EMPLOYEES’ PROVIDENT FUND AND

MISCELLANEOUS PROVISIONS ACT, 1952

Purpose

The employees provident funds and miscellaneous act,1952:

• is a piece of social legislation • a beneficent measure, • enacted for the purpose of institution of provident

fund for employees in factories and other establishments.

• Provident fund is an effective old-age and survivorship benefit.

HISTORICAL BACKGROUND

WITH THE INDUSTRIAL GROWTH • Some big employers introduced schemes of PF for welfare

of workers.• But these were private and voluntary• Workers of small employers remained deprived• Therefore grouse of deprived workers gained momentum.

• In 1946, Labour Investigation committee was formed to investigate the functioning of the above mentioned private and voluntary PF schemes.

• On 15th November 1951, the govt of India promulgated the Employees’ Provident Funds Ordinance which was subsequently replaced by the Employees’ Provident Funds and Act passed on 4th March 1952.

• This act extends to the whole of INDIA except the state of JAMMU AND KASHMIR

Objective of the Act

The object of the act is • to provide substantial security • timely monetary assistance to

EMPLOEEYEES THEIR FAMIILY MEMBERS

Applicability

This act applies to every establishment, which is• a factory, and• to any other establishment employing 20 or

more persons which the Central govt may by notification in the Official Gazette, specify in this behalf– Except• Co-op sociétés• Govt employées under cpf

But the Central Government is empowered to apply the provisions of this act to any establishment

• Employing less than 20 persons• By giving a notification at least 2 months

before it intends to do so.

Extended application

Establishment not covered through the act can be covered through the act

• On an application made to the CPF commissioner

• Stating that the employer and the majority of employees agree to the applicability of the act to the establishment

Important definitions under this Act

Basic wages : It means all emoluments earned by an employee while on duty or on leave with wages in accordance with the terms of employment and which are paid or payable in cash to him, but does not include;

(i) the cash value of the food concession (ii) allowances payable to him (iii) any presents made by the employer

Employee : It means any person who• is employed for wages in connection with the

work of an establishment • who gets wages directly or indirectly from the

employer • includes any person employed by or through

a contractor

Excluded vs Exempted Employees

• Excluded employee:– Who has withdrawn the full amount of his

accumulations after retirement– Who is drawing more than Rs 15000/ PM– Who is an international workerExempted employee:- Employees who are exempted from the scheme as per section 17 of the Act

Employer : In relation to a factory establishment, the employer means

• the owner or occupier, • including his agent ,• the legal representative of a deceased owner or occupier• manager of the factory For other establishments,• the person who has the ultimate control over the

affairs of the establishment.

Power to apply act to establishments with common PF

• When immediately before this act becomes applicable to an establishment there is in existence a provident fund which is common to the employees employed in that establishment and employees in any other establishment, the central govt may, notification in the Official Gazette, direct that the provisions shall also apply to such other establishments

Components of the Act

This Act includes : (i) Employees’ Provident Fund Scheme (ii) Employees’ Pension scheme (iii) Employees’ Deposit-linked Insurance Scheme.

EMPLOYEES’ PROVIDENT FUND SCHEME

• According to Section 5 of this Act the Central Govt may, by notification in the Official Gazette, frame a Scheme to be called the Employees’ Provident Fund Scheme for the establishment of provident funds under this Act

EMPLOYEES’ PENSION SCHEME

Section 6.A provides that the Central Government may frame an Employees’ Pension Scheme for:

• Superannuation pension, retiring pension or permanent total disablement pension to the employees covered under the act.

• Widow or widower's pension, children pension or orphan pension payable to the beneficiaries of such employees.

Employees’ Deposit-linked Insurance Scheme

The Central Government under Section 6-C of the Act may formulate an Employees’ Deposit-linked Insurance scheme for providing:

• Life insurance benefits to the employees of any establishment or class of establishments to which the Act applies.

Administration of the scheme• CENTRAL BOARDSection 5.A provides that the Central Government may by notification in the Official Gazette constitute a Central Board for all such territories as to where the Act applies.

The Board shall constitute of• A Chairman and a Vice-Chairman; • The Central Provident Fund Commissioner who shall be an ex-

officio member of the Board; • Not more than fifteen persons appointed by the Central

Government from amongst its officials; and

Contd..

• Not more than fifteen persons representing the Government of the States;

• Ten persons representing employers of the establishments to which the scheme applies;

• Ten persons representing employees in the establishments

to which the scheme applies.

NOTE: ALL APPOINTMENTS TO BE MADE BY THE CENTRAL GOVERNMENT.

