The employee provident fund & miscellaneous provisions act 1952Document Transcript
UNIT 4 Lesson No 22 The Employee Provident Fund & Miscellaneous Provisions Act 1952Dear students, we shall now study an Act that is meant to ensure social security of theworkers after they have retired form service and are no loner capable of working.Legislation for the compulsory institution of contributory provident fund in industrialundertakings were discussed several times in which representatives of the Central and StateGovernment and of workers and employers took part. A non official Bill on this subjectwas introduced in Lok Sabha in 1948 to provide for the establishment and grant ofprovident fund to certain class of workers by their employers. The Bill was withdrawn onlyon assurance by the Government it will soon consider the introduction of a comprehensivebill.On 15th November 1951, the Government of India promulgated the Employee ProvidentFund ordinance, which came into force on that date. The Employees Provident Fund Actpassed on 4th March 1952 subsequently replaced it. It was found that the lump sumprovided through the provident fund was not adequate for a retired worker or his family inthe long run. Accordingly on 1st March 1971, Employees family pension scheme wasintroduced. The Act was amended in 1976 with a view to introduce Employees DepositLinked Insurance Scheme, a measure to provide an insurance cover to the members of theprovident fund in covered establishments without the payment of any premium by thesemembers. Further more, the Act was amended in 1995 providing for employee pensionscheme in lieu of the existing employee pension scheme of 1971.Main Features of the ActThe Employee Provident Funds and Miscellaneous Provisions Act 1952 is applicable tofactories and other establishments engaged in specified industries, which has completed 3years of their existence and employ 20 or more persons. The Act however does not apply tocooperative societies employing less than 50 persons and working without the aid ofpower. The central government is empowered to apply the provisions of this Act toestablishments less than 20 persons after giving not less than two months notice of itsintentions to do so by notification in the Official Gazette Once the Act is applied, it doesnot cease to be applicable even if the number of employees falls below 20. Anestablishment / factory, which is not otherwise coverable under the Act, can be coveredvoluntarily with the mutual consent of the employer and majority of the employees underSection 1 (4) of the Act. Employees drawing a pay not exceeding Rs 5000/- per month areeligible for the membership of the fund.The normal rate of contribution to the provident fund by the employees and employers asprescribed in the Act is 10% of the pay of the employee. the term "wages" include basicwage, dearness allowance, including cash value of food concession and retaining
allowance, if any. The Act however provides that the Central Government may aftermaking such enquiries as it deems fit, enhance the statutory rate of contribution to 12% ofwages in any industry or class of establishment.Under Para 60 (1) of the Employee Provident Fund scheme the Central Government on therecommendations of the Central Board of Trustees declares the rate of interest to becredited annually to the accounts of provident fund subscribers.Under the scheme a member may withdraw the full amount standing to his credit in thefund in the event of :i) Retirement from service after attaining the age of 55 years.ii) Retirement on account of permanent and total incapacityiii) Migration from India for permanent settlement abroadiv) Termination of service in the course of mass retrenchment (involving 3 or morepersons). The membership of the scheme for a member is reckoned from the time ofjoining the establishment till the date of settlement of the claim.Incase of the death of the member before retirement the amount will be paid to hisnominee. If there is no nominee, the amount shall be paid to the members of his family inequal shares except :a) Sons who have attained majority,b) Sons of deceased son who have attained majority.c) Married daughters whose husbands are alive.d) Married daughters of the deceased son whose husbands are alive.The nomination form shall be filled in duplicate and the members will keep one copy dulyaccepted by the provident fund office and, incase of a change, a separate form for freshnomination shall be filled in duplicate.When a member leaves service in one establishment and obtains re employment in anotherestablishment, whether or exempted, or not exempted, in the same region or in anotherregion, he is required to apply for the transfer of his provident fund account to regionalProvident Fund Commissioner in the prescribed form. The actual transfer of provident fundaccumulation with interest takes place in case of :1) Reemployment in an establishment, whether in the same region/sub region.2) Re employment in an exempted establishment in the same region sub area.
