. Employer- 12% out of which 8.33% EPF
and balance 3.67% to PF A/c.
3. Admin charges on total wages by
employer- 1.10%.
4. 0.50% EDLI calculated on total EDLI
slab (Rs. 6500) wages by employer in EDLI fund.
5. 0.10% EDLI calculated on total EDLI
slab (Rs. 6500) wages by employer.
Interest & Nomination-
1- Interest credited to members PF A/c
on monthly running balance.
2- Interest set by CG with EEPF's
central board of trustees annually in March/April.
3- Present Rate- 8.5%.
4- Members can nominate any person.
5- Nominated member details will be
maintained by Regional Provident Fund Officer.
Annual Settlement and Full
Settlement-
Annual settlement
1- Annual statement will be sent to
member through establishment where the member was last employed after the close
of each year.
2- Annual statement of Fund account
shows- opening balance, interest credited, contribution done, closing balance.
3- In case of error, member must notify
PF office through employer after 6 months of receiving statement.
Full Settlement-
1- PF A/c settled within two months when
resignation from the services.
2- PF A/c settled immediately when- retirement
(58 years), termination of service, retirement due to permanent incapacity,
Permanent migration from India, Female member leaving service for getting
married.
Employers Liability-
Monthly Return
1- filling of Monthly PF return to EFPO
within 15 days of month's end.
2- Providing list of new employees
joined in the establishment. Who are qualified to become member in fund
(FORM-5).
3- Providing employees who are leaving
service (FORM-10).
Annual Return-
1- Within one month of the end of the fiscal
year, the employer must submit to the commissioner a consolidated annual
contribution statement (FORM-6A) and an individual employee sheet (FORM-3A)
detailing the contributions made by the employees and the employer.
Penalty-
1- 12-37% interest is charged for late
contributions/administrative fees.
Employees Liability-
1- Apply for Transfer of PF A/c in case
of already having one.
2- Contribution can be increase
voluntarily after informing the employer (voluntary provident fund).
3- Checking the details maintained by employers
periodically.
4- Do not approve to the employer
deducting his portion of the contribution or administrative expenses that he is
responsible for from the employee's wages.
5- At the time of entering the
establishment, you will need to provide your personal and nominees' information
(Form-2) for the pension and PF programme.
Judgements-
HORTICULTURE EXPERIMENT STATION
GONIKOPPAL, COORG VERSUS THE REGIONAL PROVIDENT FUND ORGANIZATION[3]
In this case a plea was filled by a
company for dismissing the damage imposed by High Court of Karnataka. The
damage levied upon the company was for non-payment of contributed which need to
be paid by the employers for the account of Employees’ provident fund. Non-
payment of the funds led company to be charged for the damages worth Rs. 85548
in addition to Rs. 74288. It was said that once a default in payment was done
in the account of EPF then employer is under an obligation to pay the damages
for delay in payment of contribution of EPF.
It was said by the court that- “Default
or delay in payment of EPF contribution by the employer under the act is sine
qua non for imposition of levy of damages under Section 14B of the Act 1952,
and mens rea (criminal intent) or actus reus (criminal act) is not an essential
element for imposing penalty for breach of civil obligation/liabilities.
Default or delay in payment of EPF contribution by the employer under the act
is sine qua non for imposition of levy of damages under Section[4]”
The Employees provident fund
organisation & Etc
VERSUS
Sunil Kumar B. & Etc[5]
“This case was regarding Employment
Provident Scheme 1995. In the para 11(3) of this scheme cap of Rs. 6,500 was
given which was earlier a maximum pensionable salary. It was also given that
anyone or anyone employee who exceed this cap can contribute upto 8.33% of
their actual salary to the EPF.
Amendment came in the Para 11(3)
which raise the cap from Rs. 6,500 to Rs. 15,000. But in the amendment it was
also written that employees who were the member of EPS as on September 2014 will
only be eligible to contribute in the pension fund.
High Court of Kerala quashed this
amendment in the case of P.Sasikumar & ors. Vs. Union Of India[6].
This judgement was not complied by Central Govt. as well as by EPFO through
this judgment Justice UU Lalit and Justice Joseph restrained the High Court of
Kerala, Delhi and Rajasthan from initiating contempt proceeding against the
Central govt. and EPFO and SC reinforced the judgement given by Kerala H.C.
(removing date cut-off)[7]”
RPFC West Bengal
VERSUS
Vivekananda Vidyamandir and Ors.[8]
In this case the question which raise
was “whether special allowances
paid by an establishment to its employees would fall within the ambit of the
expression 'basic wages' under section 2(b)(ii) read with section 6 of the
Employees' Provident Fund and Miscellaneous Provisions Act, 1952 ("EPF
Act"), for computation of deduction towards provident fund contribution[9].”
