This chapter will enable students to:
- Understand the scope and coverage of the EPF and MP Act, 1952, and the provisions of the Act relating to framing of schemes under the Act
- Describe the various schemes framed under the EPF and MP Act 1952
- Explain the administrative arrangement for the enforcement of the Act
- Present an assessment of the Working of the Act and the schemes framed under it
- Make a comparison with other social security laws covering similar contingencies
In India, measures for the protection of workers against loss of income due to old age and invalidity were initially confined to the efforts of private employers. Later, some government undertakings attempted to solve the problem by providing schemes of provident fund, gratuity and pension on an ad hoc basis.
The first legislation relating to provident fund was the Provident Funds Act, 1925, enacted by the central government. The Act which applies to government departments, railway administration, local authorities and certain other services, provides for the creation of provident funds and lays down rules for the protection of compulsory deposits. The Act does not deal with provident funds in private industries.
The Royal Commission on Labour, which submitted its report in 1931, expressed the need for making some provisions against old age. The Commission observed, ‘It is appreciated that in this report it is impossible to make provision for meeting every contingency in the life of the worker but, the importance of the matter being generally admitted, they feel it incumbent to recommend that until such time as it is found practicable to institute either a general scheme of old age pensions or provident funds for industrial workers, government should, wherever possible, encourage employers by financial grants or other means to inaugurate scheme of this nature for their employees’.1
The question of compulsory provident funds came up for discussions before the Third Labour Ministers’ Conference held in 1942, and it was agreed to prepare a set of model provident fund rules for circulation among the employers. After considering the views expressed, model rules were prepared and placed before the Fifth Labour Ministers’ Conference in 1943 and then to the Standing Labour committee in 1944. After incorporating some of the suggestions made in the Committee, the model rules were circulated by the central government to the provincial governments and organizations of employers and employees for information and adoption. No step was however, immediately taken to provide for provident fund schemes on a statutory basis.
In 1947, the Board of Conciliation appointed by the Government of India for the settlement of trade disputes in Bihar and West Bengal coal-fields recommended the establishment of a compulsory provident fund scheme for workers in coal mines. The question was discussed at the Industrial Committee on Coal Mining in 1948. The same year, the Government of India promulgated the Coal Mines Provident Fund and Bonus Schemes Ordinance authorizing the central government to frame a provident fund and bonus scheme for coal miners. The Ordinance was subsequently replaced by the Coal Mines Provident Fund and Bonus Scheme Act, 1948. In 1976, the title of the Act was changed to Coal Mines Provident Fund and Miscellaneous Provisions Act.
A private member’s Bill providing for the establishment of provident funds for certain classes for workers by their employers was introduced in the Constituent Assembly by R. K. Sidhva in February 1948. The Bill provided for compulsory establishment of provident funds by every employer in industrial undertakings. Although Sidhva suggested placing the bill before the Select Committee, the government preferred to circulate the bill for eliciting public opinion. On receipt of the opinions, Sidhva again moved the bill in December, 1949, and requested its reference to the select committee. The then central Labour Minister assured that the government would try to introduce a comprehensive measure of provident fund for the categories of employees and the proposed scheme would cover small units as well. On the assurance of the Labour Minister, Sidhva withdrew the bill.
The question of compulsory provident fund scheme for industrial workers was discussed at the 9th session of the Indian Labour Conference in April, 1948, and was again discussed at the 12th meeting of the Standing Labour Committee in November, 1950, which unanimously recommended the introduction of a provident fund scheme for industrial workers. In 1951, the Labour Ministers’ Conference also emphasized the urgency of enacting legislation for the purpose. Accordingly, the Government of India promulgated the Employees’ Provident Funds Ordinance on 15 November 1951, which established compulsory provident funds for employees in certain categories of factories and other industrial establishments. The ordinance was replaced by an Act of the same name in 1952.
The Statement of Objects and Reasons of the Bill inter alia reads as follows:
The question of making some provision for the future of the industrial worker after he retires or for his dependants in case of his early death, has been under consideration for some years. The ideal way would have been provisions through old age and survivors’ pensions as has been done in the industrially advanced countries. But in the prevailing conditions in India, the institution of a pension scheme cannot be visualised in the near future. Another alternative may be for provision of gratuities after a prescribed period of service. The main defect of a gratuity scheme, however, is that amount paid to a worker or his dependants would be small, as the worker would not himself be making any contribution to the fund. Taking into account the various difficulties, financial and administrative, the most appropriate course appears to be the institution compulsorily of contributory provident funds in which both the worker and the employer would contribute. Apart from other advantages, there is the obvious one of cultivating among workers a spirit of saving something regularly. The institution of provident fund of this type would also encourage the stabilisation of a steady labour force in industrial centres.
The Employees’ Provident Funds Act was amended several times since its enactment in 1952. The amendment of 1971 introduced a Family Pension Scheme and accordingly the name of the Act was changed as the Employees’ Provident Funds and Family Pension Act, 1952. The amending Act of 1973 made the penal provisions more stringent. The Labour Provident Funds Laws (Amendment) Ordinance, 1976, introduced a new social security scheme known as Deposit-linked Insurance Scheme, and changed the nomenclature of the Act as the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The amending Act of 1988 enlarged the coverage of the Act substantially and raised the minimum rates of provident fund contributions. The amending Act of 1996 introduced a comprehensive pension scheme. The existing Family Pension Scheme was replaced by the Employees’ Pension Scheme providing for superannuation pension, retirement and short-service pension, reduced pension, permanent and total disablement pension, widow pension, children pension and orphan pension.
EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 (MAIN PROVISIONS)
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, came into force on 14 March 1952. The Act as amended till date provides for: (1) the Employees’ Provident Funds Scheme, 1952, (2) the Employees’ Deposit-linked Insurance Scheme, 1976, and (3) the Employees’ Pension Scheme, 1995.
The Act originally applied to factories/establishments in six specified industries which had completed three years of existence and employed 50 or more persons.
The existing Act applies to: (i) every factory establishment in any industry specified in Schedule I of the Act and in which 20 or more persons are employed and (ii) any other establishment employing 20 or more persons which the central government may specify by notification in the official gazette. The central government may add to Schedule I any other industry if it is of the opinion that provident fund scheme should be framed under the Act [Sec. 4]. Presently, the Act applies to 186 establishments/classes of establishments employing 20 or more employees. Employees getting wages up to 6,500 a month are required to become members of the Fund.
If it appears to the Central Provident Fund Commissioner that the employer and majority of employees in an establishment have agreed that the provisions of the Act should be made applicable to the establishment, he may apply the provisions of the Act to that establishment.
Once an establishment is covered under the Act, it will continue to be governed by the Act even if the number of persons employed falls below twenty [Sec. 1].
The Act does not apply to the following categories of establishments:
- Establishments registered under Cooperative Societies Act employing less than 50 persons and working without the aid of power.
- Any other establishment belonging to or under the control of the central or state government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the appropriate government.
- Any other establishment set up under any central, provincial or state Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing the benefits.
The central government, having regard to financial position of any class of establishments or other circumstances may exempt it from the operation of the Act for a specified period [Sec. 16].
Some Important Definitions
Some important definitions under the Act are reproduced in Box 27.1.
