25

Employees Provident Fund and Miscellaneous Provisions Act, 1952

25.1 BASIC

Employees Provident Fund and Miscellaneous Provisions Act, 1952(EPF Act) provides social security to employees and their dependents under the following schemes:

1. The Employees’ Provident Fund Schemes, 1952
2. The Employees’ Pension Scheme, 1995
3. The Employees’ Deposit-linked Insurance Scheme, 1976.

25.2 APPLICABILITY OF THE ACT

25.2.1 Applicability

EPF Act is applicable to an establishment which is a factory engaged in industry specified in Schedule I and employing 20 or more persons. The Act is applicable to other establishments which are not factories but engage 20 or more employees on notification of central government. The central government may apply provisions of the Act to any establishment which has engaged less than 20 employees after giving 2 months’ notice and publication in official gazette. The Act is applicable to mines other than coal mine. The Act is applicable to the whole of India except to the state of Jammu & Kashmir.

25.2.2 Non-applicability

EPF Act is not applicable to societies registered under the Co-operative Societies Act, 1912, if it is employing less than 50 persons and it works without the aid of power. EPF Act is not applicable to establishments under the control of the central government or a state government and whose employees are entitled to the benefit of contributory provident fund or old age pension. An establishment set up under any central or state Act and whose employees are entitled to the benefits of contributory provident fund or old age pension are also outside purview of EPF Act. The central government, on receipt of an application, may exempt any establishment from provisions of the Act on ground of financial position. The central government shall publish notification to this effect.

25.2.3 Once Applicable Always Applicable

If provisions of EPF Act becomes applicable once, it is continue to be applicable even if subsequently the number of employees fall below 20.

25.3 DEFINITIONS

25.3.1 Appropriate Government—Section 2(a)

‘Appropriate Government’ means:

1. in relation to those establishments 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 oil field or a controlled industry, or in relation to an establishment having departments or branches in more than one state, the central government; and
2. in relation to any other establishment, the State Government.

25.3.2 Authorised Officer—Section 2(aa)

As per the EPF Act, ‘authorised officer’ means any of the following persons:

1. Central provident fund commissioner
2. Additional provident fund commissioner
3. Deputy provident fund commissioner
4. Regional provident fund commissioner
5. Any other officer authorised by the central government by notification.

25.3.3 Basic Wages—Section 2(b)

It means all emoluments earned by an employee either on duty or on leave. But it does not include:

1. cash value of food concession
2. dearness allowance
3. house-rent allowance
4. overtime allowance
5. bonus, commission
6. any present or gift

25.3.4 Employer—Section 2(e)

For an establishment which is factory, ‘employer’ means:

1. owner or occupier of factory or his agent or
2. legal representative of deceased owner or occupier or
3. manager appointed under Factories Act, 1948

For any other establishment, ‘employer’ means:

1. person having ultimate control over the affairs of the establishment
2. manager or managing director to whom affairs are entrusted.

25.3.5 Employee—Section 2(f)

‘Employee’ means any person employed to do any kind of work and includes:

1. Person employed through contractor
2. Person engaged as apprentice not being apprentice engaged under the Apprentices Act, 1961.

The definition of employee is inclusive. It includes part-time employee and sweepers working on few days in month. However, partners of a firm working and drawing salary are not employees.

25.3.6 Excluded Employee—Section 2(f)

‘Excluded employee’ means an employee who, having been member, has withdrawn his accumulated full amount. An employee whose pay exceeds ₹ 15000 p.m. is also considered as excluded employee.

25.3.7 Exempted establishment—Section 2(fff)

It means an establishment exempted under Section 17 from all or any provisions of the scheme.

25.3.8 Factory—Section 2(g)

‘Factory’ means any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on, whether with the aid of power or without the aid of power. The definition is very wide and includes workshop for repairing and servicing of cars.

‘Manufacturing process’ means any process for making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.

25.3.9 Superannuation—Section 2(II)

Superannuation means attaining age of 58 years by an employee member.

25.4 CENTRAL BOARD—SECTION 5

Central government constitutes the central board by notification. It is a body corporate and consists of the following persons as members:

1. Chairman and vice-chairman—2
2. Central PF commissioner, ex-officio—1
3. Central government officials—5
4. Persons representing state governments—15
5. Persons representing employees—10
6. Persons representing employers—10

Thus, the central board consists of total 43 members. Fund is administered and vested by the board. The central board shall maintain accounts of its income and expenditure. Its accounts are audited by the Comptroller and Auditor General. The board is required to submit its working report to the central government.

