Which establishment are covered by the Act?

: The Act is applicable to:

a. every factory engaged in any industry specified in Schedule I to the Act and employing 20 or
more persons;
b. every other establishment employing 20 or more persons specified by the Central Government in
this behalf.
Any establishment to which the Act applies shall continue to be governed by the Act even if the number
of persons employed therein at any time falls below 20. {Section 1(3) & (5)}

Would the Act continue to apply to an establishment which has closed its manufacturing
activities and does not employ a single employee?: Where there is neither an establishment nor an
employer nor an employee, there is no point in saying that the Act would continue to apply. In such
circumstances any continued application of the Act would be in vacuum.

Is the Act applicable to a factory which is closed down but is employing a few employees to
look after the assets of the establishment?: Where a factory is closed down for good and only four
security men are retained for keeping a watch over the assets and properties of the establishment, the
Act would not continue to be applicable to the factory.

Is the Act applicable to charitable institutions?: The plea that an establishment is a charitable
institution is not relevant to the determination of the question of the applicability of the Act.

Are "home workers" in the beedi industry entitled to the benefit of the Act?: The workers
employed at their homes in the manufacture of beedis are also entitled to the benefit of the Act and the
Schemes framed thereunder.

Is a trainee an "employee" under the Act?: The provisions of Section 2(f)(ii) of the Act and Para
2(f)(iv) of the Scheme framed under the Act are to be kept in mind while considering if a trainee is an
employee or not. These provisions show that a trainee who is an apprentice engaged under the
Apprentices Act, 1961 or who is an apprentice according to the certified standing orders applicable to
the establishment is excluded from the definition of an employee under the Act.

Is a partner of a firm an employee under the Act?: For the purpose of the Employees Provident
Funds Act a partner of a partnership firm cannot be said to be an employee of the firm having regard to
the provisions of the Indian Partnership Act. A person cannot be both an employer and employee.

Does the Act apply to a poly clinic?: A poly clinic is covered by the entry in respect of
"establishments of hospital" as well as the entry in respect of "establishment of Medical Practitioners and
Specialists" and therefore the Act applies to a poly clinic. The object (of the two entries) is to bring all
medical establishments employing 20 or more persons under the purview of the Act.

Can the Act be extended to other factories or establishments?: The Central Government has
been given wide powers to extend the application of the Act. It can apply the provisions of the Act-
a. to any factory or establishment even if such factory or establishment is employing less than 20
persons; {Section 1(3)(b) Proviso}
b. to any factory or establishment whatsoever if the employer and the majority of the employees of
such factory or establishment have agreed that the provision of the Act should be made applicable to it
on and from the date of such agreement or from any subsequent date specified in such agreement;
{Section 1(4)}
c. to any factory employing 20 or more persons but not engaged in any industry specified in
Schedule I to the Act. {Section 4}
d. where, immediately before the Act becomes applicable to any establishment there is a provident
fund which is common to the employees in that establishment and employees in any other establishment,
to such other establishment. {Section 3}

Are there any establishments to which the Act is not applicable at all?: The Act is not applicable
-
a. to any factory or other establishment registered under any Central or State law relating to co-
operative societies, employing less than 50 persons and working without the aid of power;
b. to any establishment belonging to the Central Government or a State Government and having a
scheme of contributory provident fund or old age pension;
c. to any establishment set up under any Central or State Act and having a scheme of contributory
provident fund or old age pension; {Section 16(1) and (c)}

If any establishment has departments or branches, are these departments or branches, to be
treated as separate establishments or parts of the same establishments?: Where an
establishment consists of different departments or has branches, whether situate in the same place or in
different places, all such departments or branches shall be treated as parts of the same establishment.
{Section 2(A)}