SOME IMPORTANT DEFINITIONS UNDER THE EPF AND MP Act, 1952
Appropriate Government: In relation to an establishment belonging to, or under the control of, the central government or in relation to an establishment connected with a railway company, a major port, a mine or an oilfield or a controlled industry or in relation to an establishment having departments or branches in more than one state, the central government, and in relation to any other establishment, the state government [Sec. 2(a)].
Basic Wages: All emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of contract of employment and which are paid or payable in cash to him but does not include (i) the cash value of any food concession, (ii) any dearness allowance, house rent allowance, overtime allowance, bonus, Commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment, or (iii) any presents made by the employer [Sec. 2(b)].
Employee: Any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer, and includes any person (i) employed by or through a contractor in or in connection with the work of the establishment, or (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961, or under standing orders of the establishment [Sec. 2(f)].
Employer: (i) In relation to an establishment which is a factory, the owner or occupier of the factory, including the agent, legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory, the person so named, and (ii) in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent [Sec. 2(e)].
Controlled Industry: Any industry the control of which by the Union has been declared by a central Act to be expedient in the public interest [Sec. 2(d)].
Exempted Establishment: An establishment in respect of which an exemption has been granted from the operation of all or any of the provisions of any Scheme or the Insurance Scheme, whether such exemption has been granted to the establishment as such or to any person or class of persons employed therein [Sec. 2(fff)].
The central government is empowered to frame: Employees’ Provident Funds Scheme [Sec. 5], Employees’ Deposit-linked Insurance Scheme [Sec. 6C] and Employees’ Pension Scheme [Sec. 6A].
EMPLOYEES’ PROVIDENT FUNDS SCHEME
The central government is empowered to frame the Employees’ Provident Funds Scheme for the establishment of provident funds under the Act and specify the establishments or class of establishments to which the Scheme will apply. Schedule II of the Act specifies the matters which are to be included under the Scheme. These are described in Box 27.2.
MATTERS TO BE INCLUDED UNDER THE EPF SCHEME
(i) Employees to be required to join the Fund and conditions for exemption, (ii) time and manner of paying contributions, (iii) recovery of contributions from contractors, (iv) payment of cost of administration by employers, (v) constitution of committees for assisting Board of Trustees, (vi) opening of regional and other offices, (vii) maintenance of accounts and investment of moneys, (viii) conditions for withdrawals from the Fund, (ix) rate of interest payable, (x) furnishing of particulars by employees, (xi) nominations, (xii) maintenance of registers and records, (xiii) identification of employees, (xiv) fees, (xv) punishable contraventions and defaults, (xvi) additional powers of Inspectors, (xvii) transfer of accumulations, (xviii) payment of premium on life insurance and (xix) any other relevant matter [Sec. 5 and Schedule II].
Central Board of Trustees
After framing of the Scheme, a Provident Fund has to be established [Sec. 5(1)]. The Fund is to vest in and administered by the Central Board of Trustees.
The Central Board of Trustees is to consist of: (i) a chairman and a vice-chairman appointed by the central government, (ii) not more than five central government officials, (iii) not more than 15 representatives of state governments, (iv) 10 representatives of employers in consultation with organizations of employers, and (v) 10 employees’ representatives in consultation with organizations of employees, all appointed by the central government.
Apart from administering the fund, the Board of Trustees will perform such other functions as required under the provident fund, pension and insurance schemes. The accounts of income and expenditure of the fund will be audited annually by Comptroller and Auditor General of India and forwarded to the central government [Sec. 5A].
For assisting the Central Board of Trustees, the central government may appoint the Executive Committee. The Executive Committee is to consist of: (i) a chairman from amongst the members of the Central Board, (ii) two official members of the Board, (iii) three representatives of the state governments, (iv) three representatives of employers, (v) three representatives of employees, all from amongst the members of the Central Board and (iv) Central Provident Fund Commissioner ex-officio. The terms and conditions of selection of members and procedure of meetings of the committee will be in accordance with those laid down in the Scheme [Sec. 5AA].
The central government is also empowered to constitute State Board of Trustees as laid down in the Employees’ Provident Fund Scheme. The powers and functions of the State Board are to be assigned by the central government. The terms and conditions of the selection of members, and procedure of meetings, are to be in accordance with the Scheme [Sec. 5B].
The central government is required to appoint a Central Provident Fund Commissioner who will be the chief executive officer of the Central Board of Trustees. The central government may also appoint a Financial Advisor and Chief Accounts Officer. The Central Board of Trustees is empowered to appoint required number of Additional Central Provident Fund Commissioners, Regional Provident Fund Commissioners, Assistant Provident Fund Commissioners and other officers and employees for the efficient administration of the Provident Fund, Pension and Insurance Schemes. The method of recruitment, salary and allowances, discipline and other conditions of service of the Central Provident Fund Commissioner, Financial Advisor and Chief Accounts Officer are to be specified by the central government and those of other personnel will be as per rules and orders applicable to corresponding officers and employees of the central government. The officers and employees of a State Board will be governed by the State Board with the approval of the state government concerned [Sec. 5D].
The Central and State Boards of Trustees will be corporate bodies having perpetual succession and a common seal and will by those names sue and be sued [Sec. 5C]. No Act done or proceeding taken by the Central or State Board or Executive Committee can be questioned on the ground merely of the existence of any vacancy in it, or any defect in its constitution [Sec. 5DD]. For the efficient administration of the Schemes, the Central and State Boards may delegate specified powers and functions to their respective chairmen or other officers [Sec. 5E].
The contribution payable by the employer to the provident fund will be 10 per cent of the basic wages, dearness allowance and retaining allowance payable to each of the employees, whether employed by him directly or by or through a contractor. The employee’s contribution will be equal to the employer’s contribution. However, if an employee so desires, he may contribute more, but the employer will be under no obligation to pay any contribution over and above his contribution payable under the Act. After making necessary inquiry, the central government may raise the contribution from 10 per cent to 12 per cent in application of the Act to any establishment or class of establishments [Sec. 6]. As of now, the rate of provident fund contribution is 12 per cent (in case of general establishments) and 10 per cent (in case of notified establishments) of monthly wages.
EMPLOYEES’ DEPOSIT-LINKED INSURANCE SCHEME
The central government is empowered to frame the Employees’ Deposit-linked Insurance scheme for the purpose of providing insurance benefits to the employees covered under the Act. Soon after the framing of the Scheme, a Deposit-linked Insurance Fund has to be established. The employer is required to pay to the fund not more than one per cent of the aggregate of the basic wages, dearness allowance and retaining allowance as specified by the central government in respect of every employee employed by him. The employer is also required to pay to the fund an additional amount not exceeding one-fourth of the contribution for insurance as determined by the central government to defray administrative expenses. This amount is not to be spent to meet the cost of any benefits provided under the Scheme. The insurance fund is also to vest in the Central Board of Trustees.
Schedule IV of the Act lays down the matters which will be covered under the Employees’ Deposit-linked Insurance Scheme. These are described in Box 27.3.