3) Leaving service in exempted establishment and reemployment in a not exemptedestablishment.4) Re employment in an establishment not covered under the Act.5) Financing of Life insurance policies.6) House building7) Purchase of shares of consumer cooperative credit housing societies8) During temporary closure of establishment.9) Illness of a member / family members10) Members own marriage or the marriage of his/her sister, brother, daughter or son andpost matriculation education of children11) damages to movable of immovable property of members due to calamity of exceptionalnature12) Unemployment relief to individual retrenched members13) Grant of advance to members who are physically handicapped for the purchase ofequipmentAs soon as possible after the completion of each accounting year, each member of fundshall be supplied with an account slip showing:a) The opening balanceb) The amount contributed during the yearc) The amount of interest credited or debited during the yeard) Closing balanceError if any shall be brought to the notice of the Commissioner within six months.An establishment / factory may be granted exemption under Section 17 if, in the opinion ofthe appropriate government, rules of its provident fund with respect to rates of contributionare not less favourable than those specified in Section 6 of the Act and if the employees arealso in enjoyment of other provident fund benefits which on the whole are not lessfavourable to the employee than the benefits provided under the Act or any scheme inrelation to employees in any other establishment of a similar character.The central Government is empowered to grant exemption to any class of establishmentsfrom the operation of the Act or a specified period, on financial or other grounds underSection 16(2). The exemption is granted by issue of notification in the Official Gazette andsubject to such terms and conditions as may be specified in the notification. The exemptiondoes not amount to total exclusion from the provisions of the Act. The exemptedestablishments are required to constitute a Board of Trustees according to rules governingthe exemptions to administer the fund, subject to overall control of the Regional ProvidentFund Commissioner. The exempted establishments are also required to maintain properaccounts, submit proper returns, invest provident fund accumulations in the mannerprescribed by the Central Government from time to time and pay inspection charges.Exemption is liable to be cancelled for breach of any of these conditions.Pension Scheme1995
The Scheme applies to :All establishments to which Employees provident Fund and Miscellaneous Provisions Act1952 applies.All EPF subscribers ( including exempted establishments) contributing to existingEmployees Family Pension Scheme1971All provident fund members not subscribing to family pension fund but who joined thefamily pension scheme on their own option.ContributionThe rate of contribution under Employees Pension Scheme 1995 is 8.33% of pay of theemployee. The contribution shall be payable from out of contribution payable by theemployer under Section 6 of the EPF& MP Act 1952. Incase where the pay of the memberexceeds Rs 5000/- per month contribution payable to the pension fund by the employershall be limited to a pay of Rs 5000/- only. Any additional contribution to provident fundbeyond the pay of Rs 5000/- would continue to be credited into the provident fund accountof the member. Incase where the rate of provident fund contribution is 10% the balance ofcontribution ie 1.67% Is to be credited into the Provident Fund account of the member. Thecontributions are to be rounded off to the nearest rupee. The contribution to the pensionfund shall have to be remitted within 15 days of the close of every month in Account No10.BenefitsPension will be payable on Superannuation/retirement from service and upto disablement.Widow/Widower will get family pension and also there is provision for payment of pensionto children and orphans.Pension will be payable to nominee in case of an unmarried member or a member havingno family.Existing family pension membership period will be counted for pension eligibility.Pension payable shall be 1/70th of the pension able salary for each year of service.On completion of 33 years of pension able service, pension entitlement will be 50%equivalent to member’s salary and dearness allowance.60% entitlement of pay and dearness allowance on completion of 40years of pension ableservice.Pension Quantum and CriteriaMembers pension will be payable on attaining the age of 58 years.
