The Employee Provident Funds, 1952

Introduction
The Employee Provident Funds, 1952 is a beneficial legislation enacted for the
betterment of the future of industrial worker:

1. On his retirement.
2. For his dependents in case of death of employment.
This Act is enacted as a social security measure which falls under the ground
of “retirement benefit”, the object of this Act is to inculcate, non withdrawable
financial benefit, the sum is payable normally on retirement or on the death of
the employee. Administration of the scheme given under this act is done by
the central board, state board, and regional committee, a chief executive
committee appointed and constituted by the central government.

• Central board _ Section 5A

• Executive committee – Section 5AA
• State board – Section 5B
• Regional committee

Boards under the Act

Constitution and position

Central board: Section 5

Central board – Central board is created by official gazette

notification given by the Central government.

Functions
1. Section 6 and Section 6C discussions how the central board should
use their fund vested on them.
2. Duty of the central board is to send an annual report to the Central
government, of its work and activities.
 3. The central government will submit a report to the comptroller and
Auditor General of India. Comments of Central board is laid down
before parliament.

Constitution of the following a person as a member:

• Chairman and a vice-chairman appointed by the central government
• The central Provident fund commissioner, ex-official
• Among Central government officials (not more than five-person)
• A representative of states (not more than 50)
• Representing the employer of the establishment (10 people)
• Representing the employee of the establishment (10 people)

Executive committee: Section 5AA

State Board: section 5 B

The central government, after consulting with any of the states constitute the
state board in the following state, as provided for in the scheme. Constitution
of the state board is done by the notification in the official gazette. Central
government from time to time prescribes the duties to be performed by the
state board and the powers exercised by the state government. The following
scheme will provide the terms condition subject to which a member of state
board is appointed, time place and procedure for conducting meetings etc.
Every board of trustee constituted under this section is a Body Corporate,
being a body corporate, it has perpetual succession, a common seal and right
to sue or get sued in its name.

Regional committee
Until state board is constituted, the Central Government may set up Regional
Committee, which is under the control of Central Government, it works under
the advice of the following person:

1. Central board, when matters referred to it from time to time.

2. All the matter regarding “administration of the Scheme”, such as the
progress of recovery of PF, contribution and other charges, speedy
disposal of prosecution, settlement of claims and sanctions of
advances.
Appointment of central fund commissioner
• The central government shall appoint Central provident fund
commissioner, deputy provident commissioner and regional provident
fund commissioner by discharging his duty they will assist central
provident fund commissioner.
• Chief executive officer is appointed by the central provident fund
commissioner.
• Central Board will appoint other officers, employees for the efficient
administration of various schemes.

EPF Features
The employer is under a statutory obligation to deduct a specified percentage
of the contribution from the employee’s salary for provident fund. The
employer should also contribute such percentage for provident fund. An
employee who gets more than 15,000 is eligible for getting the provident fund.

This Act contains nearly 20 sections and four schedules. Section 7E, F, G, H,
M, N is omitted, section 20 is repealed.

Applicability of the Act – section 1 of this Act deals with the application of the
Act. This is applicable to “every factory engaged in any industry specified in
schedule I”.

1. Every establishment in which 20 or more are employed.

2. Any establishment notified by the central government.
3. Any class of such establishment employing 20 or more. This Act is
applicable to home workers held in the case Mangalore Gandhi Beedi
workers V. U.O.I and P.M.Patel V. U.O.I.
4. This Act is applied when the establishment satisfies the two tests,
namely:

• Whether there is an establishment is a ‘factory’?

• Whether 20 or more person is employed which is held in the case
Andhra University V. Regional Provident Fund Commissioner.
Some workers will not come under this Act. They are Casual, or temporary
workers can’t be considered as employee held in the case Bikar cold storage
co. Ltd. V. Regional PF Commissioner.
Non-applicability of the Act
The Act does not apply to the following things. Any establishment registered
under the co-operative society Act, 1912. Any state-related co-operative
society employed less than 50 people and working without the aid of power.
From the date on which the establishment is set up, where the establishment
as:

• Only 50 or more persons, after the expiry of 3 years.