MATTERS TO BE COVERED UNDER THE EMPLOYEES’ DEPOSIT-LINKED INSURANCE SCHEME
(i) Employees to be covered, (ii) maintenance of accounts and investment of moneys, (iii) furnishing of particulars by employees, (iv) nominations, (v) maintenance of registers and records, (vi) scales of insurance benefits and related conditions, (vii) manner of payment to the nominee or family members, and (viii) any other matter relating to implementation of the Scheme [Sec. 6C].
EMPLOYEES’ PENSION SCHEME
The central government is empowered to frame the Employees’ Pension Scheme for the purpose of providing for (i) superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments covered under the Act, and (ii) widow or widower’s pension, children pension or orphan pension payable to the beneficiaries of such employees.
Soon after the framing of the Employees’ Pension Scheme, an Employees’ Pension Fund has to be established. The pension fund is to consist of: (i) a sum from the employer’s contribution to the provident fund not exceeding 8 and 1/3 per cent as specified in the pension scheme, (ii) a sum paid by employers of exempted establishments, (iii) net assets of the earlier Employees’ Family Pension Fund (1971) and (iv) such sums as the central government may specify. On the establishment of the pension fund, the Family Pension Scheme established in 1971 will cease to operate and all its assets and liabilities will vest in the pension fund. The Employees’ pension fund will vest in and administered by the Central Board of Trustees.
The Employees’ Pension Scheme may provide for all or any of the matters specified in Schedule III of the Act. These are described in Box 27.4.
MATTERS TO BE PROVIDED IN THE EMPLOYEES’ PENSION SCHEME
(i) Employees to be covered, (ii) the time within which the employees who are not members of the Family Pension Scheme will opt for the Pension Scheme, (iii) the portion of employer’s contribution to the provident fund to be credited to the Pension Fund, (iv) the period of qualifying service, (v) regulation of the period of service for which no contribution is received, (vi) protection of employees’ interest in the event of employer’s default, (vii) maintenance of accounts and investment of moneys, (viii) furnishing of particulars by employees, (ix) maintenance of registers and records, (x) the scale of pension and pensionary benefits and the conditions for their grant, (xi) the manner of payment of contributions by exempted establishments, (xii) disbursement of pension, (xiii) manner of meeting administrative expenses and (xiv) any other matter necessary for a proper implementation of the scheme [Sec. 6A and Schedule III].
Laying of the Schemes Before Parliament
All the schemes framed under the Act are to be laid before the Parliament, which can modify or annul them [Sec. 6D].
Modification of the Schemes
The central government is empowered to add to, amend or vary, either prospectively or retrospectively, the Scheme by notification in the official gazette. The notification is to be placed before the Parliament, which can modify or annul the Schemes [Sec. 7].
Determination of Moneys Due from Employers
The Central Provident Fund Commissioner, Additional Central Provident Fund Commissioner, Deputy Provident Fund Commissioners, Regional Provident Fund Commissioners and Assistant Provident Fund Commissioners are empowered to determine the amount due from any employer under the Act or the schemes in the event of disputes relating to their applicability and conduct inquiry for the purpose. The employer is to be given a reasonable opportunity to represent his case before an order in this respect is passed. In case an order has been passed against an employer ex parte, he can appeal to the officer for review of the order.
If the officer concerned believes that the material furnished by the employer has escaped his notice and the determination of the amount has not been perfect, he can re-open the case and pass fresh orders re-determining the amount due from the employer [Secs. 7A, 7B, 7C].
An appeal against the decision of the officer will ordinarily lie before the Employees’ Provident Funds Appellate Tribunal [Sec. 71].
The central government is empowered to constitute one or more Employees’ Provident Funds Appellate Tribunals to exercise the powers and discharge the functions specified under the Act. No order of the central government appointing a person as the presiding officer is to be questioned and no Act or proceeding before a Tribunal is to be called in question on the ground merely by detect in the constitution of the Tribunal [Sec. 7N]. The appellate tribunal is to consist of one person only. A person is qualified for the appointment as a presiding officer of the tribunal if he is or has been or is qualified to be a Judge of a High Court or a District Judge. The presiding officer of the tribunal will hold office for a term of 5 years or until he attains the age of 65 years. The presiding officer may resign his office by addressing the central government. The central government will determine the nature and categories of the officers and other employees for assisting the tribunal. They will discharge their functions under the general superintendence of the presiding officer [Sec. 7D–7H]. If a vacancy occurs in the office of the presiding officer, the central government will appoint another person in the place and the proceedings may be continued from the stage at which the vacancy is filled [Sec. 7M].
The Employees’ Provident Funds Appellate Tribunal can hear and decide appeals by persons aggrieved by the notification issued by the central government or an order passed by the central government or any authority in respect of (i) application of the Act to establishments [Sec. 1(3)(4),3], (ii) amendments to Provident fund, Pension and Insurance Schemes [Sec. 7A(1)], (iii) review of orders passed [Sec. 7B] except an order rejecting the application of review, (iv) determination of escaped amount [Sec. 7C] and (v) recovery of damages from the employer [Sec. 14B,171].
The tribunal is empowered to regulate its own procedure [Sec. 7J]. A person preferring an appeal to the Tribunal may either appear in person or take the assistance of a legal practitioner [Sec. 7K]. The tribunal may, after giving the parties an opportunity of being heard, pass orders confirming, modifying or annulling the order appealed against or may refer the case back to the authority concerned with directions for a fresh adjudication or order. The tribunal may amend an order passed by it within five years from the date of the earlier order [Sec. 7L]. In respect of contributions in the scheme [Sec. 7A], an appeal by an employer can be entertained by the tribunal only when he has deposited with it 75 per cent of the amount due from him as determined by the officer concerned [Sec. 7O].
Interest Payable by the Employer
The employer is liable to pay simple interest at the rate of 12 per cent per annum or at a higher rate as specified in the scheme on any amount due from him under the Act. The rate of interest is, however, not to exceed the lending rate of interest charged by a scheduled bank [Sec. 7Q].
Recovery of Moneys Due from Employers
Any amount due from an employer under the Act or the Schemes or in respect of an exempted establishment is recoverable as an arrear of land revenue [Sec. 8]. The amount of contribution to any Scheme and the charges for meeting the cost of administration paid by an employer in respect of employees employed by or through a contractor may be recovered by the employer from the contractor either by deduction from any amount payable by the contractor under any contract or as a debt payable by the contractor. The contractor may realize the amount by making deductions from employees’ wages [Sec. 8A]. The officer authorized under the schemes may issue a certificate to the concerned Recovery Officer, who will proceed to recover the amount in one or more of the following modes:
- Attachment and sale of the movable or immovable property of the establishment of the employer
- Arrest of the employer and his detention in prison
- Appointing a receiver for the management of the movable or immovable properties of the establishment or of the employer [Sec. 8B–8C].
The authorized officer may, however, grant time for the payment of the amount due, and till then, the Recovery Officer will stay the proceedings [Sec. 8E].
Other modes of recovery include: (i) recovery from any person of the amount due from him to the employee who is in arrears; (ii) application for the release of money to the court in whose custody there is money belonging to the employer; and (iii) recovery by distraint and sale of movable property [Sec. 8F].
