DR.

RAM MAHOHAR LOHIYA NATIONAL LAW

UNIVERSITY

2022-2023

Labour Law PROJECT

The Liability of Employer under Employees Provident Fund Act

AUTHORED BY: SIDDHARTHA RAO (200101139)

SEMESTER: VI
B.A.L.L.B (HONS.)
DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY,
LUCKNOW.

SUBMITTED TO: DR. PRASENJIT KUNDU

Assistant Professor (Law),
DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY,
LUCKNOW

Table of Contents
Preface ........................................................................................................... 3

Acknowledgement ........................................................................................ 4

Introduction ................................................................................................... 5

Employer's Liability under EPF

........................................................................................ 6

Legal Provisions ...................................................................... 6

Consequences of Non-compliance ………………………………................ 7

Case laws .............................................................................. 8

Conclusion .................................................................................................... 9
 PREFACE

The main objective of any law student (B.A. LLB.) is to get as much of practical knowledge as
much as possible in pursuing its degree. For developing practical knowledge in a student, he
has to make projects and it is lifetime experience for him. I am thankful of having a project
because practical knowledge is as much important as theoretical knowledge.

Through the development of the project, we had a great experience of various strategies in
developing a project. This project helps me in gaining knowledge and it is the stepping stone
in my career.

I am pleased to present this project to my teacher who gives us proper guidance in selecting
and making of the project.
 ACKNOWLEDGEMENT

I express my gratitude and deep regards to my teacher, Dr. Prasenjit Kundu, for teaching
me the basic things we need to keep in mind while doing a research work.

I also take this opportunity to express a deep sense of gratitude to my seniors in the college
for their cordial support, valuable information and guidance, which helped me in completing
this task through various stages.

Lastly, I thank my family, friends and colleagues for their constant encouragement without
which this assignment would not have been possible.

Thanking You,

Siddhartha Rao.
 Introduction: The Employee Provident Fund Act (EPF Act) is a significant piece of legislation in
India that aims to provide social security to employees by ensuring retirement savings through
the establishment of a provident fund. This research project delves into the liability of
employers under the Employee Provident Fund Act, analyzing relevant legal provisions and
case laws. The project explores the responsibilities of employers, the consequences of non-
compliance, and the role of case laws in shaping the interpretation and application of the Act.

The Employee Provident Fund Act (EPF Act) of 1952 stands as a cornerstone in India's labour
legislation landscape, serving as a vital instrument for securing the financial future of
employees. Enacted with the objective of ensuring social security and stability for workers
during their retirement years, the EPF Act establishes a framework that mandates employers to
contribute to a provident fund on behalf of their employees. This legislation not only caters to
the economic well-being of employees but also underscores the responsibilities and obligations
of employers in facilitating a seamless provident fund mechanism.
The EPF Act's significance lies in its ability to address a crucial aspect of labor welfare –
retirement benefits. Recognizing the financial vulnerabilities that employees may face post
their active working years, the Act seeks to create a robust savings mechanism by compelling
employers to make contributions towards a provident fund. This fund, consisting of both
employer and employee contributions, accumulates over time, providing a financial cushion
upon retirement or in situations of financial exigencies.
At its core, the Act is designed to foster a sense of social security among the working
population. By mandating a savings regime, it ensures that employees are not left entirely
dependent on state-sponsored pension schemes, which might not adequately cater to their
individual needs. Moreover, the Act not only contributes to an individual's financial security
but also bolsters the broader national economy by encouraging savings and reducing the
likelihood of post-retirement poverty or dependency.
This research project delves into the intricacies of the liability borne by employers under the
EPF Act. It comprehensively examines the legal provisions, regulations, and obligations that
employers are subject to under the Act. The project further delves into the potential
consequences that non-compliance or partial compliance may entail for employers. By
meticulously analysing relevant case laws, the project also illustrates how judicial
interpretation has played a pivotal role in refining the application of the Act's provisions over
the years.
In a dynamic economic landscape characterized by evolving labour dynamics and changing
employer-employee relationships, the liability of employers under the EPF Act remains a
critical area of exploration. This research project seeks to shed light on the multifaceted
dimensions of this liability, ranging from the legal framework's intricacies to the practical
implications for both employers and employees. Ultimately, an in-depth understanding of the
liability of employers under the EPF Act is indispensable for ensuring robust compliance,
promoting ethical employment practices, and safeguarding the interests of the workforce in
their post-retirement years.
2. Employer's Liability under the EPF Act: Under the EPF Act, the primary responsibility of an
employer is to deduct the employee's contribution along with the employer's share from the
employee's wages and deposit the same with the appropriate government authority. This
contribution is calculated as a percentage of the employee's basic wages, dearness allowance,
and retaining allowance. The Act also mandates employers to submit regular returns and
reports to the authorities.