DUTIES OF THE CENTRAL BOARD

The Board is expected to • administer the funds vested in it by means of

contributions, • maintain proper accounts of its income and

expenditure in such form and in such manner as prescribed by the Central Government, and

• also perform such other functions as it may be required to perform by or under any provisions of the Employees Provident Fund Scheme and the Insurance Scheme under the Act.

EXECUTIVE COMMITTEE

• Section 5(AA) provides that the Central Government may, by means of a Notification in the Official Gazette, constitute an Executive Committee to assist the Central Board in the performance of its functions.

Constitution of ECExecutive Committee shall consist of: • A Chairman appointed by the Central Government from amongst

the members of the Central Board; • Two persons appointed by the Central Government from amongst

its officials nominated into the Central Board;• Three persons appointed by the Central Government from amongst

the State nominees in the Central Board; and• Three persons representing the employers elected by the Central

Board from amongst the fifteen representatives of employers in the Central Board;

• Three persons representing the employees elected by the Central Board from amongst the fifteen representative of the employees in the Central Board; and

• The Central Provident Fund Commissioner as the ex-officio member.

STATE BOARD

• Section 5.B provides that the Central Government may, after consultation with the Government of any State, by means of a Notification in the Official Gazette, create a State Board for such State. Such a State Board shall exercise such powers and perform such duties as the Central Government may assign to it from time to time.

OFFICERS OF THE BOARD

The Central Govt shall appoint: A Central Provident Fund Commissioner who is to serve as the

Chief Executive Officer of the Central Board and shall be under the general control and superintendence of the Board.

The Central Govt may also appoint:• A Financial Adviser and Chief Accounts Officer to assist the

Central Provident Fund Commissioner in the discharge of his duties; and

• As many Additional Provident Fund Commissioners, Regional Provident Fund Commissioners, Assistant Provident Fund Commissioners, and such other officers and employees as it may consider necessary.

EMPLOYEES’ PROVIDENT FUND APPELLATE TRIBUNAL

• The Central Govt may constitute one or more employees’ provident fund appellate tribunal for establishments situated in such area as notified in notification constituting the tribunal.

• A tribunal shall consist of only one person who will be the presiding officer

A person can not be the presiding officer of a tribunal unless he is, or has been, or is qualified to be,-

(i) a judge of a high court; or (ii) a district judge

• The Statute in unequivocal terms stipulate that no employer can reduce, whether directly or indirectly, the wages or any other benefits to which the employees are entitled to, either by reason of his liability for the payment of any contribution to the Funds under the Act or due to any charges under the Act or any scheme there under.

Can the employer reduce wages?

Inspectors and their powers• May ask an employer to furnish information as he may

consider necessary.• May enter and search concerned premises and also ask to

produce documents for examination • Makes copies of, or take extracts from, any book, register

or other document maintained in relation to the establishment and, where he has reason to believe that any offence under this Act has been committed by an employer, seize with such assistance as he may think fit, such book, register or other document or portions thereof as he may consider relevant in respect of that offence;

• Exercise such other powers as the Schemes under the Act may provide

Cognizance and trial

The Act provides that no court shall take cognizance of any offence punishable under the Act, except on a report in writing of the facts constituting such offence made with the previous sanction of the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government.

BENEFITS TO MEMBERS UNDER EPF SCHEMES

Provident Fund Benefits

Pension Benefits

Death Benefits

There are 3 major benefits

Employer also contributes to Members PF

EPFO guarantees the Employer contribution and credits interest at such rates as determined by the Central Government. (Present Interest Rate is 8.75%)

On resignation, the member can settle the account. i.e., the member gets his PF contribution, Employer Contribution and Interest.

1. Provident Fund benefits

Pension to Member

Pension to Family (on death of member). Scheme Certificate

Withdrawal Benefit

2. Pension benefits

Member has to attained the age of 50 years or more.

Member has to complete a total service of 10 years or more.

Member should not get any other EPF Pension.

Member has to apply in Form-10D at the EPF Office where Member has last worked through last Employer.

How to get Pension

If the member wants to draw pension from a different place, The member have to furnish appropriate Bank / Post Office address in the application form.

