Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Employees’ Provident Funds and Miscellaneous Provisions Act,
1952.
This Act may be called the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952
The Employees’ Provident Fund & MP Act, 1952 is an important piece of Labour Welfare legislation
enacted by the Parliament to provide social security benefits to the workers. At present,
the Act and the Schemes framed there under provides for three types of benefits -Contributory
Provident Fund , Pensionary benefits to the employees/ family members and the insurance
cover to the members of the Provident Fund.
Objective
The Employees Provident fund and Miscellaneous Provisions Act,1952 is a social security
measure, aimed at promoting and securing the well being of the employees by way of provident
fund, family pension and insurance to them.
Inculcating a habit of saving amongst workers, providing a steady workforce to the employers
and assisting the government by providing funds of considerable magnitude for utilization on
various projects meant for promoting economic and social development of the country and the
well being of its people.
The object of the Act in 1952 was the institution of the compulsory contributory Provident
Fund to the employees to which both the employee and the employer would contribute. The
Employees’ Provident Fund Scheme was accordingly framed under the Act and it came into
effect from 1-11-1952 . Initally the title of the Act, was , “The Provident Fund Act, 1952”.
On a review of the working of the scheme over the years , it was found that in the event of the
premature death of the employees the accumulation in the Provident Fund were too meagre to
the family of the deceased .Thus another social security benefit of providing Family Pension
through the Employees’ Family Pension Fund Scheme , 1971 was introduced by amending the
Act . At this stage , the Act was renamed as “The Employees’ Provident Fund & Family Pension
Act , 1952" and the Employees’ Family Pension Scheme came into force on 1-3-1971 .
The Act was further amended in the year 1976 to introduce another social security benefit to
provide an insurance cover to the members of the Provident Fund in covered establishment .
The Employees’ Deposit Linked Insurance Scheme , 1976 came into force from 1-8-1976 . The
name of the Act was then changed to the present one i.e. ‘The Employees’ Provident Fund &
MP Act,1952' . From 16-11-1995 , the Employees’ Pension Scheme has come into force which
provides pension to retiring employees on reaching 50/58 years of age , widow pension , children
pension and nominee pension on death of the member to his eligible family members .
This replaces the Employees’ Family Pension Scheme, 1971 .
The provisions of the Employees’ Provident Fund & MP Act , 1952 extends to whole of India
except the State of Jammu & Kashmir and also the State of Sikkim where it has not been
notified so far after its annexation with the Union of India .
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A 262 COMMERCIAL & INDUSTRIAL LAWS
The State Government of Jammu & Kashmir have instituted a seperate Provident Fund Scheme
w.e.f. 1-6-1961 .
Applicability
The Act shall apply to every establishment which is a factory engaged in any industry mentioned
in schedule I of the Act and employing 20 or more persons or any other establishment
employing twenty or more persons or such other establishment as the central Government
may notify.
All employees in such factory or establishment including contract labour, but excluding casual
labour and receiving wages up to Rs.6,500/- per month will be regulated by the provisions of
the Act. Trainee and apprentices are also not included in determination of the numerical strength.
Once the Act applies to any establishment, it shall continue to be governed by the Act, irrespective
of the fact that the number of employees working therein have subsequently fallen
below 20.
The Act initially applied to factories/establishments falling within six specified industries which
had completed three years of existence and employed 50 or more persons. With effect from 31-
12-1960 , the establishments employing 20 or more persons were also brought under the purview
of the Act .
Under the infancy protection , the Act was not applicable for the establishment employing 50
or more persons , up to a period of three years from the date of set up . Infancy of five years was
allowed in the case of establishment employing twenty or more persons but less than 50 persons
.
With effect from 1-8-1988 , the Act is applicable to the establishment employing twenty or
more persons on expiry of a period of three years from the date of set up . From 22-9-1997 this
infancy of three years has been dispensed with and all the establishments employing 20 or
more persons are brought under the purview of the Act from the very date of set up subject to
fulfillment of other conditions . The provisions of the Act applies on its own force independently.
The Central Government has residual powers to apply this act to any establishment employing
less than twenty employees . By virtue of these provisions , the Employees’ Provident
Fund Scheme has been extended to Cinema theaters employing five or more persons , w.e.f. 1-
10-1984 . Also there is a provision for voluntary application of the Act to any establishment
upon joint request from the employer and majority of its employees , to whom it does not
apply otherwise . An establishment to which this Act applies shall continue to be governed by
this Act notwithstanding that the number of persons employed therein at any time falls below
twenty.
The Act does not apply to certain establishments as specified under Section 16 of the Act .
The Employees’ Provident Fund organisation came into being following enactment of the
Employees’ Provident Fund Act in the year 1952 . The funds established under the Act vests in
COMMERCIAL & INDUSTRIAL LAWS A 263
and administered by Central Board of Trustees constituted by Central Government which functions
subject to overall regulatory control of the Central Government .