What are the offences under the Act what is the punishment for them?:
a. If any person, for the purpose of avoiding any payment to be made under the Act or the
Schemes, knowingly makes any false statement or false representation, he would be punished with
imprisonment upto one year, or with fine upto Rs. 5000.00 or with both.
b. If any employer makes default in payment of the employer's contribution or the employee's
contribution payable under the Employees' Provident Funds Scheme or paragraph 38 of the said scheme
relating to the payment of administrative charges, or under section 17(3)(a) of the Act relating to the
payment of inspection charges, he would be punished with imprisonment upto three years but it shall not
be less than one year and a fine of Rs. 10000.00 in case of default in payment of the employee's
contribution which has been deducted by the employer from the employees' wages and six months and a
fine of a Rs. 5000.00 in any other case.
c. If any employer makes default in payment of the employer's contribution or the administrative
charges payable under the Deposit Linked Insurance Scheme under section 6-C or contravenes the
provisions of section 17(3)(a) relating to the payment of inspection charges, he would be punished with
imprisonment upto 1 year, but which shall not be less than 6 months, plus fine upto Rs. 5000.00
d. If any person contravenes or makes default in complying with any other provision of the Act or
any condition for exemption from any scheme, he would be punished with imprisonment upto six months
but which shall not be less than 1 month and with fine upto Rs. 5000.00 or with both.
e. If any person convicted of an offence under the Act or the Schemes commits it again, he would
be punished with imprisonment upto five years but which shall not be less than two years, plus fine upto
Rs. 25000.00 {Section 14 & 14(AA)}



Is any damage leviable on the employer delaying any payment due from him under the Act
or the Schemes?: If any employer makes default-
i. in the payment of any contribution to any Fund;
ii. in the transfer of accumulations as required under Section 15(2) or Section 17(5);
iii. in the payment of any charges payable under the Act or Schemes the Central/Regional Provident
Fund Commissioner can levy and recover from the employer by way of penalty such damages not
exceeding the amount of arrears, as may be specified in the scheme. The Central Board may reduce or
waive the damages levied by the Commissioner in certain case. {Section 14(B)}

Could the employer be punished under section 14-B in case the remittance of contribution by
him is delayed in a bank of post office?: If the remittance of contribution to Provident Fund is
delayed on account of the delay in a Bank or post office, the employer cannot be penalized for it under
section 14-B.

Is the employer liable to pay the contribution when he is not in a position to pay wages to
the employees?: The employer is liable to pay the employer's contribution as well as the employee's
contribution irrespective of the fact that wages have been paid to the employees or not.

Is there any offence under the Act which is cognizable?: The offence relating to default in
payment of any contribution especially the employee's share deduct from the wages of the employees by
the employer is cognizable. That means a person committing such offence can be arrested by the police
without warrant. {Section 14(AB)}

Are any employer allowed to maintain a Provident Fund account in relation to
their establishments?: The Central Government is empowered to authorize any employer of an
establishment employing one hundred or more persons to maintain a Provident Fund account in relation
to the establishment so as to ensure prompt service to the members of the Fund. {Section 16(A)}