Pension can be taken at reduced rate.Pension will be payable at normal rate on completion 20 years pension able service ormore-- Provision exists for short service pension on completion of 10 years of service at adiscounted rate.Pension will be payable to members any time after joining the scheme upon permanentdisablement.No pension will be payable for less than 10 years service. There will be return ofcontribution with slightly reduced interest in that case.Family pension will extend to widow / widower for life or until remarried, and children upto 25 years of age, upon death of the member irrespective of the death in service, out ofservice or after receiving the pension on retirement.Orphan pension will be payable to children at enhanced rate up to death of widow/widoweror ceasing payment of widow pension.Pension will be payable to nominees for specified period in case the member is unmarriedor is having no familyCapital Return OptionOn accepting 10% reduced pension (ie 90% of original pension) benefit of capital returnequivalent to 100 times of monthly pension will be payable in lump sum upon of the deathof the member to widow/family members. Incase member survives; return of capital will bemade to member on completion of twenty years.The pension benefit of family will continue to apply even after capital return. For exampleif the monthly pension is Rs 1000/- pensioner receives Rs 900/- (10% less than 1000/-)Capital return will be Rs 100000/- in lumpsum (100 times of Rs 1000.) In addition thefamily will continue to get pension for spouse and children.AdministrationThe Pension Scheme will be administered by the tripartite Central Board of Trustees set upunder the Employee Provident Fund and Miscellaneous Provisions Act. The RegionalCommittees set up under the Provident fund scheme shall advise the Regional Boards onmatters relating to administration and implementation of the scheme in the respectiveregions.
Employee Deposit linked Insurance Scheme 1976The scheme came into force from August 1976. It is applicable to all factories/establishments to which EPF & MP Act 1952 applies. All the provident fund member-employees, both in the exempted and unexampled establishments are covered under thescheme. While the employees are not required to contribute to the insurance fund, theemployers are required to pay contribution to it at the rate of 0.5% of the pay of theemployee who are provident fund subscribers. Central Government also contributes to theInsurance Fund at the rate of .25% of the pay in respect of the covered employee. Theemployers are also required to pay administrative charges in the Insurance fund at the rateof .01% of the pay drawn by the employees subject to a minimum of Rs2/- per month. TheCentral Government also meets partly the expense in connection with the administration ofthe insurance scheme by paying into the insurance fund at the rate of 0.005% of the paydrawn by the employee members subject to a minimum of rupees 1/- per month. theemployers of exempted establishments are required to pay inspection charges at the rate of0.02% of the pay of the employee-members.Contributions received in the “Insurance Fund” are kept in the Public Account of theGovernment of India after making payments due to accounts of benefits provided underthis scheme. The rate of interest on each on such accumulations in the Public Account is8.5%.Under the scheme, the nominee/members of the family of employees of coveredestablishments will get, in the event of death while in service an additional amount equal tothe average balance in the provident fund account of the deceased during the precedingtwelve months whenever the average provident fund balance is less than Rs 25000/-. Incase where the average provident fund balance of the preceding 12 months exceeds Rs25000/-, the amount payable shall be Rs 25000/- plus 25% of the amount in excess of Rs25000/- subject to a ceiling of Rs 35000/-There is a provision in the scheme for exemption of factories/establishments which have aninsurance scheme approved by the government and conferring more benefits than thoseprovided under this statutory scheme, provided that a majority of the employees are infavour of such exemption. The Central Government is the appropriate authority to grantexemption from the Employees Deposit Linked Insurance Scheme under Section 17 (2A). The Employees Provident Fund Organisation is in charge of all the three schemes. TheCentral Board of Trustees, a tripartite body consisting of the Chairman, nominees of thecentre and state government and employees ‘and employers’ organizations, administersthese schemes. The Central Provident Fund Commissioner is the chief executive officer ofthe organization and secretary to the Board of Trustees. He is assisted by the RegionalProvident Fund Commissioners, one in each state and in Delhi. The regional committeesadvise the Central Board on matters connected with the administration of the scheme intheir respective states. Sub Regional Provident Fund offices have been opened in someregions to render better service to the subscribers of the fund. Provident Fund inspectorsare appointed to carry out inspection and to perform an advisory role vis-à-vis the
employers and workers in different covered establishments. They conduct surveys toensure that all coverable establishments/factories are covered under the Act. They alsorecommend and file prosecutions in the courts against defaulting employers and pursuethese cases till their final disposal.Questions1.Describe the main features of the Employees Provident Fund and MiscellaneousProvisions Act?2. What are the provisions regarding transfer of the amount to the credit of the providentFund of an employee where he leaves his appointment and joins another employment?