Protection Against Attachment
The amount standing to the credit of any member in the fund or any exempted employee in a provident fund is not to be assigned or charged and is not liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the member or exempted employee. Similarly, an amount standing to the credit of a member in the fund of an exempted employee in a provident fund at the time of his death and payable to his nominee is to vest in the nominee and it is to be free from any debt or other liability incurred by the deceased under any decree or order of any court. These provisions also apply to the Pension and Insurance Schemes under the Act [Sec. 10].
Priority of Payment of Contributions Over Other Debts
In case an employer is adjudicated insolvent or a company is ordered to wind up, the amount due an contributions to the fund, recoverable damages, accumulations to be transferred or other charges payable under the Act or the schemes is deemed to be included among the debts which are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up. However, the liability should have accrued before the order of adjudication or winding up of the company, as the case may be. Similar provisions apply to the employers of exempted establishments. In other cases, the amount due as employer’s or employee’s contributions is to be deemed to be the first charge on the assets of the establishment and will have to be paid in priority to all other debts [Sec. 11].
Employer Not to Reduce Wages, and Others
The employer is prohibited from reducing the wages of any employee covered under the schemes or the total quantum of benefits in the form of old-age pension. gratuity, provident fund or life insurance to which he is entitled under the terms of his employment, by reason of his liabilities under the schemes [Sec. 12].
Special Provisions Relating to Existing Provident Funds
Pending the application of the Employees’ Provident Funds Scheme in an establishment, unless exempted, every subscriber to a provident fund of the establishment will continue to be entitled to the benefits accruing to him under it. Such provident fund will continue to be maintained in the same manner and subject to the same conditions as it would have been, had this Act not been passed. When the scheme under the Act is applied to the establishment, the accumulations standing to the credit of the employees becoming members of the Employees’ Provident Fund will be transferred to it and credited to the accounts of the employees concerned [Sec. 15].
Authorizing Certain Employers to Maintain Private Provident Funds
On the application of the employer and majority of employees of an establishment employing 100 or more persons, the central government may authorize the employer to maintain a provident fund account in relation to the establishment and specify the terms and conditions for it. However, the central government will refrain from making such an authorization if the employer of the establishment had been a defaulter in the payment of provident fund contributions or had committed any other offence under the Act during a period of three years immediately preceding the date of such authorization.
When an employer is authorized to maintain a provident fund account, he is required to maintain accounts, submit returns, deposit contributions, provide for facilities for inspection, pay administrative charges and abide by the terms and conditions as laid down in the Employees’ Provident Funds Scheme. If the employer fails to comply with these requirements or commits any offence under the Act, the authorization to maintain the fund may be cancelled, but the employer is to be given a reasonable opportunity of being heard [Sec. 16A].
Transfer of Accounts
If an employee employed in an establishment covered under the Act leaves his employment and obtains re-employment in another establishment where the Act does not apply, the amount of accumulations to the credit of the employee in the Employees’ Provident Fund or other provident fund of the establishment will be transferred to the credit of his account in the provident fund of the establishment in which he is re-employed, if the employee so desires and the rules of the provident fund permit such transfer. Similar provisions apply where an employee employed in an establishment to which this Act does not apply, leaves his employment and obtains re-employment in another establishment to which the Act applies [Sec. 17A].
Power to Exempt
- The central and state governments are empowered to exempt the following categories of establishments from the operation of all or any provisions of the schemes and specify the conditions for it.
- Establishments in which the rules of the provident fund relating to the rates of contribution are not less favourable than those prescribed under the Act and the employees are also in enjoyment of other provident fund benefits which are not less favourable than the benefits provided under the Act or the schemes applicable to similar establishments.
- Establishments in which the employees are in enjoyment of benefits in the nature of provident fund, pension or gratuity which, in the opinion of the appropriate government, are not less favourable, separately or jointly, than the benefits provided under the Act or any scheme in relation to employees in any other establishment of a similar character. Such an exemption can be made only after consultation with the Central Board of Trustees.
- The provisions of the Act relating to payment of prescribed contributions [Sec. 6], determination of moneys due [Sec. 7A], mode of recovery of moneys due [Sec. 8] and recovery of damages [Sec. 14B] along with other specified conditions will apply to them and their contravention will be a punishable offence.
- The employer of such an establishment will have to establish a Board of Trustees, whose composition and the terms and conditions of service of members will be such as specified in the scheme. The duties and functions of the board are laid down in the Act. Non-compliance of the duties imposed is punishable under the Act.
The Act also provides for exemptions from the Employees’ Pension and Insurance Schemes and prescribes the conditions for the exemption, which are similar to those applicable to the Employees’ Provident Funds Scheme. The establishment, exempted from the Pension and Insurance Schemes are also required to observe specified requirements. Failure to comply with the requirements may lead to cancellation of exemption [Sec. 17].
The central and state governments are empowered to appoint inspectors for the purposes of the Act and the Employees’ Provident Fund, Pension and Insurance Schemes. The main duties of inspectors comprise: inquiring into the correctness of information furnished in connection with the Act or schemes, ascertaining their compliance, their applicability and the observance of the conditions or exemption. For these purposes, an inspector is empowered to (i) require an employer to furnish necessary information, (ii) enter and search any establishment and require the production of account-books, registers and other documents for examination, (iii) examine the employer, contractor, agent or other person in charge of the establishment, (iv) make copies of, or take extracts from, any book, register or other document and (v) exercise such other powers as specified in the schemes. The inspector has also the power to search and seize documents, and so on, under the Code of Criminal Procedure [Sec. 13].
Penalties for offences under the Act are shown in Box 27.5.
PENALTIES FOR OFFENCES UNDER THE EPF AND MP ACT, 1952
Making any false statement or false representation for the purpose of avoiding any payment to be made under the Act or the Schemes is punishable with imprisonment up to one year or with fine of 5,000 or with both [Sec. 14(1)].
Contravention of or making default in paying prescribed employees’ contribution deducted from wages [Sec. 6] is punishable with imprisonment for one to 3 years and fine of 10,000 [Sec. 14(1A)].
Contravention of or making default in paying inspection charges [Sec. 17(3a)]. or administrative charges [Para 38 of Employees’ Provident Fund Scheme] is punishable with imprisonment from 6 months to 3 years and fine of 5,000 [Sec. 14(1A)].
Non-payment of Inspection charges under Employees’ Deposit-linked Insurance Scheme [Sec. 6C] or by the employer of exempted establishment [Sec. 17(3A)(a)] is punishable with imprisonment from 6 months to one year and fine up to 5,000 [Sec. 14(IB)].
Contravention of or making default in complying with any other provisions of the Schemes is punishable with imprisonment up to one year or with fine up to 4,000 or with both [Sec. 14(2)].
Contravention of or making default in complying with the provisions of the Act or the conditions imposed in regard to exemptions [Sec. 17] is punishable with imprisonment from one month to 6 months and fine up to 5,000.
Punishment for the same offence committed subsequently after the previous conviction is imprisonment from 2 to 5 years and fine of 25,000 [Sec. 14AA].
Non-employment of the amount of contribution or failure to transfer accumulations in contravention of the order of the court is punishable with fine extending up to 100 per day of default [Sec. 14C].