Employees' Provident Funds (Fourth Amendment)
Scheme, 2012 Relating to International Worker
covered under social security agreement entered
into between Government of India and any other
country, on ceasing to be an employee in an
establishment covered under the Act.
The due amount in respect of the said international worker shall be payable in the
payees bank account directly or through the employer
MINISTRY OF LABOUR AND EMPLOYMENT
NOTIFICATION
New Delhi, the 5th October, 2012
G.S.R. 744(E). In exercise of the powers conferred by section 5, read with sub-
section (1) ofsection 7 of the Employees Provident Funds and Miscellaneous
Provisions Act, 1952 (19 of 1952), the Central Government hereby makes the following
Scheme further to amend the Employees Provident Funds Scheme, 1952, namely: -
1. (I) This Scheme may be called the Employees Provident Funds (Fourth
Amendment) Scheme, 2012.
(2) It shall come into force on the date of its publication in the Official Gazette.
2. In the Employees Provident Funds Scheme, 1952 (hereinafter referred to as
the principalScheme), under paragraph 83 relating to special provisions in respect of
International Workers.-
(a) in paragraph 69 of the principal Schemeas modified by para 6 of
aforesaid paragraph83, for sub-paragraph (4), the following sub-paragraph shall be
substituted, namely:-
"(4) In respect of a member covered under social security agreement entered into
between Government of India and any other country, on ceasing to be an employee in
an establishment covered under the Act";
(b) in paragraph 72 of the principal Scheme, as modified by para 7 of
aforesaid paragraph83, for sub-paragraph (2), the following sub-paragraph shall be
substituted, namely:-
"(2) The due amount in respect of the member shall be payable in the payees bank
account directly or through the employer".
[F. No. S-35025/09/2011-SS-II]
RAVI MATHUR, Addl. Secy.
Foot Note : The Employees Provident Funds Scheme, 1952 was published in
the Gazette of India, Part II, Section 3, Sub-section (i), vide number S.R.O. 1509, dated
the 2nd September, 1952 and lastly amended vide number G.S.R. 382(E), dated the
24th May, 2012.
Basics of Employee Provident Fund: EPF, EPS, EDLIS
Employee Provident Fund (EPF) is one of the main platforms of savings in India for nearly all people
working in Government, Public or Private sector Organizations. This article is about what is Employee
Provident Fund(EPF), Employee Pension Scheme(EPS), Employees Deposit Linked Insurance
Scheme (EDLIS), how the contributions are calculated based on basic salary and dearness allowance,
what are the EPF interest rate, how much would one save in EPF, how would one know about the
amount accumulated in PF.
What is Employee Provident Fund?
A provident fund is created with a purpose of providing financial security and stability to elderly people.
Generally one contributes in these funds when one starts as employee, the contributions are made on a
regular basis (monthly in most cases). Its purpose is to help employees save a fraction of their salary
every month, to be used in an event that the employee is temporarily or no longer fit to work or at
retirement. The investments made by a number of people / employees are pooled together and invested
by a trust.
Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation
(EPFO) of India. An establishment with 20 or more workers working in any one of the 180+ industries
( given here) should register with EPFO. Typically 12% of the Basic, DA, and cash value of food
allowances has to be contributed to the EPF account. EPFO is a statutory body of the Indian Government
under Labour and Employment Ministry. It is one of the largest social security organisations in the world
in terms of members and volume of financial transactions undertaken.