25.5 EMPLOYEE’S PENSION FUND SCHEME—SECTION 6

Employees’ pension fund is vested in and administrated by the central board. The board of trustees or central board is constituted by the central government by notification in official gazette. Every employee other than excluded employee is required to join the scheme.

As per Section 6, an employer should make a contribution of 10% of the basic wages, dearness allowance and retaining allowance for each employee. The central government is empowered to increase contribution to 12% after notification in official gazette. The employee is required to make contribution of 10% of pay. He may voluntarily contribute a higher amount. Out of 10 or 12% of contribution, 8.33% is diverted to employees’ pension fund.

Contribution made to the fund is invested by a board of trustees. A member (employee) gets interest in his provident fund account as per the rate decided by the government. Non-refundable advances can be granted to a member for:

1. Payment of LIC premium of member
2. Temporary closure of factory for a period more than 15 days.
3. Hospitalisation of employee for one month or more or major surgical operation.
4. Hospitalisation of his family member for one month or more for major surgical operation.
5. Marriage of self or marriage of daughter, sons, sister or brother.
6. Post matriculation education of son or daughter
7. Relief in case of damage to property by a calamity of exceptional nature such as floods, earthquakes or riots.

A member can withdraw the amount accumulated with interest in the following situations:

1. Death
2. Permanent disability
3. Superannuation,
4. Retrenchment
5. Migration from India for permanent settlement abroad
6. Voluntary retirement
7. Certain discharges from employment under Industrial Disputes Act, 1947
8. Transfer to an establishment not covered under the PF Act.

25.6 EMPLOYEES’ PENSION SCHEME—SECTION 6A

In 1995, Employees’ Pension Scheme was introduced and it replaced the earlier Family Pension Scheme, 1971. The Employees’ Pension Scheme is compulsory for

1. all persons who were members of the Family Pension Scheme, 1971.
2. persons who become members of the Provident Fund from 16.11.1995

The PF subscribers who were not members of the Family Pension Scheme have an option to join this pension scheme in which the employer’s contribution of 8.33% is diverted to Employees’ Pension Fund. The central government contributes as approved by the parliament. A member is required to have minimum 10 years’ contributory service for entitlement to pension under this scheme. The member is granted monthly pension in following situations:

1. Superannuation on attaining 58 years
2. Retirement
3. Permanent total disablement
4. Death during service
5. Death after retirement or superannuation or permanent total disablement
6. Children pension
7. Orphan pension.

As per the Employees’ Pension scheme, pension is paid to:

1. Widow of member for life or until she remarries.
2. Children up to 25 years (maximum 2 children)
3. Orphans, at an enhanced rate

Pension is calculated as per the following formula:

 

25.7 EMPLOYEES DEPOSIT LINK INSURANCE SCHEME—SECTION 6B

Employees’ deposit link scheme is applicable to all establishments to which PF Act is applicable. According to this scheme, contribution to insurance fund by an employer is at the rate of 1% of Basic Wage + Dearness Allowance + Cash value of food concession + Retaining allowance AND administrative expenses @ 0.01% of pay of employee. The employee is not required to contribute any amount towards insurance fund.

The Scheme provides following benefits:

1. On death of the member, an amount equal to the average balance in the account of the deceased during the last 12 months or period of membership, whichever is less, shall be paid to the persons eligible to receive the amount or the Provident Fund accumulations.
2. In case the average balance exceeds ₹ 50,000, the amount payable shall be ₹ 50,000 plus 40% of the amount of such excess subject to a ceiling of ₹ 1 lakh.

25.8 RECOVERY OF MONEY DUE FROM EMPLOYER—SECTION 8B

To recover money due from employer, the authorised officer issues a certificate to the recovery officer. The recovery officer may:

1. Attach and sell movable or immovable property of establishment. If immovable property is insufficient, the property of employer may be sold.
2. Arrest the employer and send him to prison
3. Appoint a receiver to manage the property of establishment of the employer.

25.9 TRANSFER OF ACCOUNTS—SECTION 17A

When any person leaves one establishment and joins another establishment, any one of the following possible alternatives are available to him with reference to his provident fund account.