Cognizance of Offences
No court is to take cognizance of any offence under the Act or the Schemes except on a written report by an Inspector, of facts constituting the offence made with the previous sanction of the Chief Provident Fund Commissioner or an officer authorized by the central government. No court inferior to that of a presidency magistrate or a magistrate of the first class is to try an offence under the Act or the Schemes [Sec. 14AC]. An offence relating to default in payment of contribution by the employer punishable under the Act is cognizable [Sec. 14AB].
Where an offence under the Act or the Schemes is committed by a company, every person in charge of the company at the time of commitment of the offence as well as the company, will be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly. If the person proves that the offence was committed without his knowledge or that he exercised the diligence to prevent the Commission of the offence, he will be absolved of the liability. However, when it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, a director, manager, secretary or other officer of the company, that official will be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly [Sec. 14A].
Where an employer is convicted on an offence relating to default the payment of contribution in or transfer of accumulations, the court, in addition to awarding any punishment, by order require him to pay the amount within a specified period. In such a case, the employer is not liable for punishment for the continuance of the offence. However, if the employer does not comply with the order, he is liable to pay fine which may extend to 100 for every day of default [Sec. 14C]
Recovery of Damages
In case an employer makes default in the payment of contributions to the funds, or in the transfer of accumulations [Secs. 15(2), 17(5)] or in the payment of any charges, the Central Provident Fund Commissioner or an officer authorized by the central government may recover from him such damages not exceeding the amount of arrears as may be imposed. However, before levying and recovering such damages, the employer is to be given a reasonable opportunity of being heard. The Central Board of Trustees may reduce or waive the damages of sick industrial company in respect of which a scheme of rehabilitation has been sanctioned [Sec. 14B].
Protection of Action Taken in Good Faith
No suit, prosecution or other legal proceeding will lie against the central government, a state government, the presiding officer of a Tribunal, or an authority empowered to determine moneys due from employers [Sec. 7A], an Inspector or any other person for anything done or intended to be done in good faith in pursuance of the Act or the Schemes [Sec. 18].
Delegation of Powers
The central government may delegate powers exercisable by it to an officer or authority subordinate to it or to the state government or to an officer or authority subordinate to the state government. The state government may also delegate its powers to an officer or authority subordinate to it [Sec. 19].
Power of Central Government to Give Directions
The central government may give necessary directions to the Central Board of Trustees for the efficient administration of the Act and the Board is required to comply with the directions [Sec. 20].
Power to Make Rules
The central government is empowered to make rules for carrying out the provisions of the Act. The matters on which rules may be made include: (i) salary and allowances and other terms and conditions of service of presiding officer and the employees of a Tribunal; (ii) the form and the manner in which, and the time within which an appeal will be filed before a Tribunal and the fees payable; (iii) the manner of certifying the copy of the certificate to be forwarded to the recovery officer; and (iv) any other matter which may be prescribed by the rules. The rules thus framed are to be placed before a Parliament which may modify or annul them [Sec. 21].
Schemes Under the Act
The existing Schemes under the Act are: (i) the Employees’ Provident Funds Scheme, 1952, (ii) the Employees’ Deposit-linked Insurance Scheme, 1976, and (iii) the Employees’ Pension Scheme, 1995. The main features of the schemes are explained below.
EMPLOYEES’ PROVIDENT FUNDS SCHEME, 1952
The Employees’ Provident Funds Scheme launched in pursuance of Section 5 of the Act initially covered factories/establishments falling within 6 specified industries completing 3 years of existence and employing 50 or more workers. Presently, the scheme is applicable to factories/establishments engaged in about 180 industries/classes of establishments employing 20 or more workers. With effect from 1 October 1994, the wage-ceiling for the coverage under the scheme was fixed at 5,000 per month, but since 1 June 2001, it has been raised to 6,500 per month.
The normal rate of contribution payable by the employees and employers was originally 6 and 1/4 per cent of the wages of the employees which was subsequently raised to 8.33 per cent. Since September 1997, it was enhanced to 10 per cent, but the central government is empowered to raise it to 12 per cent. The enhanced rate of 12 per cent has been applied to most of the establishments.
In case of notified establishments, it is 10 per cent of monthly wages.
Rate of Interest
The rate of interest on the provident fund accumulations is fixed by the central government in consultation with the Central Board of Trustees. This rate, which was 12 per cent per annum, prior to 2001, was reduced to 9.5 per cent in 2002 and 8.5 per cent in 2006.
The provident fund contributions are invested as per the pattern of investment prescribed by the central government from time to time.
A member of the fund is authorized to withdraw the full amount standing to his credit (including employer’s share of contribution) in the event of retirement after superannuation or on account of total and permanent incapacity. Full accumulations may also be withdrawn if an employee (i) migrates from India for permanent settlement abroad, or (ii) is retrenched, or (iii) completes 15 years of membership or (iv) is suffering from leprosy or T.B. or is physically or mentally incapacitated to work. Full refund of employee’s and employer’s contributions is also permissible in cases of individual retrenchment under certain conditions and some other contingencies.
In the event of the death of a member, the full amount standing to his credit is to be paid to the nominee. In case there is no nominee, the amount is to be paid to his family members in the prescribed proportions. If the deceased employee does not leave behind any nominee or family members, the amount standing to his credit is to be paid to the person legally entitled to it.
Partial withdrawals are also permitted in situations like (i) construction of dwelling house and purchase of dwelling accommodation, (ii) illness, (iii) invalidation, (iv) marriage of the employee and that of dependants, (v) higher education of children, (vi) payment of life insurance premium, (vii) temporary closure of establishment, (viii) purchase of share of cooperative society, (ix) serious damage of property caused by calamities of exceptional nature, (x) individual retrenchment, and (xi) cut in supply of electricity to the factory/establishment.
Table 27.1 contains figures relating to the number of factories and establishments and subscribers covered under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and the progressive total of contribution and other receipts and investments made in respect of both exempted and unexempted establishments during 1952–2009.
Table 27.1 Number Factories/Establishments and Subscribers Covered, and Total Receipts and Investiments under the Employees’ Provident Funds Scheme, 1952 (1984—2009)
Source: Government of India, Ministry of Labour. Various issues of Pocket Book of Labour Statistics, Indian Labour Year Book and Annual Reports of Employees’ Provident fund Organisation. http://labourbureau.nic.in
Starting with a meagre six classes of establishments, the Act has now come to cover 186 classes of establishments spread though out the country. As is evident from the table, the number of factories/establishments covered under the EPF Scheme was about 1.50 lakh in 1984, which increased to 5.73 lakh in 2009, thus recording an increase of more than three times the figures of 1984. The number of subscribers, which was about 1.3 crore in 1984 increased to 4.4 crore in 2007 and 4.7 crore in 2009. The progressive total of contributions and other receipts increased from 10,295 crore in 1984 to about 86,000 crore in 2001, crossed 1,58,000 crore mark in 2007 and increased to over 183,000 crore in 2009.
The progressive total of investment, which was a little more than 10,000 crore in 1984, increased to about 89,000 crore in 2001, nearly 1,77,000 crore in 2007 and over 2,94,000 crore in 2009. There has, however, been a gradual decrease in the rate of interest on investment from 2001 onwards. Prior to 2001, the rate of interest was 12 per cent, which was reduced to 11 per cent in 2001, 9.5 per cent in 2002 and to 8.5 per cent in 2006.
