EMPLOYEES PROVIDENT FUND SCHEMES

Section 5(1) 

The Central Government has framed a Scheme called Employees Provident Fund Scheme for the establishment of provident funds for employees.

Section 5(1A) 

The Fund vests in and is administered by the Central Board constituted under Section 5A.

Section 5(1B) 

The scheme framed may provide for all or any of the matters specified in Schedule II. 

Section 5(2) 

The scheme may provide that any of the provisions shall take effect either prospectively or retrospectively on such date as may be specified in the scheme.


CONTRIBUTION

As per Section 6, 

  • the contribution which shall be paid by the employer to the Fund shall be 10%, of the basic wages, dearness allowance and retaining allowance.
  • if any, for the time being payable to each of the employees whether employed by him directly or through a contractor and 
  • the employees contribution shall be equal to the contribution payable by the employer. 

  • Employees, if they desire, may make contribution exceeding the prescribed rate but subject to the condition that employer shall not be under any obligation to contribute over and above the contribution payable as prescribed by the Government from time to time under the Act. 
Explaination
  • Dearness allowance shall include the cash value of any food concession allowed to an employee. 
  • Retaining allowance is the allowance payable to an employee for retaining his services, when the establishment is not working.


INCREASE IN RATE OF CONTRIBUTION

The Government has raised the rate of Provident Fund Contribution from the current 8.33% to 10% in general and in cases of establishments specially notified by the Government, from 10% to 12% with effect from September 22, 1997.


MANDATORY SCHEME

The 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 (State v. S.P. Chandani, AIR 1959 Pat.9).


ROUNDING OFF

Each contribution shall be calculated to the nearest rupee, fifty paise or more to be counted as the next higher rupee and fraction of a rupee less than fifty paise to be ignored.


WAGE LIMIT

Contribution is paid up to a maximum of ₹ 15,000 by employer and employee with effect from 01.09.2014. To pay a contribution on higher wages, a joint request from employee and employer is required. In such case the employer has to pay administrative charges on the higher wages. For the international worker wage ceiling of ₹ 15,000 is not applicable.


APPLICABILITY OF SCHEME

This scheme shall apply to all factories and other establishments to which the Act applies. 

This scheme shall not applicable to the tea factories in the State of Assam.


INVESTMENT

The amount received by way of Provident Fund contributions is invested by the Board of Trustees in accordance with the investment pattern approved by the Government of India. 

The members of the Provident Fund get interest on the money standing to their credit in their Provident Fund Accounts. The rate of interest for each financial year is recommended by the Board of Trustees and is subject to final decision by the Government of India.


WITHDRAWAL FROM THE FUND

Withdrawal from the fund is allowed for the following purposes-

  • For the purchase of a dwelling house/flat or for the construction of a dwelling house including the acquisition of a suitable site for this purpose;
  • For repayment of loans in special cases;
  • Withdrawal within one year before the retirement;
  • Withdrawal upto 75% of the balance, if not employed from one month or more, subject to approval of P.F. Commissioner or any officer authorised by him.

Such withdrawals are not required to be repaid.


ADVANCES FROM THE FUND

Advances from the fund are paid for the following purposes-

  • For illness in certain cases;
  • For marriages or post matriculation education of children;
  • In abnormal conditions such as calamity of exceptional nature such as flood, earthquakes or riots – (non-refundable)
  • Granted to members affected by cut in the supply of electricity; (non-refundable)
  • Grant of advance to members who are physically handicapped; (non-refundable)


EMPLOYEES PENSION SCHEME 

Section 6A(1) 

The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees’ Pension Scheme for the purpose of providing for —

  • (a) superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to which this Act applies; and
  • (b) widow or widower’s pension, children pension or orphan pension payable to the beneficiaries of such employees.
Section 6A(6) 

The Pension Scheme may provide that all or any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in that behalf in that Scheme.


CONTRIBUTION [EMPLOYEES PENSION SCHEME, 1995]

  • Employee does not have to make any contribution to this fund.
  • Contribution representing 8.33 percent of the Employee's pay shall be remitted by the employer to the Employees' Pension Fund within 15 days of the close of every month by a separate bank draft or cheque on account of the Employees' Pension Fund.
  • The Central Government shall also contribute at the rate of 1.16 percent.
  • Provided that where the pay of the member exceeds fifteen thousand rupees per month the contribution payable by the employer and the Central Government be limited to the amount payable on his pay of fifteen thousand rupees only.


EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME

Section 6C(1) 

The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees’ Deposit-linked Insurance Scheme for the purpose of providing life insurance benefits to the employees of any establishment or class of establishments to which this Act applies.

The Central Government has accordingly framed the Employees’ Deposits-Linked Insurance Scheme, 1976. It came into force on the 1st August, 1976.


APPLICATION OF THE SCHEME

The Central Government made the Employees’ Deposit Linked Insurance Scheme, 1976 which came into effect from 01.09.1976. It applies to all factories and other establishments to which the Act applies except tea factories in State of Assam.


WAGE LIMIT & INSURANCE BENEFIT

The wage ceiling limit under Employees Deposit linked Insurance Scheme has been increased from ₹ 6,500 to ₹ 15,000.

The insurance benefit under the scheme shall be an amount between ₹ 2.5 lakhs and 6 lakhs.


CONTRIBUTIONS TO THE INSURANCE FUND

The employees are not required to contribute to the Insurance Fund.

The employers are required to pay contributions to the Insurance Fund at the rate of 1% of the total emoluments, i.e., basic wages, dearness allowance including, cash value of any food concession and retaining allowance, if any.


RESTRICTIONS ON CONTRIBUTION

Where the monthly pay of an employee exceeds ₹ 15,000 the contribution payable is restricted to the amounts payable on a monthly pay of ₹ 15,000, dearness allowance, retaining allowance and cash value of food concession.


ADMINISTRATIVE EXPENSES

The employer shall pay into the Insurance Fund such further amount of money not exceeding one fourth of the contribution which is required to make as the Central Government may from time to time determine to meet all the expenses in connection with the administration of the scheme other than the expenses towards the cost of any benefits provided by or under that scheme.

 

NOMINATION

The nomination made by a member under the Employee Provident Fund Scheme 1952 or in the exempted provident fund is treated as nomination under this scheme. Provisions of Section 5 have overriding effect and will override the personal laws of the subscriber in the matters of nominations.

 

PAYMENT OF ASSURANCE BENEFIT 

In case of death of a member, an amount equal to the average balance in the account of the deceased during the preceding 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.

 

EXEMPTION FROM THE SCHEME 

Factories/establishments, which have an Insurance Scheme conferring more benefits than those provided under the statutory Scheme, may be granted exemption, subject to certain conditions, if majority of the employees are in favour of such exemption.