INTRODUCTION

Provident Fund schemes for the benefit of the employees had been introduced by some
organisations even when there was no legislation requiring them to do so. Such schemes were,
however, very few and they covered only limited classes/groups of employees. In 1952, the
Employees Provident Funds Act was enacted to provide an institution of Provident Fund for
workers in six specified industries with provision for gradual extension of the Act to other
industries/classes of establishments. The Act is now applicable to employees drawing pay not
exceeding Rs. 6,500/- per month. The term pay includes basic wages with dearness allowance,
retaining allowance (if any), and cash value of food concession.

Definitions—In this Act, unless the context otherwise requires;

- “Appropriate Government” means—

(i) In relation to an establishment belonging to, or under the control of, the Central Government
or in relation to an establishment connected with a railway company, a major port, a mine or an
oilfield or a controlled industry, [or in relation to an establishment having departments or
branches in more than one State,] the Central Government; and

(ii) In relation to any other establishment, the State Government; “authorised officer” means the
Central Provident Fund Commissioner, Additional Central Provident Fund Commissioner,
Deputy Provident Fund Commissioner, Regional Provident Fund Commissioner or such other
officer as may be authorised by the Central Government, by notification in the Official Gazette

- “Basic wages” means all emoluments which are earned by an employee while on duty or [on
leave or on holidays with wages in either case] in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but does not include—

(i) the cash value of any food concession;

(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an
employee on account of a rise in the cost of living), house-rent allowance, overtime allowance,
bonus commission or any other similar allowance payable to the employee in respect of his
employment or of work done in such employment;
(iii) any presents made by the employer;

- “Contribution” means a contribution payable in respect of a member under a Scheme 4[or the
contribution payable in respect of an employee to whom the Insurance Scheme applies]

- “Controlled Industry” means any industry the control of which by the Union has been declared
by a Central Act to be expedient in the public interest

- “Employer” means —

(i) in relation to an establishment which is a factory, the owner or occupier of the factory,
including the agent of such owner or occupier, the legal representative of a deceased owner or
occupier and, where a person has been named as a manager of the factory under clause (f) of
sub-section (1) of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and

(ii) in relation to any other establishment, the person who, or the authority which, has the
ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a
manager, managing director or managing agent, such manager, managing director or managing
agent.

- “Employee” means any person who is employed for wages in any kind of work, manual or
otherwise, in or in connection with the work of 6[an establishment], and who gets his wages
directly or indirectly from the employer, 7[and includes any person—

(i) employed by or through a contractor in or in connection with the work of the establishment;

(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961
(52 of 1961), or under the standing orders of the establishment

“Exempted employee” means an employee to whom a Scheme 2[or the Insurance Scheme, as the
case may be,] would, but for the exemption granted under section 17, have applied

“exempted” means [an establishment] in respect of which an exemption has been granted under
section 17 from the operation of all or any of the provisions of any Scheme 2[or the Insurance
Scheme, as the case may be], whether such exemption has been granted to the 4 [establishment]
as such or to any person or class of persons employed therein
- “Factory” means any premises, including the precincts thereof, in any part of which a
manufacturing process is being carried on or is ordinarily so carried on, whether with the aid of
power or without the aid of power

- “Fund” means the provident fund established under a Scheme

- “Industry” means any industry specified in Schedule I, and includes any other industry added
to the Schedule by notification under section 4

(i) “Insurance Fund” means the Deposit-linked Insurance Fund established under sub-section (2)
of section 6C

(ii) “Insurance Scheme” means the Employees” Deposit-linked Insurance Scheme framed under
sub-section (1) of section 6C

(iii) “manufacture” or “manufacturing process” means any process for making, altering,
repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing
or otherwise treating or adapting any article or substance with a view to its use, sale, transport,
delivery or disposal

- “Member” means a member of the Fund

- “Occupier of a factory” means the person who has ultimate control over the affairs of the
factory, and, where the said affairs are entrusted to a managing agent, such agent shall be
deemed to be the occupier of the factory

“Pension Fund” means the Employees’ Pension Fund established under sub-section (2) of
section 6A

“Pension Scheme” means the Employees’ Pension Scheme framed under sub-section (1) of
section 6A