EMPLOYEES’ DEPOSIT-LINKED INSURANCE SCHEME, 1976
The scheme came into force with effect from 1 August 1976. All the members of the Employees’ Provident Funds Scheme are members of this scheme also.
The employee-members are not required to pay any contribution to the Insurance Fund, but the employers are required to pay contribution at the rate of 0.5 per cent of the employees’ wages which include basic wage, dearness allowance, cash value of food concession and retaining allowance. The central government contributes 0.25 per cent of the employees’ wages bill. The employers are also required to pay administrative charges at the rate of 0.01 per cent of the employees’ wages subject to the minimum of 2 per month.
CHART 27.A: Number of Factories/Establishments Covered Under the EPF & MP Act, 1952 (1998–2009), (See Table 27.1)
CHART 27.B: Number of Subscribers Covered Under the EPF & MP Act, 1952 (1998–2009), (See Table 27.1)
In the event of the death of an employee subscribing to the provident fund in an establishment covered under the Act, the person entitled to receive his provident fund accumulations is to be paid an additional amount equal to the average balance in the provident fund account of the deceased during the preceding 12 months, wherever the average provident fund balance is less than 25,000. In case the average balance exceeds 25,000, the benefit under the scheme will be 25,000 plus 25 per cent of the amount in excess of 25,000 subject to a maximum of 60,000.
The pattern of investment of the insurance fund is similar to that applicable to the Employees’ Provident Fund. The progressive total of investment of the fund was 2,466 crore in 2000 which increased to 4,919 crore in 2006 and 6,278 crore in 2009.2
EMPLOYEES’ PENSION SCHEME, 1995
An amendment of the Employees’ Provident Funds Act, 1952, in 1971 provided for the Employees’ Family Pension Scheme and the nomenclature of the Act was changed to the Employees’ Provident Funds and Family Pension Act. The Employees’ Family Pension Scheme, 1971, provided for a substantial long-term protection to the family of the employee-member who died prematurely in service. The scheme was applicable compulsorily to all the employees who had become members of the Employees’ Provident Funds Scheme or any other exempted provident funds on or after 1 March 1971. The benefits available under the Scheme were family pension, life insurance benefits and retirement cum-withdrawal benefits.3
The Scheme of 1971 was later merged in the Employees’ Pension Scheme, 1995. The new Scheme aims at ‘providing for economic sustenance during old age and survivorship coverage to the member and his family’. With the establishment of the Employees’ Pension Fund, the Family Pension Scheme ceased to operate and all assets and liabilities of the ceased scheme were transferred to the new scheme. The main features of the Employees’ Pension Scheme are described below.
The Employees’ Pension Scheme, 1995, is compulsory for all persons who were members of the Family Pension Scheme, 1971, and also for those who became members of the Employees’ Provident Fund from 16 November 1995, that is, the date of the introduction of the scheme. The subscribers, who were not the members of the Family Pension Scheme, 1971, were given an option to join the pension scheme. The employees including those covered under the voluntary retirement scheme were allowed to join the Scheme with effect from 1 April, 1993.
Under the Family Pension Scheme, neither the employer nor the employee is required to make any additional contribution. The Pension Fund has been constituted in a manner in which all accumulations of the ceased family fund have been merged and since 16 November 1995, the employer’s share of provident fund contributions representing 8.33 per cent of the wages have been diverted to the fund. The central government contributes to the fund at the rate of 1.16 per cent of the wages of the employees.
The following benefits are available under the Employees’ Pension Scheme:
- Monthly members’ pension on superannuation/retirement and short-service pension
- Monthly reduced pension
- Permanent and total disablement pension
- Monthly widow pension (in the event of death of the member)
- Monthly children pension (in the event of death of the member)
- Monthly orphan pension (in the event of death of the member)
- Monthly pension to permanently and totally disabled son or daughter (in the event of death of the member)
In addition to these, the scheme also provides for withdrawal benefit, return of capital and commuted pension.
Monthly Member’s Pension on Superannuation/Retirement and Short-service Pension
The amount of monthly pension varies from member to member depending upon his pensionable salary and pensionable service. A member is entitled to superannuation pension if he has rendered eligible service of 20 years or more and retires at the age of 58 years. Retirement pension is payable if the member has rendered eligible service of 20 years or more and retires before attaining the age of 58 years. A short-service pension is payable if the member has rendered eligible service of 10 years or more but less than 20 years.
The formula for calculation of monthly pension is as follows:
To illustrate, if the contributory service is 33 years and pensionable salary in 5,000 per month, the above formula operates as given below:
Pensionable salary is the average of last 12 months’ pay.
- Pensionable service is the service rendered by the member for which contributions have been received or receivable in the Employees’ Pension Fund. In case a member who superannuates on attaining 58 years of age and who has rendered pensionable service of 20 years or more, his pensionable service is increased by adding a weight age of 2 years.
- Contributory service is the period of actual service for which the contribution to the fund has been received. The balance of actual service is non-contributory.
- Eligible service is (a) in case of an existing member, the aggregate of the past service rendered from the date of joining the Employees’ Family Pension Fund, 1971, to 15 November 1995 and the actual service rendered from 16 November 1995 to the date of exit from the employment; (b) in case of a new entrant, the actual service rendered from 16 November 1995 or the date of joining any establishment, whichever is later, to the date of exit from employment.
Monthly Reduced Pension
A monthly reduced pension is payable at the option of a member from a date after 50 years of age but earlier than 58 years. In such cases, the amount of pension is reduced at the rate of 3 per cent for every year the age fails short of 58 years, subject to a maximum of 25 per cent reduction.
A member, who is permanently and totally disabled during employment, is entitled to the monthly member’s pension, subject to a minimum of 250 per month. The pension is available irrespective of the member’s pensionable service. The pension is payable from the date of disablement for the whole life of the members.
Monthly Widow Pension
A monthly widow pension ranging from 450 per month to an amount equal to monthly member’s pension is payable to the widow of the deceased member from the date of his death to the lifetime of the widow or her remarriage, whichever is earlier. If the deceased member is unmarried, the amount of monthly pension is payable to his nominee. If there is no nomination, the widow pension is payable to the dependent father, and after his death, the admissible pension is extended to the surviving mother lifelong.
Monthly Children Pension
A monthly children pension at the rate of 25 per cent of the monthly widow pension subject to a minimum of 150 per month per child for a maximum of two children at a time is payable until they attain the age of 25 years.
Monthly Orphan Pension
In case the deceased member does not leave behind a widow or the widow pension is not payable, the children are entitled to monthly orphan pension equal to 75 per cent of the monthly widow pension subject to a minimum of 250 per month per child. The orphan pension is permissible to a maximum of two orphans at a time and is to run in order from the oldest to the youngest orphan.
Monthly Pension to Permanently and Totally Disabled Son or Daughter
In case a deceased member leaves behind a family having permanently and totally disabled son or daughter, such son or daughter is to be paid monthly children orphan pension, irrespective of age and number of children in the family in addition to monthly children pension.