3. Legal Provisions: The key legal provisions pertaining to the liability of employers under the
EPF Act include:
Section 2(f): Defines the term "employee" and outlines the criteria for an employee to be
eligible for the provident fund scheme.
Section 6: Imposes an obligation on the employer to make contributions to the provident fund
for eligible employees.
Section 7A: Empowers authorities to assess damages for delayed or non-payment of
contributions by the employer.
Section 14B: Provides for the imposition of damages for default in the payment of
contributions.
Section 17: Grants power to the Central Government to exempt certain establishments or
classes of employees from the provisions of the Act.

Thus, the liability of employers under the Employee Provident Fund Act (EPF Act) is
underpinned by a comprehensive set of legal provisions that outline their responsibilities,
obligations, and the regulatory framework for provident fund contributions. The Act,
supplemented by various rules and regulations, creates a structured mechanism to ensure the
systematic accumulation and management of provident funds for the benefit of employees.
The following legal provisions elucidate the contours of employer liability under the EPF Act:

 Section 2(f): Definition of "Employee": This section of the EPF Act provides a crucial
definition of the term "employee." It encompasses any person employed for wages in any
kind of work, manual or otherwise, including contractual, casual, or temporary
employment. The significance of this definition lies in determining the scope of employees
entitled to the benefits of the provident fund scheme.
 Section 6: Contributions and Deposits: Section 6 of the Act establishes the cornerstone of
the employer's liability. It mandates that the employer and employee each make a
contribution to the provident fund. The employer's contribution constitutes a fixed
percentage of the employee's basic wages, dearness allowance, and retaining allowance, if
any. The employee's contribution is deducted from their wages and matched by the
employer.
 Section 7A: Assessment of Damages: This section empowers the authorities to assess
damages for the delayed payment of contributions by the employer. If an employer fails to
deposit contributions within the stipulated time, the EPF authorities have the discretion to
impose damages, which are calculated as a percentage of the amount of arrears. This
provision underscores the seriousness of timely contribution and serves as a deterrent
against non-compliance.
 Section 14B: Imposition of Damages for Default: Section 14B is pivotal in highlighting the
financial repercussions of defaulting on contributions. It authorizes the imposition of
damages for default in the payment of contributions or administrative charges. The
damages are calculated based on the period of default and the amount of arrears, serving
as a financial penalty to ensure adherence to contribution timelines.
 Section 17: Exemptions: This section empowers the Central Government to exempt certain
establishments or classes of employees from the provisions of the Act. Exemptions may be
granted based on specific criteria, and they underscore the Act's flexibility to accommodate
unique circumstances while ensuring the broader objective of social security.
 Various Rules and Schemes: Apart from the Act itself, several rules and schemes have been
formulated under the EPF Act to streamline the operational aspects of provident fund
contributions. Notable among these are the Employees' Provident Fund Scheme, 1952,
which lays down the rules for the administration and management of the provident fund,
and the Employees' Pension Scheme, 1995, which provides for pension benefits to eligible
employees.

Consequences of Non-Compliance: Non-compliance with the EPF Act can lead to severe
consequences for the employer, including:

Damages: The EPF Act allows for the imposition of damages, which are essentially fines, for
delayed payment or non-payment of contributions. The damages can be substantial and can
vary based on the duration of the delay. The provisions for imposition of damages have been
given under section 14B of the act.

Interest: In addition to damages, the employer is liable to pay interest on the overdue
contributions. The interest rate is determined by the EPFO and can compound over time.
Legal Proceedings: The EPF Act empowers the EPFO to take legal action against employers who
do not comply with the contribution payment requirements. This can include initiating legal
proceedings to recover the outstanding dues.

Section 7Q deals with Interest payable by the employer, according to it the employer shall be
liable to pay simple interest at the rate of twelve per cent. per annum or at such higher rate as
may be specified in the Scheme on any amount due from him under this Act from the date on
which the amount has become so due till the date of its actual payment: Provided that higher
rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by
any scheduled bank.
Criminal Prosecution: In cases of repeated non-compliance or willful evasion, the employer
could also face criminal prosecution under the EPF Act. This could lead to fines and
imprisonment.
5. Case Laws: Some notable cases include:

Sury a Roshni Ltd. v. Employees' Provident Fund Organisation (2017): In this case, the
Supreme Court held that special allowances that are universally, ordinarily, and necessarily
paid to all employees are liable to be considered as part of basic wages for calculating
provident fund contributions.

Bharat Heavy Electricals Ltd. v. Regional Provident Fund Commissioner (2012): The Supreme
Court ruled that allowances that are not paid universally or ordinarily to all employees need
not be considered while calculating provident fund contributions.
Bennett Coleman & Co. v. Employees' Provident Fund Organisation (2016): The High Court
held that the employer's contribution to the provident fund cannot be reduced from the
employee's salary if the same is part of the terms of employment.

Comparative Analysis:

A comparative analysis of employer liabilities under Employees’ Provident Fund (EPF) Acts
across different countries provides valuable insights into the diversity of approaches and
practices. By examining how various jurisdictions handle employer responsibilities, it becomes
possible to identify strengths, weaknesses, and potential improvements in the implementation
of EPF systems.

