The Employees Provident Funds and Misc.

Provisions Act, 1952

Applicability of the Act:
The Act applies to every factory, engaged in industry prescribed by the Act, and
employs 20 or more persons.
The Act applies to every establishment and its departments and branches, in
which 20 or more persons are employed. Educational Institutions are also
considered as establishments.
Government may make the Act applicable to establishments with less than 20
employees, by notification in an official gazette.

Basic Wages:
Basic wages means all earnings by employee, paid or payable to him in cash, while on
duty or paid leave.
Basic Wages does not include:

Food Concession
Dearness Allowance
House-rent allowance
Bonus, commission or any other similar payment
Any presents made by the employer

An apprentice other than an apprentice engaged under Apprentices Act, 1961 shall be
treated as an employee.

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Non-applicability of the Act:

Any registered Co-operative society employing less than 50 persons and working
without the aid of power.
Any Govt establishment that have a separate contributory provident fund or old
age pension.
An undertaking constituted under a separate Act.

Can CG authorize certain employers to maintain PF accounts?

An application shall be made to CG seeking permission to maintain PF accounts.

The application must be made by the employer and majority of the employees.
The establishment employs 100 persons or more.
The establishment has not committed any default in the payment of provident fund
during 3 years preceding the date of application.
The CG shall then give authorization, adding any conditions thereof.
The CG may cancel the authorization, if employer has failed any conditions specified.
Before cancelling the application, employer shall be given opportunity of being
heard.

Exemption from provision of the Act:

The Exemption shall be granted by the AG.

The exemption shall be given by notification in an official gazette.
AG shall specify the conditions for exemption.
Exemption shall be given prospectively or retrospectively.
AG shall take the suggestions from the Central Board.

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Central Board of Trustees:

Composition of Board:

1 Chairman
1 Vice Chairman
1 Central PF commissioner
Maximum 5 officials representing CG.
Maximum 15 officials representing SG.
10 persons representing employers.
10 persons representing employees.

Functions of the Central Board:

The Central Board shall administer the Provident Fund Scheme, Employees Pension
Scheme, Employees Deposit Linked Insurance Scheme.
Central Board shall take important policy decisions.
Maintaining proper accounts, as specified by CG.

Executive Committee:
Executive committee shall constitute 13 members. The members of Executive
Committee are selected from the members of Central Board.

Chairman: From amongst the members of Central Board.

2 members from representatives of CG elected to Central Board.
3 members from representatives of SG elected to Central Board.
3 members from representatives of employers elected to the Central Board.
3 members from representatives of employees elected to the Central Board.
Central Provident Fund commissioner shall be a member.

The purpose of executive committee is to assist Central Board in its functions. The
Executive committee shall hold meetings to appoint any member to the Central Board.

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Order against Employer:

Where there is any dispute regarding applicability of the act to an establishment or any
other dispute, employer shall be ordered for a hearing. If employer fails to show at the
hearing, an ex parte order shall be passed.
Review of Order:

Employer has right to make an application for review of the order.

An Officer can also review the order on his own motion.
Application for review shall be made within 45 days from the order.
Application shall be made in following cases If new and important evidence is discovered, which could not be
produced earlier as employer dont have any knowledge of it.
Any other sufficient reason.
The officer may reject the application or grant the review.
Appeal cannot be filed against the rejected review.

Interest payable by Employer

For any delay in payment of any amount, employer shall be liable to pay a simple
interest at 12% p.a. or at higher rate specified in the scheme
However, the higher rate specified in the scheme shall not exceed the lending
rate charged by any scheduled bank.
The interest is payable from the date on which the amount becomes payable, till
the date of actual payment.