If a member has not rendered the minimum eligible service of 10 years on the date of superannuation/retirement, he is entitled to return of contribution at the prescribed rate. An existing member is entitled to receive additional return of contributions for his past service under the Employees’ Family Pension Scheme computed as withdrawal-cum-retirement benefit.
Return of Capital
Under the scheme, the member has the option to accept the admissible pension or reduced pension with return of capital. ‘In the case of an employee opting for 10 per cent less pension than the actual entitlement, the Scheme provides for return of capital equivalent to 100 times of the original pension in the event of the death of the pensioner.’5 For example, if the monthly pension of the member is 2,000 per month and he opts for reduced pension of 1,800 per month, the family will have a refund of the capital amounting to 2,00,000 on the death of the pensioner. The widow and the two children will continue to get the permissible pension, in addition.
A member eligible to pension under the scheme, on completion of 3 years from the commencement of the scheme, may opt to commute up to a maximum of one-third of his pension to receive 100 times the monthly pension so commuted. The balance pension is payable on monthly basis as per alternative opted for by the member in respect of ‘return of capital’.
The scheme also specifies the details of calculations relating to new entrants and existing members of the Family Pension Scheme of 1971 and slabs of reduced pensions and amount payable as return of capital.
As on 31 March 2001, 4.34 lakh members, 3.10 lakh spouses, and 1.91 lakh children and orphans were in receipt of pension under the scheme.6 On 31 March 2006, as many as 13.06 lakh members, 5.12 lakh spouses, 4.40 lakh children, 10,400 orphans and 12,300 nominees were getting pension under the scheme.7
The Act has been a laudable measure presently providing for the establishment of Employees’ Provident Funds, Deposit-linked Insurance and Pension Schemes. These schemes, which broadly cover the contingencies of old age, disablement and death, provide for a cluster of benefits. With a moderate beginning, the schemes under the Act have expanded rather rapidly. In 1952, the Act covered only 6 classes of industries, but presently it applies to 186 such classes. Originally, the Act applied to establishments completing 3 years of existence and employing 50 or more employees, but today, it applies to establishments employing 20 or more employees and the requirement of the minimum period of existence has been done away with. The government in empowered to apply the Act even to establishments employing less than 20 persons. In 1952, the number of establishments and subscribers within the purview of the Employees’ Provident Fund Scheme was 14,000 and 12 lakh, respectively,8 which increased to about 5.7 lakh and 4.7 crore, respectively, in 2009. In spite of a more or less appreciable progress of the schemes under the Act, certain deficiencies have come to be observed during the course of their working. Some of these are as follows:
- As the existing schemes are applicable to employees getting monthly wages at 6,500 or less, a number of employees crossing this wage-ceiling are deprived of the benefits. So long as the wage-ceiling is not removed, it is desirable to raise its level substantially so that the benefits of the schemes may reach employees getting higher pay packets also.
- The rate of interest on provident fund accumulations has fluctuated during more recent years. In 1999, it was 12 per cent per annum, and it was reduced to 11 per cent in 2001 and 9.5 per cent in 2002 and again slashed down in to 8.5 per cent since 2006. This is a distressing trend. Arrangements should be made to ensure a high rate of interest on a more or less long-term basis. The lowering of the rate may have adverse repercussions on the scale and quality of benefits under the schemes.
- Although the schemes provide for prompt settlement of claims and holds the Provident Fund Commissioner personally responsible for delay in many cases, such delays often occur. In a large number of cases, ignorance or negligence of employees as well as that of employers has also been contributing factors. It is necessary to educate both the employees and employers about their respective obligations in regard to the schemes. Of late, all regional offices of the organization have been asked to hold Lok Adalats every month to resolve grievances and disputes of complex nature.
- The recovery from employers of provident fund arrears has also been a problem. In this regard, the first National Commission on Labour expressed the view, ‘Workers have to submit to compulsory deduction from their wages. It is necessary to ensure that their contributions are deposited with the funds as promptly as possible’.9 A few employers also evade their coverage under the Act on one pretext or the other.10 Evasion of statutory obligations by employers can be checked by an effective enforcement of the Act and the schemes. Cases of defaults in the submission of returns have also been frequent.
- Some of the benefits similar to those under the schemes such as permanent and total disablement pension, widow and children’s pensions are also available under the Employees’ State Insurance Act, 1948, in the form of disablement and dependants’ benefits, and under the Employees’ Compensation Act, 1923, in the form of workmen’s compensation based on the employer’s liability to pay. There may be situations where problems of duplication and choice are involved. The laws do not clearly define the rights and obligations of the employees and employers and the role of enforcement machineries in many of such cases. Moreover, the contingencies of old age, disablement and death are also partly covered by the Payment of Gratuity Act, 1972, which provides for payment of gratuity by the employers during such contingencies. It will be more appropriate to enact a consolidating Act incorporating provisions relating to similar contingencies in a single legislation.
- Many small employers often express difficulties in bearing the financial burden involved, submission of returns, maintenance of accounts and complying with other requirements of the Act and the schemes. Still, many of them often complain of similar obligations imposed on them by a plethora of labour laws. In the existing situation of competition, they demand that they should not be placed on the same footing on which big employees are placed.
- Changes of jobs and establishments by employees have become more frequent during recent years. A number of employees do not swallow the idea of ‘life-term employment’ in view of growing job insecurity, retrenchment and voluntary retirement schemes. A large number of them have increasingly desired shortterm palliatives and gains, especially in view of fear of unemployment, job changes and low return on their savings. The working of the Provident Funds Scheme shows that the amount of non-refundable advances has been much higher than the amount of contributions and refunds during recent years.
In spite of the problems and deficiencies experienced during the course of the operation of the Act and the schemes, their contribution towards provision of economic security during various contingencies such as old age, retirement, disablement and death, even in establishments of small size cannot be minimized. The advances taken from the fund have also helped a large number of employees in meeting social obligations such as construction of houses, meeting expenses of marriage and education of children and medical treatment. Time has now come to frame a comprehensive social security plan bringing within its fold relevant contingencies by pooling together hitherto scattered provisions for old age, death, disablement and family allowances or benefits.
RECOMMENDATIONS OF THE SECOND NCL (2002)
The Recommendations of the second National Commission on Labour (2002) in regard to provident fund legislation and the schemes under the EPF and MP Act, 1952, have been mentioned in some detail in Chapter 23. Some of more important Recommendations of the Commission relevant to this chapter are: (i) placing all provident funds schemes under a single regime, (ii) application of the Act to all classes of establishments employing 10 or more persons, (iii) extending the application of the scheme to self-employed persons also, (iv) integration of the Payment of Gratuity Act, 1972, with the EPF and MP Act, 1952, and converting it into a social insurance scheme, and (v) evolving an integrated social insurance scheme providing for gratuity, unemployment benefit, lay-off and retrenchment compensation. The Recommendations of the Commission, if implemented, may bring about significant changes in the social security laws and schemes in the country.