• Only 20 or more, but less than 50 people before the expiry of 5 years,
which is held in the case V.K. Bhatt V. A.C.B & T. Mfg. Co.
Central Government also has the power to exempt any class of establishment,
on such condition mentioned in the notification:

• On the ground of financial position.

• Other circumstances of the case which is held in the case Mohammed
Ali V. U.O.I.
Eligibility For getting EPF- Any person is eligible, who is employed:

• For work of the establishment.

• Through contractor.
• Connection with work of establishment is eligible for the benefit of the
Act.
This Act was constitutionally challenged on the ground that it is:

• Discriminative in nature.
• Article 14 is violated because it is applied only to a particular class of
industry, but the Supreme Court said that it doesn’t violate article 14,
it is certain, classification of a certain class of industry falls in
reasonable classification which is valid.
 Employees’ Pension Scheme (EPS)
What is Employees’ Pension Scheme
Employees’ Pension Scheme is a social security scheme provided by the Employees’ Provident
Fund Organisation (EPFO). The scheme makes provisions for employees working in the
organized sector for a pension after their retirement at the age of 58 years. However, the benefits
of the scheme can be availed only if the employee has provided a service for at least 10 years
(this does not have to be continuous service). Existing as well as new EPF members can join the
EPF scheme.

Both the employer and employee contribute 12% each of the employee’s pay towards EPF.
However, the employee’s entire share is contributed towards EPF, 8.33% of the employer’s
share goes towards the Employees’ Pension Scheme (EPS) and 3.67% goes towards EPF
contribution every month.

Eligibility Criteria
In order to be eligible for availing benefits under the Employees’ Pension Scheme (EPS), an
individual has to fulfil the following criteria:

• He should be a member of EPFO

• He should have completed 10 years of service
• He has reached the age of 58
• He can also withdraw his EPS at a reduced rate from the age of 50 years
• He can also defer his pension for two years (up to 60 years of age) after which he will get
a pension at an additional rate of 4% for each year

How to Calculate Your Pension Under EPS

The pension amount in PF depends on the pensionable salary of the member and the
pensionable service. The member’s monthly pension amount is calculated as per the following
EPS formula or the EPF pension calculation formula:

Member’s Monthly Pension = Pensionable salary X Pensionable service / 70

a) Pensionable Salary

Pensionable salary is the average monthly salary in the last 60 months before the member exits
the Employees’ Pension Scheme.

If there are non-contributory periods in the last 60 months of the employment, the non-
contributory days in the month will not be considered and the benefit of those days would be
given to the employee. Let us assume that the person takes up the job on 3rd of the month then
his salary of 28 days will be divided as per each day’s pay and then multiplied with 30 to
calculate the total monthly wage for the month.

If the salary of the person is ₹ 15,000, the salary for the person would be ₹ 14,000 for 28 days ( ₹
500 per day less for two days). However, the monthly salary considered for EPS would be for 30
days, i.e. ₹ 15,000

The maximum pensionable salary is limited to ₹ 15,000 every month.

Since the employer contributes 8.33% of this salary in the employee’s EPS account, the amount
deposited in the EPS account of the employee every month is

₹ 15000 x 8.33/100 = ₹ 1250

b) Pensionable Service

The actual service period of the member is considered as the pensionable service. Service
periods under different employers are added at the time of calculating the pensionable service
period. The employee has to get the EPS Scheme Certificate issued and submit it to the new
employer every time he switches a job.

It is worth mentioning that the employee gets a bonus of 2 years after completing 20 years of
service.

If the member withdraws the EPS corpus before completing the service period of 10 years and
joins another company, he will have to start afresh for contributing to the EPS account and the
service period will also be set as zero at the start.

The pensionable service period is considered on a 6 months basis. The minimum pensionable
service period is 6 months. If the service period is 8 years 2 months, the pensionable service
period considered is 8 years. However, if the service duration is 8 years and 10 months, the
pensionable service period is taken as 9 years.
Pension Benefits under Employees’ Pension
Scheme (EPS)
All eligible members of EPFO can avail pension benefits as per their age from when they start
withdrawing the pension. The pension amount is different in different cases.