EPFO logo
EPF, EPS, EDLIS
The Constitution of India under Directive Principles of State Policy provides that the State shall within
the limits of its economic capacity make effective provision for securing the right to work, to education and
to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved want.
The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 4th
March,1952. A series of legislative interventions were made in this direction, including the Employees
Provident Funds & Miscellaneous Provisions Act, 1952. Presently, the following three schemes are in
operation under the Acts:( Click on the link if interested in reading the acts which are in pdf format)
1. Employees Provident Fund Scheme, (EPS)1952
2. Employees Deposit Linked Insurance Scheme,(EDILS) 1976
3. Employees Pension Scheme, 1995 (replacing the Employees Family Pension Scheme, 1971)(EPS)
Employees Pension Scheme (EPS) of 1995 offers pension on disablement, widow pension, and
pension for nominees. EPS program replaced the Family Pension Scheme (FPS). It is financed by
diverting 8.33 percent of employers monthly contribution from the EPF(restricted to 8.33% of 6500 or Rs
541) and governments contribution of 1.17 percent of the workers monthly wages.
The purpose of the scheme is to provide for
1) Superannuation Pension:Member who has rendered eligible service of 20 years and retires on
attaining the age of 58 years.
2) Retiring Pension:member who has rendered eligible service of 20 years and retires or otherwise
ceases to be in employment before attaining the age of 58 years.
3) Permanent Total Disablement Pension
4) Short service Pension: Member has to render eligible service of 10 years and more but less than 20
years.
Employees Deposit Linked Insurance Scheme (EDLIS)
Under the EDLI scheme life insurance cover is provided to the PF members. The cost of the scheme is
borne by the employer but as the amount of life coverage under this statutory scheme is very low (a
maximum amount of Rs. 60,000), usually employers opt out of the EDLI scheme by going for group
insurance scheme which usually provides higher coverage to employees without any increase in cost to
the employer.
EPF, EPS and EDLIS are calculated on Basic salary,Dearness allowances(DA), cash value of food
concession and retaining allowances if any.Most of the organizations follow Basic+ DA Method.
Retaining allowances means an allowance payable for the time being to an employee of any factory or
other establishment during any period in which the establishment is not working, for retaining his services.
Table below gives the rates of contribution of EPF, EPS, EDLI, Admin charges in India.
Scheme Name Employee contribution Employer contribution
Employee provident fund 12% 3.67%
Employees Pension scheme 0 8.33%
Employees Deposit linked insurance 0 0.5%
EPF Administrative charges 0 1.1%
EDLIS Administrative charges 0 0.01%
In industries like beedi, jute, guar gum factories, coir industry (other than spinning sector) the Employee
contribution is 10% while employers contribution is 1.67%.
Employees drawing basic salary upto Rs 6500/- have to compulsory contribute to the Provident fund and
employees drawing above Rs 6501/- have an option to become member of the Provident Fund. It is
beneficial for employees who draw salary above Rs 6501/- to become member of Provident Fund as it is
deducted from the salary before it is deposited on bank or given hence compulsorily saving
happens.Employees contribution is matched by Employers contribution(till 12%) so extra money
and it is helpful for tax purpose too. The employer contribution is exempt from tax and employees
contribution is taxable but eligible for deduction under section 80C of Income tax Act.
Calculation of Employees Provident Fund Contributions
Basic salary of Rs 3500
Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.
Contribution Towards Calculation Amount
EPF Employees share 3500 x 12% 420
EPS Employer share 3500 x 8.33% 292
EPF employer share 3500 x 3.67% 128
EDLI charges 3500 x 0.5% 18
EPF Admin charges 3500 x 1.1% 39
EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)
Basic salary above Rs 6500
In such cases companies uses different method for calculation as per their pay roll policy. Consider an
employee getting a basic salary of 7500/- We can calculate it in different ways but EPS is calculated only
up to 6500/- that means the maximum amount is fixed to Rs 541.00. The three methods mentioned below
are based on the above example.
Method-1
If company consider total basic salary above the limit fixed 6500.00 for PF calculation. Employer has
decided to contribute on total basic salary which is 12 % on 7500.00 equal to 900.00. EPS Share is fixed
to 541. Balance (900-541) goes to EPF account 359.00. You may be thinking that, what about 3.67%?,
Here you dont need to care about it.
Contribution Towards Calculation Amount
EPF Employees share 7500 x 12% 900
EPS Employer share 6500 x 8.33% 541
EPF employer share 7500 x 12% (-) 541 359
EDLI charges 7500 x 0.5% 38
EPF Admin charges 7500 x 1.1% 83
EDLI Admin charges 7500 x 0.01% 0.75 ( Round up to Rs 1/-)
Method -2
Some companies follows the below method in which employee share is calculated on 7500/- and
employer share is calculated on up limit Rs 6500/-
Contribution Towards Calculation Amount
EPF Employees share 7500 x 12% 900
EPS Employer share 6500 x 8.33% 541
EPF employer share 6500 x 3.67% 239
EDLI charges 6500 x 0.5% 33
EPF Admin charges 6500 x 1.1% 72
EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)
Method-3
Some companies calculate both employer and employee shares on 6500/- in spite of higher basic salary
than 6500.00
Contribution Towards Calculation Amount
EPF Employees share 6500 x 12% 780
EPS Employer share 6500 x 8.33% 541
EPF employer share 6500 x 3.67% 239
EDLI charges 6500 x 0.5% 33
EPF Admin charges 6500 x 1.1% 72
EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)
Ref:caclubindia.com
EPF scheme allows partial withdrawals for the purpose of marriage/illness/higher
education/house construction etc.