Recovery of money from Employer:

The authorized officer shall issue a Recovery Certificate, specifying the amount due.
Recovery Certificate shall be sent to the jurisdictional Recovery Officer.
Mode of receovery Attachment and sale of property, amount recovered is insufficient.
Arrest of Employer.
Appointing a receiver to manage the properties of establishment.
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Transfer of Accounts:
If the new establishment is not covered under PF Act: The employee who is a member
of PF obtains employment in an establishment that is not covered under PF Act, and the
new establishment has a Provident Fund of its own. In this case, at the request of the
employee, the amount standing to the credit will be transferred to his account in the
new establishment, within such time specified by the CG.
If the old establishment was not covered under PF Act: If an employee is employed in
an establishment to which the provisions of PF Act do not apply, because such
establishment has its own PF account, and obtains employment in an establishment to
which PF Act shall apply, then the amount standing to the credit will be transferred to
his account in the new establishment.

Protection against attachment:

The amount standing to the credit of any member of PF fund Shall not in any way capable of being assigned or charged.
Shall not be liable for attachment by any decree or court
Shall not be capable of being claimed by the official assignee.
Shall be free from any debt or liability.
>The employee cannot claim any protection in respect of the amount withdrawn from
the PF account.

Liability of employer in case of transfer of establishment:

Where an employer transfers any establishment, he as well as the transferee
shall be jointly and severally responsible for contributions and other sums
due up to the date of transfer of establishment.
The liability of the transferor shall be limited with respect to the period upto the
date of transfer.
The liability of the transferee shall be limited to the assets obtained by him by
way of transfer of establishment.
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Employees Provident Fund Scheme

Quantum of contribution:
Employee 10% of pay (Basic + DA + Retaining allowance). Employer can make a
higher contribution)
Employer 10% of pay
CG is empowered to increase the rate of contribution to 12%

Amounts standing to the credit shall be payable in a lump sum amount at the time of
termination of service.
In case of death of a member, legal heir will get the right.
Member can make partial withdrawals during his service.

Employees Pension Scheme

The Pension fund shall be established by CG.
Contribution: Employer shall contribute amount not exceeding 8.33% of the basic
wages, DA and retaining allowance.
The pension fund will be vested in the hands of the Central Board.
Some of the benefits of the scheme are superannuation pension, widow pension,
retiring pension etc.
Provision of the pension Scheme:

Employees to whom the pension scheme shall apply.

Manner of crediting of employers contribution to the scheme.
The minimum qualifying service to be eligible for pension.
Forms, registers and records to be maintained under the scheme.
Manner in which the amounts in pension fund shall be invested.
Mode of disbursement of pension.
Manner in which expenses for administering the pension scheme shall be met.

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Employee Deposit Linked Insurance Scheme

The Scheme shall be framed by the CG.
Contribution: The employer shall time to time shall contribute such amount not
exceeding 1% of the aggregate of Basic Salary, DA and retaining allowance.
The insurance fund will be vested in the hands of the Central Board.
At the time of death of employee, his nominee shall be entitled to receive a onetime lump sum amount as insurance benefit. Such amount shall be higher of
following-

Average monthly wages drawn

(subject to max of 6,500)
X

20

An amount equal to the average

balance in the fund, in preceeding
12 months.

>However, if the average balance

Exceeds 50,000, then the amount
Payable shall be 50,000 plus 40% of the
amount in excess of 50,000, subject to
a maximum of Rs.100,000

Preferential Payment [Section 11]:

Section 11 is attracted when the employer is wound up or become insolvent.
Where the employer is a company: The amounts due from employer until the date of
liquidation order shall be included among the debts which u/s 530 of the Companies
Act, 1956, are to be paid in priority to all other debts, at the time distribution of the
property of the company.
In any other case: The amounts due from employer until the date of adjudication order
shall be included among the debts that are to be paid in priority to all other debts, at the
time distribution of the property of the insolvent.
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Whether the following nominations are valid?

Prakul dont have a family and therefore nominated Mohith, who is his friend as
a nominee.
Answer: It is valid.

Krishna dont have a family and therefore appointed his friend as nominee.
After a year, he gets married. Whether the nomination is still valid?
Answer: Nomination made in favour of a person who is not member of the family
becomes void immediately when the employee subsequently acquires a family.

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