1) Pension on Retirement at the Age of 58 Years

A member becomes eligible for pension benefits once he retires at the age of 58 years. However,
it is mandatory for him to provide service for a period of at least 10 years when he turns 58 for
availing pension benefits. An EPS Scheme Certificate is generated which can be used to fill
Form 10D for withdrawing the monthly pension.

2) Pension on Leaving Service before Becoming Eligible for Monthly Pension

In case a member is not able to remain in service for 10 years before attaining the age of 58
years, he can withdraw the complete sum at the age of 58 years by filling Form 10C. It is worth
mentioning here that he will not get the monthly pension benefits after retirement.

3) Pension on Total Disablement during the Service

A member of the EPFO, who becomes disabled totally and permanently, is entitled to a monthly
pension irrespective of the fact that he has not served the pensionable service period. His
employer has to deposit funds in his EPS account for at least one month to be eligible for the
pension.

The member becomes eligible for the monthly pension from the date of permanent disablement
and is payable for his lifetime. However, the member may have to undergo a medical
examination to check whether he is unfit for the job that he was doing before becoming disabled.

4) Pension for the Family on the Death of the Member

A member’s family becomes eligible for the pension benefits in the following cases:

• In case of death of the member while in service and the employer has deposited funds in
his EPS account for at least one month
• In case the member has completed 10 years of service and dies before attaining 58
years of age
• In case of death of the member after the commencement of the monthly pension

Types of Pensions under Employees’ Pension

Scheme
There are different types of pensions under EPS such as pensions for widows, children and
orphans. These pensions provide an income to the family member of the EPF subscriber.

1) Widow Pension

Widow pension or vridha pension is applicable to the widow of the member eligible for a
pension. The pension amount will be payable until the death of the widow or her remarriage. In
case of more than one widow, the pension amount will be payable to the eldest widow.

The monthly vridha pension amount depends on Table-C of the EPS, 1995. The minimum
pension amount has been increased to ₹ 1000 as of now. As per the pensionable salary of ₹
6,500 for member pensioners, the widow pension amount is calculated according to the table
illustrated below. Note that the monthly pensionable salary has been increased to Rs 15,000 and
hence a higher pension may be available :

2) Child Pension

In case of death of the member, monthly children pension is applicable for the surviving children
in the family in addition to the monthly widow pension. The monthly pension will be paid till the
child attains the age of 25 years. The amount payable is 25% of the widow pension and can be
paid to a maximum of two children.

3) Orphan Pension

In case the member dies and has no surviving widow, his children will be entitled to get the
monthly orphan pension of 75% of the value of monthly widow pension. The benefit will be
applicable for two surviving children from oldest to youngest.

4) Reduced Pension

A member of the EPFO can withdraw an early pension if he has completed 10 years of service
and has reached the age of 50 years but is less than 58 years. In this case, the pension amount
is slashed at a rate of 4% for every year the age is less than 58 years.

In case the member decides to withdraw the monthly reduced pension at the age of 56 years, he
will get the pension at a rate of 92% (100% – 2 x4) of the original pension amount.