MEMBERSHIP
At the inception of the scheme an employee who was in receipt of pay up to Rs.300/- p.m. , and
who worked for one year was eligible for membership of the fund. As a result of amendments
made from time to time , the conditions of eligibility for membership of the fund have been
liberalised in favour of employee. Presently an employee at the time of joining the employment
and getting wages upto Rs.6500/- is required to become a member. Now an employee is
eligible for membership of fund from the very first date of joining a covered establishment.
The Act provides for
Grant of exemption from the operation of the scheme/s framed under the Act to an establishment
, to a class of employees and to an individual employee , on certain conditions.
— Penalties to employers/trustees of exempted Provident Fund who contravene the provision
of the Act and the Scheme.
— Appointment of inspector to secure compliance under the Act and the Schemes framed
there under.
— Mode of recovery of moneys due from employers.
1. Provident Fund benefits
1. Employer also contributes to Members PF @ 12% ( 10% in case of sick industrial co., any
establishment having accumulated loss equal to its entire paid up capital and any establishment
in Jute Industry, Beedi Industry, Brick Industry, Coir Industry and Gaur Gum
Factories. )
2. EPFO guarantees the Employer contribution and credits interest at such rates as determined
by the Central Government.
3. Member can withdraw from this accumulations to cater to financial exigencies in life - No
need to refund unless misused.
4. On resignation, the member can settle the account. i.e., the member gets his PF contribution,
Employer Contribution and Interest.
2. Pension Benefits
1. Pension to Member
2. Pension to Family (on death of member)
3. Scheme Certificate
This Certificate shows the service & family details of a member.
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A 264 COMMERCIAL & INDUSTRIAL LAWS
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 atleast 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).
4. 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)
5. No amount is taken from Member to give Pension to the Member. Employer and Govt.
contributes to Pension fund @8.33% and @1.16% respectively
6. EPFO guarantees pension to members, even if the Employer has not contributed to Pension
Fund.
3. Death Benefits
1. Provident Fund Amount to Family (or to Nominee);
2. Pension to Family (or to Parent / Nominee);
3. Capital Return of Pension;
4. Insurance (EDLI) amount to Family (or to Nominee).
No amount is taken from Member for this facility. Employer contributes for this.
5. Nominee is basically determined as per the information submitted by the member at this
office through FORM-2.
How to become a EPF Member—
You, as your own, can not become an EPF Member. To become an EPF member, you have to
work in an establishment which is covered under EPF and MP ACT, 1952.
If 20 or more employees are working in an establishment, EPFO will cover that establishment.
If Employer and Employees of an establishment desires, that establishment can voluntarily
opt for EPF coverage even if the employees employed therein is less than 20.
COMMERCIAL & INDUSTRIAL LAWS A 265
If your establishment is not covered and atleast 20 employees are working in that establishment,
you can approach EPFO to cover it.
Contributions
Employees Provident fund scheme takes care of the members at the time of retirement, medical
care, housing, family obligations, education of children, finance of insurance policies. etc.
In terms of section 6 of the Act, the employee may contribute 12 or 10 %, as the case may be, of
the basic wages, dearness allowance including the cash value of any food concession and retaining
allowance. An allowance paid to an employee for retaining his services when the establishment
is not working is retaining allowance. The rate of contribution shall be 10% in the
case of certain establishments.
Any covered establishment with less than 20 employees;
Any sick industrial company with in the meaning of SICA;
Any establishment which has at the end of the financial year accumulated losses equal to or
exceeding its entire net worth;
Any establishment in the business of jute, beedi, brick, coir.
If the employee so desires, he may opt to contribute a higher rate also. However, employer
does not have to match the voluntary contribution over and above the statutory rate. The
employer’s contribution of 12% or 10% shall be up to 8.33% of the basic wages, dearness allowance
and retaining allowance towards Employees’ Pension Scheme and the balance 1.67%/
3.67% towards the provident fund. The employer’s contribution to the Employees deposit linked
insurance scheme shall be 0.5 % of the basic wages, dearness allowance, retaining allowance.
In addition, the employer has to pay @ 1.10% of ‘pay’ Contribution and .01% towards administrative
charges of fund and insurance scheme respectively. The employee does not have to
make any contribution to the pension fund account. These amounts must be paid within 15
days from close of every month with the PF commissioner into the respective accounts maintained
with the State bank of India. If the amount is not paid, employer is liable to pay “damages”.
In addition, criminal prosecution can also be launched.
Filing of returns
The employer shall within 15 days of the applicability of the Act send the particulars of all
branches, departments, owners, occupiers, director, partners or any other person in charge of
and responsible for the conduct of business, in form 5 A (Return of ownership), in duplicate, to
the commissioner. In the event of any change, the same too should be intimated within 15 days
to the regional commissioner. The commissioner shall on receipt of the return of ownership
verify the particulars submitted therein and after having been satisfied allot an establishment
code No. This code shall be mentioned on all forms, challans, statements, returns and all future
correspondence.
