Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 Definition, Scope of the act, Employees Provident fund, Scheme and Authorities

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is a pivotal social security legislation in India aimed at providing financial security and stability to employees in the organized sector. The Act establishes a compulsory contributory Provident Fund, a Pension Scheme, and an Insurance Scheme for employees in establishments with 20 or more workers. It mandates employers and employees to contribute a specified percentage of the employees’ wages to the Provident Fund (PF) account, which is managed by the Employees’ Provident Fund Organisation (EPFO).

Act’s primary objective is to encourage savings that can be used by employees at the time of retirement or upon exiting their employment prematurely under specific circumstances. The PF amount accumulates over the employee’s career, earning interest, and is paid out as a lump sum upon retirement or resignation, providing a financial safety net. Additionally, the Act includes provisions for the Employees’ Pension Scheme (EPS) and the Employees’ Deposit Linked Insurance Scheme (EDLI), offering pension benefits to the employees and their dependents and insurance cover, respectively.

By ensuring that workers save a part of their earnings in a Provident Fund, the Act plays a crucial role in providing social security and fostering employee welfare. It underscores the government’s commitment to protecting the interests of the workforce by facilitating the creation of a corpus for their retirement and unforeseen circumstances.

Scope:

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, extends its coverage and applicability across various dimensions, making it a comprehensive piece of social security legislation for employees in India’s organized sector.

1. Applicability to Establishments:

• The Act applies to every establishment which is a factory engaged in any industry specified in Schedule I of the Act and employs 20 or more persons.
• It also applies to other establishments employing 20 or more persons or class of such establishments that the Central Government may notify.
• Once the Act applies to an establishment, it continues to apply even if the number of employees falls below 20.

2. Coverage of Employees:

• Act covers every employee who is employed in an establishment to which the Act applies, regardless of the salary or wage levels, subject to specific exclusions provided in the Act.
• It includes provisions for the voluntary application of the Act to establishments employing less than 20 employees and for employees drawing wages beyond the specified threshold.

3. Components of the Act:

• Act encompasses the Employees’ Provident Fund Scheme (EPF), which is a retirement benefit scheme that mandates monthly contributions by both the employer and the employee towards the fund.
• It includes the Employees’ Pension Scheme (EPS) that provides pension on superannuation or disability and family pension in case of the death of the employee.
• The Employees’ Deposit Linked Insurance Scheme (EDLI) provides life insurance benefits to the employees of the covered establishments.

4. Central and State Governments:

• Act applies to establishments under the control of the Central Government as well as to certain establishments under the State Governments, as notified by the Central Government.
• The Central Government, through the Ministry of Labour and Employment, administers the Act, primarily via the Employees’ Provident Fund Organisation (EPFO).

5. International Workers:

The Act also has provisions that apply to international workers, enhancing the social security agreements between India and other countries, ensuring that employees from other countries working in India and vice versa are covered under the Act.

6. Exemptions:

Act provides for certain exemptions under specific conditions, where an establishment can be exempted from the Act’s provisions if it offers benefits that are deemed to be equivalent to or better than those prescribed under the Act.

Employee’s Provident Fund

Employees Provident Fund (EPF) is a pivotal savings scheme introduced under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, in India. It serves as a retirement benefit scheme that is available to all salaried employees. The EPF scheme is managed by the Employees’ Provident Fund Organisation (EPFO) and aims to promote savings to support employees after retirement or in cases of unemployment due to incapacity to work.

Features of the Employees Provident Fund:

• Mandatory Participation:

The scheme is mandatory for employees in establishments with 20 or more workers, with some exceptions based on the nature and income level of employment.

• Contributions:

Both the employee and employer contribute 12% of the employee’s basic wages, dearness allowance, and retaining allowance (if any) to the EPF account each month. Employers’ contributions are divided between the EPF and the Employees’ Pension Scheme (EPS), according to prescribed ratios.

• Interest Rate:

The contributions made towards the EPF earn interest at a rate decided by the government and the EPFO every year. This interest is compounded annually.

• Withdrawals:

Employees can partially withdraw from their EPF account for specific purposes such as medical emergencies, home loans, education, and marriage, subject to certain conditions. Complete withdrawal is allowed upon retirement or if an individual is unemployed for more than two months.

• Tax Benefits:

Contributions to the EPF are eligible for tax deductions under Section 80C of the Income Tax Act. Furthermore, the interest earned and the amount withdrawn after the requisite period of five continuous years of service are tax-free, under certain conditions.

• Universal Account Number (UAN):

The EPFO allocates a Universal Account Number (UAN) to all employees enrolled in the EPF scheme. The UAN facilitates the portability of the provident fund accounts when individuals change jobs, ensuring that their EPF account is continuous and cumulative across their employment.

• Online Services:

EPFO offers various online services through its portal, enabling members to check their EPF balance, download their UAN card, update KYC information, and file for withdrawal or transfer of funds online.

• Insurance Benefit:

The scheme also provides a life insurance cover through the Employees’ Deposit Linked Insurance (EDLI) scheme, offering financial security to the family of the deceased employee.

Schemes under the Act:

• Employees’ Provident Fund Scheme (EPFS):

This is the main scheme under the Act, aimed at promoting savings for retirement among employees in the organized sector. Both employers and employees contribute a specified percentage of the employee’s salary (basic wages plus dearness allowance) to the Provident Fund (PF). The amount accumulated in this fund, along with interest, is payable to the employee at the time of retirement or resignation, or to their beneficiaries in case of the employee’s death.

• Employees’ Pension Scheme (EPS):

Introduced in 1995, this scheme provides pension benefits to employees in the organized sector. It is funded by a portion of the employer’s contribution to the EPF. The scheme ensures a pension for the lifetime of the employee after retirement, and upon the employee’s death, the pension is provided to the spouse and children.

• Employees’ Deposit Linked Insurance Scheme (EDLIS):

This scheme provides a lump sum insurance benefit to the nominated beneficiary in the event of the death of an employee, while in service, due to natural causes, illness, or accident. The benefit amount is linked to the balance in the employee’s PF account, subject to a maximum limit.

Authorities under the Act:

• Employees’ Provident Fund Organisation (EPFO):

EPFO is a statutory body formed by the government to administer the EPF, EPS, and EDLIS. It operates under the administrative control of the Ministry of Labour and Employment. The EPFO is responsible for ensuring the enforcement of the Act across establishments and managing the funds collected under the schemes.

• Central Board of Trustees (CBT):

EPFO is guided by the Central Board of Trustees, which is a tripartite board consisting of representatives from the government, employers, and employees. The CBT is responsible for administering the provident fund scheme, pension scheme, and insurance scheme. It also decides on the rate of interest for the EPF each year.

• Employees’ Provident Fund Appellate Tribunal (EPFAT):

This is a judicial body established to hear appeals against the decisions made by the EPFO. It provides a mechanism for resolving disputes related to the EPF, EPS, and EDLIS.