25.9.1 If the New Establishment is Covered Under PF Act

An employee who is a member of Provident Fund may leave an establishment and obtain employment in another establishment which may be covered under the Act. In such a case, the amount standing to his credit shall be transferred to his account in the new establishment (i.e., the establishment where he is re-employed)

25.9.2 If the New Establishment is not Covered Under PF Act

An employee who is a member of Provident Fund may leave an establishment and obtain employment in another establishment which may not be covered under the Act, but which may have a Provident Fund of its own. In such a case, at the request of employee, the amount standing to his credit shall be transferred to his account in the new establishment if the rules of such provident fund permit such transfer. The transfer shall be made within such time as may be specified by the central government.

25.9.3 If the Old Establishment was not Covered Under PF Act

An employee may be employed in an establishment to which the provisions of the Act do not apply, but such establishment may have its own Provident Fund. If the employee leaves such establishment and obtains employment in any other establishment which is covered under the Act, then at the request of the employee, the amount standing to his credit will be transferred to his account in the new establishment.

Recently PF office has launched a Universal Account Number (UAN) for provident fund members. This number will enable employee to link his PF account to this number and allow easier portability as well as ease of transfer directly to your bank accounts.

25.10 TRANSFER OF ESTABLISHMENT—SECTION 17B

1. On transfer of establishment by sale, gift, lease or license or in any other manner, the employer and transferee are jointly and severally liable to pay contribution and other sums due under PF Act for a period up to the date of transfer.
2. Liability of transferee is limited up to value of assets obtained by him.

25.11 PROTECTION OF FUND OF EMPLOYEE FROM ATTACHMENT—SECTION 10

As per Section 10 of EPF Act, 1952, the amount standing to the credit of provident fund account of employee shall not, in any way, be capable of being attached under insolvency proceedings. This protection is available in case of provident fund, pension and insurance amount receivable by the employee under the scheme.

The amount standing to the credit of any member in the Fund:

1. Cannot be assigned or changed.
2. Cannot be liable to attachment under any decree or order of any court in respect of any debt or liability.
3. Cannot be claimed by official receiver.
4. Shall be free from any debt or other liability incurred by the deceased member

However, the employee cannot claim any protection in respect of the money which has been withdrawn by him from the PF account.

LIST OF LANDMARK JUDGEMENTS

1. P.F. Inspector vs Hariharan, (1971)

   Casual workers are not covered to ascertain total strength of establishment.

2. Railway Employees Co-operative Banking Society Ltd. vs The Union of India (1980)

   The definition of ‘employee’ includes a part-time employee, who is engaged for any work in the establishment, a sweeper working twice or three times in a week, a night watchman keeping watch on the shops in the locality, a gardener working for ten days in a month, etc.

3. Hindustan Levers Employees Union vs RPF Commissioner (1995)

   The encashment of leave would be covered by basic wages for contribution towards provident funds.

4. RPF Commissioner vs Management, Hotel Highways Ltd (1992)

   An apprentice engaged under the Apprentice Act, 1961, or under the standing orders of the establishment is not an employee under Sec 2(f) of PF Act.

5. B. T. Mfg. Co. vs T L Association (1960)

   All or any of the schemes may be exempted if the appropriate government is of the opinion that the benefits already provided to the employees are not less favourable than the statutory benefits provided under the schemes on application.

6. Lawly Sen vs RPFC (1959)

   Workshop for repairing and servicing cars is included within the meaning of definition of factory.

7. Burmah Shell Oil Storage and Distributing Co. of India Ltd vs RPF (1980)

   Ad-hoc payment in terms of settlement is not basic wages.

8. P. G. Textile Mills vs UOI (1976)

   A mere change in the partnership deed does not mean that a new business has come into existence for the purpose of Section 16.

9. State vs S. P. Chandani (1959)

   Provident fund scheme has made the payment of contribution mandatory and the Act provides for no exception under which a specified employer can avoid his mandatory liability.

10. Railway Employees Co-operative Banking Society Ltd vs UOI (1980)

    An employee includes a part-time employee.