A return in the prescribed form 5 in respect of employees qualifying to be members of the fund
for the first month during the preceding month, shall be filed within 15 days of the close of
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every month be sent to the CPFC. A monthly return of contributions in the prescribed form 6
has to be filed with the commissioner within 25 days of the close of the month. Annual return
of contributions in form 6 A reflecting the employer and employees contribution in respect of
each employee is to be submitted within one month of the close of the period of currency to the
commissioner.
Modes of recovery
The recovery officer shall proceed to recover the amounts in any one or more of the modes
given below.
Attachment and sale of moveable or immoveable property of the establishment or employer
arrest of the employer and his detention in prison; or
Appointing a receiver for the management of the moveable or immoveable properties of the
establishment or employer (Section 8 B).
Offences by Companies
In case of an offence by a company, every person who at the time of the offence was committed
was in charge of the company and was responsible for the conduct of business of the company
as well as the company itself shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly. Unless a person fulfills both the requirements
i.e being in charge as well as responsible to the company for the conduct of its business, no
prosecution shall lie against him. The words ‘deemed’ is significant as the company is an artificial
person and the person in charge of the company and responsible for the conduct of business
bears a vicarious liability for being prosecuted in respect of the offence committed by the
company.
However, the person prosecuted can take the defence that the offence was committed without
his knowledge or that he had exercised all due diligence to prevent the commission of the
offence. if, however, it is proved that the offence was committed with the consent or connivance
or is attributable to any neglect on the part of any director, manager, secretary or any
other officer of the company then such director, manager, secretary or any other officer shall be
deemed to be guilty of that offence and shall be liable to be punished.
Frequently asked questions
— How to withdraw money from EPF
To withdraw money from EPF Account, you have to either:
Resign or retire from the establishment and apply for settlement of PF in Form-19
— How to get Pension
If you have attained the age of 50 years or more, and
If you have completed a total s ervice of 10 years or more, and
If you are not getting any other EPF Pension.
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Then you have to apply in Form-10D at the EPF Office where you last worked through your
last employer.
If you want to draw pension from a different place, you 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).
Four situations when Pension can be applied for :
No pensioner can receive more than one EPF Pension.
—How to settle EPF account
You have to resign or retire from the establishment and apply for settlement of PF in Form-19.
If the exit is 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 my account / What to do if I join another establishment
You have 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. You have to obtain new EPF
Number from your New Employer. New EPF Number will be allotted by New Employer, not
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.
60,000/-. The nominee(s) have to apply in From-5IF through the Employer. No amount is
1. On superannuation
Age 58 years or More and
atleast ten years of service
2. Before superannuation
Age between 50 and 58 years and
atleast ten years of service
3. Death of the member
4. Permanent disability
The member can continue in service
while receiving this pension
On attaining 58 Years of age, a EPF
member cease to be a member of EPS
automatically.
The member should not be in service.
Death while in service orDeath while
not in service.
Permanently and totally unfit for the
employment which the member was
doing at the time of such disablement.
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A 268 COMMERCIAL & INDUSTRIAL LAWS
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
DO’S FOR A MEMBER
(1) While joining an establishment, furnish details of previous employment if any, with previous
Provident Fund a/c number and scheme certificate.
(2) In case of existing Provident Fund/ Pension a/c, apply for transfer of previous a/c number
to the present a/c number.
(3) Ensure that employer furnishes Form-5 with details of previous Provident Fund a/c no.
to Employees’ Provident Fund Organisation.
(4) Execute Form-2, with details of self, nominee for Provident Fund and pension and details
of family, so that it is forwarded to Employees’ Provident Fund Organisation by the employer.
(5) Ensure that particulars furnished are correct in all respects.
(6) Ensure that enrolment to Employees’ Provident Fund/ Employees’ Pension Scheme is
done immediately on the date of joining the establishment.
(7) Ensure that Provident Fund is deducted at statutory rate from the total wages i.e. basic,
D.A. and retaining allowance if any.
(8) If desirous of enhancing rate of contribution, inform your willingness with the higher rate
opted and forward to Employees’ Provident Fund Organisation through employer and
allow employer to deduct at enhanced rate from the wages.
(9) If the wages drawn is more than Rs. 6500/-, intimate your willingness to contribute on the
whole salary as per higher rate to Employees’ Provident Fund Organisation through employer.
Employer can also contribute on the whole amount drawn as wages under intimation
to Employees’ Provident Fund Organization.
(10) Check up periodically with the employer that contribution and other charges are paid to
Employees’ Provident Fund Organisation and ensure it’s correctness by verifying the Form-
3A (contribution card) maintained by the employer.
DON’TS FOR A MEMBER
(1) Don’t give false declaration and incorrect particulars to Employer and Employees Provident
Fund Organisation.
(2) Don’t fall victim to middleman/ agents. Please Contact PRO for Doubts / Clarifications if
any.
(3) Don’t allow Employer to deduct his own share of contribution or administrative charges
payable by him from your wages.
(4) Don’t be a party to misclassification of allowances of your wages, with a view to avoid
payment of Provident Fund.