“While
Deciding the case SC applied the ‘Rule of Universality’ to the allowances and
said that if the special allowance is given for the purpose of special work
which doesn’t come in normal working of the labour than that special allowance
will not be counted in basic wages otherwise it will be counted. PF authority
can question to the employer about any special allowance during assessment.
Then employer need to produce records to the authorities.[10]”
Facilities
to Beneficiaries/subscribers-
·
Registration of new subscribers- registration
for new employees become feasible and easy. Registration can be done through
online mode also and new employees could receive and apply for Aadhar-based UAN
through online mode also. To become EPFO member employees need only Aadhar
number, bank details and Contact mobile.
·
Facilities for International workers- EPFO has
done a bilateral Social Security agreement with 19 countries to protect the
Indian professionals and skilled workers who are working in abroad. EPFO also
facilitated an online portal for international worker who seek certificate fo
coverage.
·
Aadhaar?enabled
digital life certificate- This initiative allows a pensioner to digitally
submit proof of existence to EPFO (online) for annual pension continuity.
Physically presenting and submitting paper-based certifications is no longer
required.
·
Self?certification
of claims- Subscribers' access to medical advances and withdrawals from their
EPF accounts have been simplified. Self-certification was implemented to
eliminate the requirement for submitting medical certificates or other physical
papers in order to obtain progress.
Transfer of Accounts -
As a beneficiary of employee
provident fund scheme there are a lot of benefits which can be utilised by the
employee after the termination or superannuation. But Transfer of accounts of
an employee (beneficiary) from one establishment to another is proved to be
more beneficial to the employee. According to sec 22 of Code on Social Security
2020- Transfer of accounts of and employees were done. There are two scenarios
which can occur while transferring the accounts
1- When an employee employed in an
establishment to which this chapter applies relinquishes his/her employment and
therefore join in an establishment to which this chapter doesn’t applies; Or,
2- Whereas, employee employed in an
establishment to which this chapter doesn’t applies and relinquishes his/her
employment and therefore join in an establishment to which this chapter
applies,
The in both the cases employee’s
accumulated amount in provident fund or pension account. Shall be transferred
or dealt in a manner as may be specified in the Provident Fund Scheme or
Pension Scheme.
Conclusion-
Working in an industrial setting
affects the human body's natural ageing process. This supports a somewhat
greater total pay package, which was common practise up until the early 1990s.
Since the fifth and sixth pay commission recommendations were implemented,
however, the ensuing years witnessed the industrial employees being brought on
par with, or even placed below, the Government employees. This occurred as a
result of the wage gap between the two groups. In the end, the Government came
to the conclusion that the best way to handle its finances was to abolish the
pension plan for its workers. Since 2004, government employees do not receive a
pension benefit, unless the employee chooses to form a partnership with an
insurance or financial institution that offers a pension system on a private
basis. The problem for those who work in manufacturing is made even worse by
the fact that their pay is derived from the profits of the company, and most
businesses do not update their wage and salary structures on a consistent
basis, in contrast to the situation for those who work for the government. This
pension is payable to the honourable members even if they serve for just term
of five years, whereas industrial workers do not get the revision for their
decades of service. It should be noted that members of parliament and members
of state legislatures draw hefty pensions, despite the fact that by the very
nature of their office they are supposed to be public representatives and not
employees of the government.
[1] NIRBADH SEAMLESS SERVICE DELIVERY-
epfindia.gov.in/site_docs/PDFs/Updates/Nirbadh_EPFO_to_e%20EPFO.pdf (reported-
18-sep-2022)
[2] Employer Service- EPFO.GOV
-https://www.epfindia.gov.in/site_docs/PDFs/Updates/Presentation_ERservices062016.pdf
(reported- 18-sep-2022)
[3] CIVIL APPEAL NO(S). 2136 OF 2012
WITH CIVIL APPEAL NO(S). 2121 OF 2012 WITH CIVIL APPEAL NO(S). 2135 OF 2012
WITH CIVIL APPEAL NO(S). 2141 OF 2012
[4] EBID
[6] W.P. (C) No. 13120 of 2015 decided on
12.10.2018
[7] EBID
[8] 2019 LLR 339
[9] EPF- AFTERMATH of Vidyamandir
casehttps://www.mondaq.com/india/employment-litigation-tribunals/844118/employees39-provident-fund--aftermath-of-vidyamandir-case-and-epfo39s-caution
(reported- 19-sep-2022)
[10] SUPRA
Article Information
EMPLOYEES PROVIDENT FUND
Authors: UDIT SHARMA
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/06/14
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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