- The enactment of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, was the direct outcome of the deliberations of the Indian Labour Conference (1948), Standing Labour Committee (1950) and the Labour Ministers’ Conference (1951), all of which emphasized the urgency of enacting provident fund legislation for industrial workers in the country. Accordingly, the Government of India promulgated the Employees’ Provident Funds Ordinance in November 1951, which was replaced by an Act of the same name in 1952. The Act was amended several times since its enactment in 1952. The Act which is now known as, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, as amended till date provides for the framing of (i) Employees’ Provident Funds Scheme, (ii) Employees’ Deposit-linked Insurance Scheme and (iii) Employees’ Pension Scheme by the central government.
- The Act applies to (i) every factory establishment in any industry specified in Schedule I of the Act (presently 186 in number) in which 20 or more persons are employed and (ii) any other establishment employing 20 or more persons which the central government may specify by notification in the official gazette. The central government is also empowered to add any industry in Schedule I.
- The contribution payable by the employer to the provident fund is presently 12 per cent of the basic wages, dearness allowance and retaining allowance payable to each of the employees in case of the general establishments, and 10 per cent in case of notified establishments. The employee’s contribution is equal to the employer’s contribution. He may contribute more, but the employer is under no obligation to make matching contribution. The scheme provides for withdrawal of full amount of provident fund accumulation in the event of retirement of the employee after superannuation or on account of his total and permanent incapacity. Withdrawal of full amount of accumulation is also permissible in the event of employee’s (i) migration from India, (ii) retrenchment, (iii) completion of 15 years of service and (iv) physical or mental incapacity to work or contracting of leprosy or T.B. Partial withdrawals are permissible in situations like construction of houses, illness, marriage, higher education of children, payment of life insurance premium and certain other contingencies.
- All members of the Employees’ Provident Funds Scheme are members of the Employees’ Deposit-linked Insurance Scheme. The employees do not have pay any contribution to the scheme, but the employers are required to pay 0.5 per cent of the employees’ wages. The central government contributes 0.25 per cent of the employees’ wages bill. The employers are also required to pay administrative charges at the rate of 0.01 per cent of the employees’ wages. In the event of the death of an employee, the person entitled to receive his provident fund accumulations is to be paid an additional amount as laid down in the scheme.
- The Employees’ Pension Scheme which was introduced in 1995 provides for: (i) monthly members’ pension on superannuation/retirement and short-service pension, (ii) permanent and total disablement pension, and in the event of death of the member (iii) widow pension, (iv) children pension, (v) orphan pension and (vi) pension to permanent and totally disabled son or daughter. Under this scheme neither the employer nor the employee is required to make any contribution. The fund for the scheme is raised by diverting 8.33 per cent of employer’s share of contributions to provident fund to the pension fund. The central government contributes to the fund at the rate of 1.16 per cent of the wages bill of the employees.
- The major responsibility for the management and enforcement of the Act and the schemes framed under it devolves on the Central Board of Trustees, the Executive Committee and principal and other officers assisted by inspectors. The Act also provides for the constitution of Employees’ Provident Funds Appellate Tribunals for disposal of claims and disputes.
- Although the Act and the schemes framed under it have brought increasing number of establishments and employees under their coverage, certain limitations have come to the fore in the process of their working. Some of these are: (i) low level of wage limit for coverage, (ii) low level of interest on investment, (iii) problems of recovery of dues, (iv) increasing number of disputes and delay in the disposal of claims, (v) duplication of benefits available under other social security laws and (vi) problems resulting from job changes of employees.
QUESTIONS FOR REVIEW
- Explain the objectives and scope of the Employees’ Provident Funds and Miscellaneous Provisions Act 1952. Will you suggest any change in its coverage?
- Describe the main features of the Employees’ Provident Funds Scheme. What benefits does it confer upon the subscribers to the fund?
- Describe the coverage, financing and benefits under the Employees’ Pension Scheme.
- Explain the administrative arrangement for the enforcement of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Suggest measures for making it more effective.
- Highlight the limitations of the Employees’ Provident Funds Act, 1952, and suggest measures for improvement.
Is an employer of an establishment responsible for the production of documents relating to PF in respect of employees employed by the contractors?
A factory at Manali owned by the Chennai Petroleum Corporation Ltd. employed 1,700 permanent workmen and also took work from contractors. The Assistant Provident Funds Commissioner, Chennai directed the company to produce attendance register in respect of employees employed by contractors from 1 January 1967 onwards. The company contended that it was not possible for the company to produce the documents demanded as these were available only with the contractors concerned, and filed a petition before the assistant provident funds Commissioner to implead the contractors as parties. The Assistant P.F. Commissioner did not consider the petition, and passed order directly to the company to pay contributions in respect of the workmen employed by the contractors.
Aggrieved by the order of the Assistant P.F. Commissioner, the company filed a writ petition before the Madras High Court. The High Court held that the Assistant P.F. Commissioner should have impleaded the contractors and proceeded against them for determining the quantum of provident fund contributions payable by them. Therefore, the Assistant P.F. Commissioner has committed an illegality in not considering the petition filed by the company for impleading the contractors and directed him to implead the contractors as parties [Chennai Petroleum Corporation Ltd. v. Assistant Provident Funds Commissioner, Chennai 2006 LLR 507 (Madras High Court)].
Are employees employed by contractors in a factory employing 25 persons covered under the definition of ‘employee’ under the Act?
Is an employer of an establishment covered under the EPF and MP Act, 1952, entitled to recover from a contractor the money paid by him as contributions to provident fund of employees employed by the contractor?
Can a branch of an establishment covered under the EPF and MP Act, 1952, situated at a different place come under the purview of the Act?
Case Study 2
Are casual piece-rated employees covered under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952?
Jaggi & Co. had an establishment in Azadpur engaged in selling fruits. The inspector of the EPF Organization of the area visited the establishment with a view to ascertaining whether the establishment came under the purview of the EPF and MP Act, 1952. The employer of the establishment furnished the details regarding the establishment including the strength of the employees, 12 of whom were piece-rated casual workers employed by the contractor. He contended that these casual workers should not be counted for determining the required 20 employees for coverage under the Act. On the basis of the documents produced by the employer, the inspector, however, found that the establishment came under the purview of the Act and issued a letter to the employer accordingly. As the employer did not comply with the direction, proceedings were initiated against the employer.
The decision of the Regional Provident Fund Commissioner was endorsed by the Employees’ Provident Funds Appellate Tribunal. Aggrieved by the decision of the Appellate Tribunal, the employer filed a writ petition before the Delhi High Court. The High Court held that Section 6 of the Act does not distinguish between employees engaged by the employer and those engaged by the contractor. Even the definition of ‘employee’ does not distinguish between a casual employee and a regularly engaged employee and instead includes employee employed by or through the contractor in connection with the work of the establishment. The claim of the employer that the twelve piece-rated workers working under the contractor ought to have been excluded while considering the applicability of the Act is contrary to the intendment of the Act and is rejected [Jaggi & Co. v. Presiding Officer, Employees’ Provident Fund Appellate Tribunal 2008 LLR 126, (Delhi High Court)].
Does an establishment in an industry covered under the EPF and MP Act, 1952, employing 10 employees directly and 8 by two contractors each come under the purview of Employees’ Provident Funds Scheme?
Is an apprentice covered under the definition of ‘employee’ under the EPF and MP Act, 1952?
Can the EPFO require the contractors employed by an establishment to pay provident fund contributions in respect of employees employed by them and other employees of the establishment?