Social Security for Unorganised Workers

What is SSA?
▪ SSA is a bilateral agreement between India and a foreign
country designed to protect the interests of cross border
workers.
▪ The agreement provides for avoidance of ‘double
coverage’ and ensures equality of treatment to workers of
both countries from a social security perspective.
▪ Under detachment or elimination of dual
contribution, employees moving on employment to any
SSA country are exempt from making social security
contributions in the host country for a specified period
(specific to each SSA), provided they continue to make
social security contributions in their home countries.
▪ India has SSAs with Belgium, Germany, Switzerland,
Grand Duchy of Luxembourg, France, Denmark, Korea, the
Netherlands, Hungary, Finland, Sweden, Czech Republic,
Norway, Austria, Canada, Australia, Japan and Portugal.
What is a Social Security?
▪ About:
o According to the International Labour
Organisation (ILO), Social Security is a
comprehensive approach designed to prevent
deprivation, give assurance to the individual of a
basic minimum income and to protect the
individual from any uncertainties.
▪ Elements:
o Right to a Standard of Living adequate for the
health and well-being, including food, clothing,
housing and medical care and necessary social
services.
o Right to Income Security in the event of
unemployment, sickness, disability, widowhood,
old age or other lack of livelihood in circumstances
beyond any person’s control.
What is the Need for Social Security Measures?
▪ Informal workers in rural and urban areas have been hit the
most due to the Covid-19 Pandemic, because of
the seasonality of their employment and lack of formal
employee-employer relationship.
o As per the Periodic Labour Force
Survey (PLFS), 90% of workers are in the
informal sector, which is 419 million of the 465
million workers.
▪ Moreover, the Covid-19 crisis in India has come in the
backdrop of pre-existing high and rising unemployment.
▪ The consequential effects on loss of jobs, rising
unemployment, indebtedness, nutrition, health and
education of unorganised workers and their family members
have the potential to cast a long shadow and irreparable
damage.
▪ India has been witnessing a steady informalisation of the
formal workforce in manufacturing and services,
underlined by the growth of the gig economy. While this
 informalisation has offered additional income-generating
opportunities, the informality in the arrangement has led
to employment increasingly characterised by
uncertainty.
▪ Less than half of the informal sector workers have
access to any form of risk protection such as life
insurance, health insurance and pensions.
What is Current State of Informal workers in India?
▪ Over 94% of 27.69 crore informal sector workers
registered on the e-Shram portal have a monthly income
of Rs 10,000 or below and over 74% of the enrolled
workforce belongs to Scheduled Castes (SC), Scheduled
Tribes (ST) and Other Backward Classes (OBC).
o The proportion of the General Category workers is
25.56%.
▪ The data showed that 94.11% of the registered informal
workers have a monthly income of Rs 10,000 or
below, while 4.36% have a monthly income between Rs
10,001 and Rs 15,000.
What are the Related Initiatives for Unorganised
Workers?
▪ Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY):
o It is a one-year life insurance scheme renewable
from year to year offering coverage for death due
to any reason.
▪ Pradhan Mantri Suraksha Bima Yojana (PMSBY):
o It is a one-year accidental insurance scheme
renewable from year to year offering coverage for
death or disability due to accident.
▪ Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana
(AB-PMJAY):
o It is the world’s largest health insurance/
assurance scheme fully financed by the
government.
 ▪ Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM):
o It is a Central Sector Scheme administered by
the Ministry of Labour and Employment and
implemented through Life Insurance Corporation
of India and Community Service Centers (CSCs).
▪ Atal Pension Yojana:
o The scheme was launched in May, 2015, with the
objective of creating a universal social security
system for all Indians, especially the poor, the
under-privileged and the workers in the
unorganised sector.
▪ National Social Assistance Programme (NSAP):
o The Ministry of Rural Development has proposed
that the monthly pensions of the elderly poor,
disabled and widows should be increased from the
current Rs 200 to Rs800 under NSAP.
▪ Garib Kalyan Rojgar Abhiyaan:
o The scheme empowers and provide livelihood
opportunities to the
returnee migrant workers and rural citizens who
have returned to their home states due to
the Covid-19 induced lockdown.
Social Security for the Unorganised Sector
Unorganised Sector Definition:

The unorganised sector includes workers who do not have formal employment contracts and work in various
informal employment types such as agriculture, construction, street vending, home-based work, etc.
Challenges:

Workers in this sector often lack access to formal social security benefits like health insurance, provident
fund, pension, etc.
They face issues like low and irregular income, lack of job security, and poor working conditions.
Social Security Initiatives:

National Social Security Board: Established to recommend policies for the welfare of unorganised workers.

Unorganised Workers' Social Security Act, 2008: Provides for the social security and welfare of unorganised
workers, including provisions for life and disability cover, health and maternity benefits, old age protection,
and any other benefit as determined by the government.

Schemes and Programs: Various government schemes such as the Pradhan Mantri Shram Yogi Maandhan
(PM-SYM), which provides old age pension for unorganised workers, and Rashtriya Swasthya Bima Yojana
(RSBY), which offers health insurance.
These concepts form the backbone of retirement and social security benefits under labour laws in India,
aiming to provide financial stability and security to employees both during and after their employment.