TEST YOUR KNOWLEDGE

1. State the establishments to which the Employees’’ Provident Funds and Miscellaneous Provisions Act, 1952, applies.

   (Ref. Para-25.1)

2. Explain ‘establishments’ to which the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 do not apply.

   (Ref. Para-25.1)

3. State the emoluments paid to employees, which do not come within the purview of ‘basic wages’ under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

   (Ref. Para-25.3)

4. Explain ‘Employer’ under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

   (Ref. Para-25.3)

5. Explain the meaning of ‘Factory’ under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

   (Ref. Para-25.3)

6. Write a note on the composition of Central Board of Trustees under the EPF and MP Act, 1952.

   (Ref. Para-25.4)

7. Explain the law relating to the extent of contribution by an employee to his provident fund under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Can the amount of contribution be increased by the employee?

   (Ref. Para-25.5)

8. What kind of protection is available to fund lying under Pension Fund?

   (Ref. Para-25.11)

9. An employee leaves the establishment in which he was employed and gets re-employment in another establishment. He desires that his provident fund account be transferred to the establishment wherein he has been employed. Explain the procedure laid down in the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, in this relation.

   (Ref. Para-25.10)

10. Explain the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 relating to the liability of an employer in case of transfer of the establishment to another person.

    (Ref. Para-25.10)

