PF Act 1952

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)

02 March 2010

THE EMPLOYEES' PROVIDENT FUND AND MP ACT, 1952

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is enacted to provide a kind of social security to the industrial workers. The security, however, differs from the security provided to them under the Workmen's Compensation Act or the Employees' State Insurance Act. The Employees' Provident Funds and Miscellaneous Provisions Act mainly provides retirement or old age benefits, such as Provident Fund, Superannuation Pension, Invalidation Pension, Family Pension and Deposit Linked Insurance.

Provision for terminal benefit of restricted nature was made in the Industrial Disputes Act, 1947, in the form of payment of retrenchment compensation. But this benefit is not available to a worker on retirement, on reaching the age of superannuation or voluntary retirement.

The Employees' Provident Funds and Miscellaneous Provisions Act is intended to provide wider terminal benefits to the industrial workers. For example, the Act provides for payment of terminal on reaching the age of superannuation, voluntary retirement and retirement due to incapacity to work.

Eligibility

Any person who is employed for work of an establishment or employed through contractor in or in connection with the work of an establishment.

Applicability

Establishment which is factory engaged in any industry specified in Schedule 1 and in which 20 or more persons are employed.

Any other establishment employing 20 or more persons which Central Government may, by notification, specify in this behalf.

Any establishment employing even less than 20 persons can be covered voluntarily under section 1(4) of the Act.

Payment of Contribution

The employer shall pay the contribution payable to the EPF, EDLI and Employees' Pension Fund in respect of the member of the Employees' Pension Fund employed by him directly by or through a contractor.

It shall be the responsibility of the principal employer to pay the contributions payable to the EPF, EDLI and Employees' Pension Fund by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor.

Benefits

Employees covered enjoy a benefit of Social Security in the form of an unattachable and unwithdrawable (except in severely restricted circumstances like buying house, marriage/education, etc.) financial nest egg to which employees and employers contribute equally throughout the covered persons’ employment.

This sum is payable normally on retirement or death. Other Benefits include Employees’ Pension Scheme and Employees’ Deposit Linked Insurance Scheme.

Rate of Contribution
Scheme	Employee's	Employer's	Central Govt.
Provident Fund Scheme	12%	Amount>8.33% (in case where contribution is 12% of 10%)10% (in case of certain Establishments as per details given earlier)	NIL
Insurance Scheme	NIL	0.5%	NIL
Pension Scheme	NIL	8.33%(Diverted out of Provident Fund	1.16%

Damages
Less than 2 months	@ 17% p.a.
Two months and above but less than upto four months	@ 22% p.a.
Four months and above but less than upto six months	@ 27% p.a.
Six months and above

Damages
Less than 2 months	@ 17% p.a.
Two months and above but less than upto four months	@ 22% p.a.
Four months and above but less than upto six months	@ 27% p.a.
Six months and above

Clarification about Contribution

After revision in wage ceiling from Rs.5000 to Rs.6500 w.e.f. 1.6.2001 per month, the government will continue to contribute 1.16% upto the actual wage of maximum Rs.6500 per month towards Employees’ Pension Scheme. The employer’s share in the Pension Scheme will be Rs.541 w.e.f. 1.6.2001.

Under Employees’ Deposit-Linked Insurance Scheme the contribution @ 0.50% is required to be paid upto a maximum limit of Rs.6500.

The employer also will pay administrative charges @ 0.01% on maximum limit of Rs.6500 whereas an exempted establishment will pay inspection charges @ 0.005% on the total wages paid.

Notes:

The above clarification is given by taking wages upto a maximum of Rs.6500 towards wage (basic+DA).

Since an excluded employee i.e. drawing wages more than Rs.6500 can also become member of the Fund and the Schemes on joint request and if, for instance, such an employee is getting Rs.10, 000 per month, his share towards provident fund contribution will be Rs.1200 e.g. 12% and employer’s share towards provident fund contribution will be Rs.659 and Rs.541 towards Employees’ Pension Fund.

Penal Provision

Liable to be arrested without warrants being a cognizable offence.

Defaults by employer in paying contributions or inspection/administrative charges attract imprisonment upto 3 years and fines upto Rs. 10,000.00 {Section 14}

For any retrospective application, all dues have to be paid by employer with damages upto 100% of arrears.