Sometimes you might be puzzled by deductions on your pay slip. Is a large sum being deducted for my PF? How would I benefit from it? What is my investment? How am I protected by it? We help you understanding the scheme and its functionality better.
Backgrounder How it works Disputes & Settlements Aim The Employees' Provident Fund aims to provide social security and to help employees increase savings, which will benefit workers after they retire, or their family members after their death. To the employers, it helps to ensure a steady workforce, which will increase productivity. It also gives the government a substantial sum for investment.
Applicability The Employees' Provident Fund was established by an Act in 1952. It was originally intended to cover workers in factories with a workforce of over 50 people. It now applies to establishments of more than 20 people, and has been extended to cover a wide range of organisations, specified in Schedule 1 of the Act. It was also extended to cover plantations (tea, coffee, rubber, pepper or cardamom) employing 50 or more workers. The government can also specify establishments to be covered by the Act, which have fewer than 20 employees.
Any business to which this Act applies continues to be covered by it even if the number of workers falls below 20.
The persons employed should be generally required by the establishment for its regular business. The term "employee" means any person who is employed for wages of any kind, paid either directly or indirectly by the employer. It includes casual or temporary workmen, trainees, apprentices etc. Persons taken on briefly for some temporary or emergency work are not included. However if a number of persons are required for the regular work of the establishment, the Act does not cease to apply just because the employment may fall short of a complete year. In fact, if an establishment employs 20 or more people for just one day, it is sufficient condition to ensure the applicability of the Act.
Establishments which are not covered by the conditions of the Act can apply for coverage on a voluntary basis if a majority of employees are in favour. Such establishments are required to comply with the provisions of the Act at par with other covered establishment and cannot opt out of coverage on a subsequent date.
Exemptions Subject to various conditions, the government can grant exemptions to the establishments, which it feels, are providing sufficient pension and gratuity benefits to its employees.
Exemption once granted can be cancelled for contravention of any of the prescribed conditions governing exemption and on such cancellation the establishment would be required to comply with the provisions of statutory schemes. The Act provides for imprisonment upto six months and a fine of Rs 5000 for failure to comply with the conditions under which exemption was granted.
How it works The amount of an Employee's Provident Fund is calculated as 12 per cent of his wages, contributed by both the employer and the employee. (In the case of establishments with fewer than 20 employees, the contributions can be made at the rate of 10 per cent.) The employee's contribution must be deducted from his earnings. Wages here include basic pay, house rent allowance, dearness allowance, overtime, bonus, cash value of food coupons or concessions, gifts from the company etc. Emoluments earned while on leave are included. The employer must contribute an equal amount towards the fund. Employees can voluntarily contribute a larger portion of their earnings to the fund, though the employer is under no obligation to contribute this excess amount. The responsibility for making the payment of the total amount to the Provident Fund (PF) rests on the employer.
As soon as possible and after the close of each period of currency of contribution, annual statement of accounts will be sent to each member by the employer. The statement of accounts in the fund will show the opening balance at the beginning of the period, amount contributed during the year, the total amount of interest credited at the end of the period or any withdrawal during the period and the closing balance at the end of the period. Members should satisfy themselves as to the correctness of the annual statement of accounts and any error should be brought through employer to the notice of the concerned Provident Fund Office within six months of the receipt of the statements.
Contributions of the employer towards pension fund do not allow him to decrease or do away with contributions to PF on behalf of an employer. Similarly, or contributions to provident fund or special contributions to the fund do not nullify pension fund or gratuity schemes.
All employers are required to deposit their dues directly with SBI and its branches authorised to collect the dues. The employers have to deposit dues assessed into the bank in a prescribed challan within a stipulated period. A register called "Demand-Collection-Balance-Register" (DCB Register) is maintained by regional offices of EPFO to watch the recovery of amounts due.
Default in payment of contribution by employer is a cognizable offence.
In an establishment of over 100 employees, if the employer and the majority of employees agree, the government may authorise the employer to maintain the provident fund account of its employees
Withdrawals An employee is entitled to withdraw 90 per cent of his PF at the age of 54 and can take the full amount if he retires at the age of 55, if he migrates to another country, or in case of retirement due to permanent disablement.
- Prior to retirement a person can take advances for special events like:
- Acquiring immovable property
- Treatment of illness
- College education or marriage of children
- Lock-out from work
- Life insurance policy
- Damage to immovable property
Non payment of PF: Employee rights (Inputs by H S Sachindananda)
An employee on his retirement shall make an application to his employer who in turn forwards the said application to the Regional Provident Fund Commissioner's Office. On scrutiny of the application and on the office satisfying itself about the correctness of the details in the application, the amounts shall be released from the fund. In the event of any dispute/problem arising regarding the settlement, the following propositions arise depending on the nature of the problem.
In a situation where the employee has failed to make/deposit the requisite contributions with the PF Commissioner, the PF Commissioner shall adjudicate upon the issue in the first instance, in fact even before determining the quantum of the amounts due under the scheme. Therefore the employee would have the option of making an application before the Provident Fund Commissioner or the High Court by way of a writ under the Constitution of India.
In the event of any delay in payment/disbursement of PF the employee may again move the High Court under the writ jurisdiction for a direction. However it has also recently been held that an employee may prefer a complaint before the Consumer Disputes Redressal Forum as the Supreme Court has held that the function of the Provident Fund Commissioner is in the nature of a service. The latter option would seem to be a quicker, cheaper and also more effective remedy. However it must be understood that the Consumer Forum is not the competent authority to determine the quantum of the PF due from an employer.
So an employee basically has two options, ie, either preferring a Writ Petition in the High Court or making an application before the Regional Provident Fund Commissioner. The more recent remedy provided before the Consumer Forum can be resorted to only in the case of any delay in the payment/disbursement of the PF. Further it would be interesting to note that under the Act there is no specific Authority/Tribunal set up, except the Provident Fund Commissioner whose orders are final and cannot be called in challenge before any other Authority. This has been provided with a view that the amounts due to an employee may be paid to him quickly and effectively, especially considering the fact that civil litigation in India is strife with delays, with appeals and revisions provided for all the way upto the Supreme Court.
An employee's best option would lie in preferring a writ before the High Court in order to get a direction for payment of his PF. In case there is a delay his best option lies in preferring a complaint before the Consumer Disputes Redressal Forum.
To register your grievances online, you can go to the site:
http://dpg.bharatsarkar.nic.in/