Jurisdictional Variations:

Different countries have established EPF or similar social security systems with varying
features. A comparative analysis reveals several jurisdictional variations:

Contribution Rates: The percentage of contributions mandated for employers and employees
can vary significantly. Some countries may place a higher burden on employers, while others
might distribute the contributions more evenly.

Coverage and Eligibility: Eligibility criteria for EPF enrollment differ across countries. Some
nations might have broader coverage, including part-time workers and specific industries,
while others may limit coverage to certain categories of employees.

Regulatory Framework: The legal and regulatory frameworks governing EPF Acts can differ,
affecting factors such as the calculation of contributions, timelines for payment, and penalties
for non-compliance.
 Challenges and Reforms:

Analysing the challenges faced by different countries in implementing EPF Acts can offer
insights into potential reforms:

Enforcement Mechanisms: Understanding how countries enforce compliance can shed light on
successful methods for minimizing evasion and enhancing employer adherence to EPF
obligations.

SME Support Mechanisms: Countries that have successfully supported SMEs in meeting EPF
requirements can provide models for others to follow, helping alleviate the financial burden on
smaller businesses.

Flexibility in Contribution Calculations: Jurisdictions that allow flexible contribution calculations

based on factors such as wage structures and business performance can offer ideas for
adapting EPF systems to changing economic conditions.

6. Conclusion: The liability of employers under the Employee Provident Fund Act is a significant
aspect of ensuring social security for employees. Adhering to the legal provisions of the Act is
crucial for employers to avoid penalties and legal repercussions. The role of case laws in
clarifying the interpretation of various provisions adds depth to the implementation of the Act.
It is essential for employers to stay updated with legal developments to ensure compliance and
fulfil their obligations towards their employees' financial security in their post-retirement
years.
The Employees' Provident Fund (EPF) Act stands as a crucial pillar in ensuring financial security
for employees during their retirement years. This research project has delved into the
multifaceted aspects of employer liability under the EPF Act, uncovering the intricate legal
framework, implications, challenges, and potential reforms associated with this liability.
The findings of this research underscore the significance of employer compliance with EPF
obligations. Through the consistent and timely contributions made by employers, the EPF fund
is fortified, enabling it to fulfill its core objective of providing employees with a stable and
secure financial future after their active years of service. When employers diligently meet their
financial commitments, the entire social security ecosystem is reinforced, cultivating trust
among employees and facilitating a smoother transition to retirement.
The implications of employer liability under the EPF Act extend beyond mere monetary
transactions. By fulfilling their obligations, employers contribute to a culture of responsibility
and mutual care within the workforce. Employees are reassured that their future is
safeguarded, enhancing their sense of loyalty and dedication to their employers. This symbiotic
relationship strengthens organizational stability and fosters a positive working environment.
However, this research has also illuminated the challenges that employers face in upholding
their EPF obligations. Administrative complexities, financial strains on SMEs, and occasional
compliance issues pose hurdles that need to be addressed. It is essential to recognize that
these challenges are not insurmountable barriers, but rather areas where strategic
interventions can lead to better outcomes for both employers and employees.
In light of the findings, the proposed reforms and best practices emphasize a forward-looking
approach to enhance employer compliance. The simplification of procedures through digital
platforms and user-friendly interfaces can alleviate administrative burdens and reduce errors.
Providing financial education and awareness campaigns can equip employers with the
knowledge needed to effectively manage EPF contributions. Tailored support mechanisms for
SMEs can balance the mandate of compliance with the practical considerations of businesses
of varying sizes.
In the broader context, a comparative analysis of employer liabilities under EPF Acts in
different countries showcases the diversity of approaches. By learning from international
experiences, jurisdictions can adapt successful strategies to their own contexts, fostering
improvements in compliance and overall social security systems.
In conclusion, the liability of employers under the Employees' Provident Fund Act carries far-
reaching implications that extend well beyond the realm of financial transactions. It embodies
a commitment to the well-being of employees and the stability of organizations. By adhering to
their EPF obligations, employers play a pivotal role in building a resilient and sustainable
retirement ecosystem. To fully realize the potential of the EPF Act, stakeholders must
collaboratively work towards simplifying procedures, providing adequate support, and
fostering a culture of compliance. Ultimately, the fulfillment of employer liability under the EPF
Act is not just a legal requirement; it is a testament to the shared responsibility of ensuring a
dignified and secure post-retirement life for the workforce.
References:
 The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
 Surya Roshni Ltd. Vs. Employees’ Provident Fund Appellate Tribunal, (2019) 4
SCC 17.
 Indian Kanoon, “Responsibility of Principal Employer under EPF”,
https://indiankanoon.org/search/?formInput=%20responsibility%20of%20principal
%20employer%20
 Sharmila Bhadoria, “What happens when employer delays EPF contribution?”,
livemint – https://www.livemint.com/money/personal-finance/what-happens-when-
employer-delays-epf-contribution-what-should-you-do-epfo-11676780938957.html