MULTIPLE-CHOICE QUESTIONS

1. PF and Miscellaneous Provisions Act, 1952, covers____schemes.
   1. two
   2. three
   3. four
   4. all
2. PF and Miscellaneous Provisions Act, 1952, is applicable to ____.
   1. factory employs 20 or more persons
   2. factory engaged in any industry specified in Schedule I and employs 20 or more persons
   3. establishment employs 20 or more persons
   4. Both (ii) and (iii)
3. Applicability of PF and Miscellaneous Provisions Act, 1952 also extends to ____.
   1. mines
   2. only coal mines
   3. mine other than coal mines
   4. None of the above
4. Applicability of PF and Miscellaneous Provisions Act, 1952, also extends to ____.
   1. hospitals
   2. travel agencies
   3. banks
   4. All of the above
5. Under PF Act, ‘employer’ means ____.
   1. owner of factory
   2. occupier of factory
   3. Either (i) or (ii)
   4. Neither (i) nor (ii)
6. Which of the following statement(s) is/are not correct as per PF Act, 1952?
   1. Definition of employee is inclusive.
   2. Partner of a firm working and drawing salary is employee.
   3. Both of the above
   4. None of the above
7. Under PF Act, ‘employer’ is defined under ____.
   1. Section 1
   2. Section 2(a)
   3. Section 2(e)
   4. Section 2(f)
8. ‘Excluded employee’ means an employee whose pay exceeds ₹ ____ per month.
   1. 1500
   2. 6000
   3. 3500
   4. 10000
9. Under PF Act, basic wages includes ____.
   1. cash value of any food concession
   2. DA
   3. Both of the above
   4. None of the above
10. Under PF Act, basic wages includes ____.
    1. HRA
    2. overtime allowance
    3. Both of the above
    4. None of the above
11. Under PF Act, basic wages does not include ____.
    1. bonus
    2. commission
    3. gifts from employer
    4. All of the above
12. Vimal is an employee of a company. He has been paid piece-rate wages, productivity bonus, additional dearness allowance and value of puja gift during a year. Which of the above payment(s) form part of ‘basic wage’ of Vimal under PF Act, 1952?
    1. Piece-rate wages and additional dearness allowance
    2. Piece-rate wages and productivity bonus
    3. Piece-rate wages only
    4. Piece-rate wages, productivity bonus and additional dearness allowance
13. Which of the following statement(s) is/are not incorrect as per PF Act, 1952?
    1. An employee who, having been member, withdraws his accumulated full amount is an exempted employee
    2. If an employee who, having been member, withdraws his accumulated full amount from an establishment, such establishment is known as exempted establishment.
    3. Exempted employee and exempted establishment are one and the same thing.
    4. All of the above.
14. Central Board administer s ____.
    1. Employees’ Provident Fund Scheme
    2. Employees’ Family Pension Fund Scheme
    3. Employees Deposit Linked Insurance Scheme
    4. All of the above
15. As per Employees’ Provident Fund Scheme, employer’s contribution is ____ % of pay.
    1. 10
    2. 11
    3. 12
    4. 12.5
16. As per Employees’ Provident Fund Scheme, employee contribution is ____ % of pay.
    1. 10
    2. 11
    3. 12
    4. 8.33
17. As per Employees Provident Fund Scheme, employer’s contribution is 10 % of ____.
    1. basic wages, dearness allowance and bonus
    2. basic wages, retaining allowance and bonus
    3. basic wages, dearness allowance and retaining allowance
    4. basic wages, dearness allowance and overtime.
18. As per Employees Provident Fund Scheme, employer’s contribution is 10 % of basic wages, dearness allowance and retaining allowance. However it can be increased to ____ % by CG.
    1. 10.75
    2. 11
    3. 12
    4. 20
19. As per Employees Provident Fund Scheme, employer’s contribution is 10 % of basic wages, dearness allowance and retaining allowance. Out of the 10 % contribution, ____ % is diverted to Employees’ Pension Fund.
    1. 10
    2. 11
    3. 12
    4. 8.33
20. For which of the following purpose an employee who is member of Employees’ Provident Fund Scheme is granted non-refundable advances?
    1. Payment of LIC premium of member.
    2. Temporary closure of factory for a period more than one week.
    3. Both of the above.
    4. None of the above.
21. As per Employees’ Pension Scheme, minimum ____ contributory service is required for entitlement to pension.
    1. 10 months
    2. 10 years
    3. 240 days in the preceding year
    4. 5 years
22. As per Employees’ Pension Scheme, pension is paid to:
    1. Widow for life or until she remarries.
    2. Children of deceased employee
    3. Orphans gets pension at an enhanced rate
    4. All of the above
23. As per Employees’ Pension Scheme, pension is paid to maximum ____ children up to age of ____
    1. 3; 18
    2. 2; 20
    3. 3; 25
    4. 2; 25
24. Employee’s Pension Scheme was introduced in the year ____.
    1. 1990
    2. 1995
    3. 1971
    4. 1952
25. What should be the contribution to insurance fund by an employer as per Employees’ Deposit Link Insurance Scheme?
    1. 1% of basic wage + DA + Cash value of food concession + Retaining allowance AND Administrative expenses @ 0.01% of pay of employee.
    2. 2% of Basic wage + DA AND Administrative expenses @ 0.01% of pay of employee.
    3. 1% of Basic wage + DA + Cash value of food concession + Retaining allowance AND Administrative expenses @ 0.001% of pay of employee.
    4. 1% of Basic wage AND Administrative expenses @ 0.01% of pay of employee.
26. What should be the contribution to insurance fund by an employee as per Employees Deposit Link Insurance Scheme?
    1. 1% of Basic wage + DA + Cash value of food concession + Retaining allowance AND Administrative expenses @ 0.01% of pay of employee.
    2. 8.33% of basic wages or salary
    3. Nil
    4. Up to value of insurance premium
27. S retires from the services of PQR Ltd, on 31^st March, 2009. He had a sum of ₹ x lakhs in his PF Account. It became due for payment to S on 30th April, 2009, but the company made payment of the said amount after one year. Which is most appropriate as per EPF Act, 1952?
    1. S can claim interest at rate of 12% p.a. for one year.
    2. S can claim interest at rate of 15% p.m. for one year.
    3. S can claim interest at rate of 12% p.m. for one year.
    4. S cannot claim interest.
28. If, in the above question, the scheme provide payment of interest @ 15%, which position will be most suitable as per EPF Act, 1952?
    1. S can claim interest at rate of 12% p.a. for one year.
    2. S can claim interest at rate of 15% p.a. for one year.
    3. S cannot claim interest.
    4. Scheme will not be valid and interest at bank rate will be paid
29. Mr. A has a contributory service of 30 years and his pensionable salary is ₹ 5000 per month. His pension per month as per PF and MP Act will be ₹ ____.
    1. 2280
    2. 2285
    3. 2290
    4. 2300
30. Who is liable to pay contribution and other sums due under EPF Act, on transfer of establishment by sale, gift, lease or licence or in any other manner?
    1. Transferor
    2. Transferee
    3. Transferor and employee
    4. Both (i) and (ii) jointly and severally

ANSWER KEYS

1. ii
2. iv
3. iii
4. iv
5. iii
6. ii
7. iii
8. i
9. iv
10. iv
11. iv
12. iii
13. i
14. iv
15. i
16. i
17. iii
18. iii
19. i
20. i
21. ii
22. iv
23. iv
24. ii
25. i
26. i
27. i
28. ii
29. ii
30. iv