Pension is distributed through Post Offices or through some designated banks only (eg: Indian Bank, SBI, Indian Overseas Bank, HDFC Bank, ICICI and UTI Bank)

1. On superannuation(Age 58 years or more and

atleast 10years of service)

The member can continue in service while receiving

this pensionOn attaining 58 Years of age, a

EPF member cease tobe a member of EPS

automatically

2. Before superannuation(Age between 50 and 58 years

and at least ten years of service)

The member should not be in service

3. Death of the member Death while in service or Death while not in service

4. Permanent disability Permanently and totally unfit for the employment which

the member was doing at the time of such disablement

Scheme Certificate This Certificate shows the service & family details of a member

This is issued if the member has not attained the age of 58 while leaving an establishment and he applies for this certificate

Member can surrender this certificate while joining another establishment and the service stated in the certificate is added with the service he is gaining from the new establishment.

After attaining the age of 50 or above, the member can apply for Pension by surrendering this scheme certificate (if total service is at-least 10 years)

This is a better choice than Withdrawal Benefit, as a member dies holding a valid scheme certificate, his family will get pension (Death when NOT in service)

Withdrawal Benefit If not eligible for pension, member may withdraw the amount

accumulated in his pension account.

The calculation of this amount is based only on (i) Last average salary and (ii) Service (Not based on actual amount available in Pension Fund Account)

No amount is taken from Member to give Pension to the Member. Employer and Govt. contributes to Pension fund @8.33% and @1.61% respectively

EPFO guarantees pension to members, even if the Employer has not contributed to Pension Fund.

How to settle EPF account The Member has to resign or retire from the establishment and apply for

settlement of PF in Form-19. If the member exits before 55 years of age, the member should not work in any covered establishment for a period of 2 months from the exit date.

If the member dies, Family members/Nominee have to apply in Form-20 for settlement of PF (In case of death, apply in From-10D and Form-5IF for Pension and EDLI also)

How to transfer the account / What to do if joined in another establishment

The Member has to apply in From-13(R) through the NEW Employer at the EPF Office from which transfer is sought clearly stating New and Old EPF Numbers. Member has to obtain new EPF Number from the New Employer. New EPF Number will be allotted by New Employer, not by EPFO.

Employees' Deposit Linked Insurance (EDLI) Scheme

On death of a member, the Family Members or Nominee (whoever has the entitlement to claim Provident Fund amount) can claim for EDLI Benefit. Maximum amount payable is Rs. 1,30,000/-.

The nominee(s) have to apply in From-5IF through the Employer.

No amount is taken from the Member for this facility. Employer contributes for this.

Average PF Balance, salary and service are the factors considered for the calculation of this amount

Advance/ Withdrawals may be availed for the following purposes:

•Marriage / EducationPurpose : For the marriage/education of Self & FamilyEligibility : Should Complete atleast 7years of service.Max Amount : 50% of Emp’e ShareDocument : Apply in Form 31 thorough the Employer

•Treatment

Purpose : Treatment of Self, Family (Dependents)Eligibility : No minimum service requiredMax Amount : 6 times of Wages or Full of Emp’e ShareDocuments : Apply in Form 31 through the Employer

•Purchase or construction of Dwelling housePurpose : Purchase or Construction House/FlatEligibility : Should complete 5years only in one service.Max Amount : 36 times of Wages.Documents : Apply in Form 31 through Employer

•Repayment of Housing LoanPurpose : Payment of House LoanEligibility : Should complete 10years only in one service.Max Amount : 36 times of WagesDocuments : Apply in Form 31 through the Employer

•Purchase of PlotPurpose : Purchase of Site/PlotEligibility : Should complete 5years only in one serviceMax Amount : 24 times of WagesDocuments : Apply in Form 31 through the Employer

•Addition/Alteration of HousePurpose : Repair of houseEligibility : Should complete 5years only in one service / Construction of House.Max Amount : 24 times of WagesDocuments : Apply in Form 31 through the Employer

•LockoutPurpose : Lockout of Closure of the EstablishmentEligibility : Should be closed for 15days / No wages for 2months.Max Amount : Total of wages multiplied by no.of months closedDocuments : Apply in Form 31 through the Employer

•Withdrawal Prior to RetirementPurpose : Withdrawal prior to RetirementEligibility : No min service, atleast 54 years of age /

1year before retirement.Max Amount : 90% of total of both sharesDocuments : Certificate from the Emp’r showing the date of

retirement / Apply in Form 31•Other Advances

Purpose : Advance in Abnormal ConditionsEligibility : Certificate of damage from appropriate authorityMax Amount : Rs. 5000/- or 50% of member’s own share of

contribution.Documents : Certificate from Appropriate authority / Form 31.

IMPORTANT:

• The amount of advance/withdrawal is not required to be refunded under normal circumstances. If the amount is not utilised, the same should be refunded with penal interest.