“Prescribed” means prescribed by rules made under this Act

“Recovery Officer” means any officer of the Central Government, State Government or the
Board of Trustees constituted under section 5A, who may be authorised by the Central
Government, by notification in the Official Gazette, to exercise the powers of a Recovery Officer
under this Act
- “Scheme” means the Employees’ Provident Fund Scheme framed under section 5

- “Superannuation”, in relation to an employee, who is the member of the Pension Scheme

means the attainment, by the said employee, of the age of fifty-eight years

- “Tribunal” means the Industrial Tribunal referred to in section 7 D

The following three schemes have been framed under the Act by the Central Government:

(a) The Employees’ Provident Fund Schemes, 1952;

(b) The Employees’ Pension Scheme, 1995; and

(c) The Employees’ Deposit-Linked Insurance Scheme; 1976.

The three schemes mentioned above confer significant social security benefits on workers and
their dependents.

INTRODUCTION

Provident Fund schemes for the benefit of the employees had been introduced by some
organisations even when there was no legislation requiring them to do so. Such schemes were,
however, very few and they covered only limited classes/groups of employees. In 1952, the
Employees Provident Funds Act was enacted to provide an institution of Provident Fund for
workers in six specified industries with provision for gradual extension of the Act to other
industries/classes of establishments. The Act is now applicable to employees drawing pay not
exceeding Rs. 6,500/- per month.The term pay includes basic wages with dearness allowance,
retaining allowance (if any), and cash value of food concession.

OBJECTIVE OF THE EPF AND MP ACT, 1952

♦ The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 aims to provide
a kind of social security to the industrial workers. The Act mainly provides retirement or
old age benefits, such as Provident Fund, Superannuation Pension, Invalidation Pension,
Family Pension and Deposit-Linked Insurance.
♦ The Act provides for payment of terminal benefits on the happening of various
contingencies such as retirement, closure, retirement on attainment of the age of
superannuation, voluntary retirement and retirement due to factors which result in
incapacity of the employee to work.

IMPORTANT DEFINITIONS

- “Appropriate Government” means—

(i) In relation to an establishment belonging to, or under the control of, the Central Government
or in relation to an establishment connected with a railway company, a major port, a mine or an
oilfield or a controlled industry, [or in relation to an establishment having departments or
branches in more than one State,] the Central Government; and

(ii) In relation to any other establishment, the State Government; “authorised officer” means the
Central Provident Fund Commissioner, Additional Central Provident Fund Commissioner,
Deputy Provident Fund Commissioner, Regional Provident Fund Commissioner or such other
officer as may be authorised by the Central Government, by notification in the Official Gazette

- “Basic wages” means all emoluments which are earned by an employee while on duty or [on
leave or on holidays with wages in either case] in accordance with the terms of the contract of
employment and which are paid or payable in cash to him, but does not include—
(i) the cash value of any food concession;

(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an
employee on account of a rise in the cost of living), house-rent allowance, overtime allowance,
bonus commission or any other similar allowance payable to the employee in respect of his
employment or of work done in such employment;

(iii) any presents made by the employer;

- “Contribution” means a contribution payable in respect of a member under a Scheme 4[or the
contribution payable in respect of an employee to whom the Insurance Scheme applies]

- “Controlled Industry” means any industry the control of which by the Union has been declared
by a Central Act to be expedient in the public interest

- “Employer” means —

(i) in relation to an establishment which is a factory, the owner or occupier of the factory,
including the agent of such owner or occupier, the legal representative of a deceased owner or
occupier and, where a person has been named as a manager of the factory under clause (f) of
sub-section (1) of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and

(ii) in relation to any other establishment, the person who, or the authority which, has the
ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a
manager, managing director or managing agent, such manager, managing director or managing
agent.

- “Employee” means any person who is employed for wages in any kind of work, manual or
otherwise, in or in connection with the work of 6[an establishment], and who gets his wages
directly or indirectly from the employer, 7[and includes any person—

(i) employed by or through a contractor in or in connection with the work of the establishment;

(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961
(52 of 1961), or under the standing orders of the establishment

“Exempted employee” means an employee to whom a Scheme 2[or the Insurance Scheme, as the
case may be,] would, but for the exemption granted under section 17, have applied
“exempted” means [an establishment] in respect of which an exemption has been granted under
section 17 from the operation of all or any of the provisions of any Scheme 2[or the Insurance
Scheme, as the case may be], whether such exemption has been granted to the 4 [establishment]
as such or to any person or class of persons employed therein

- “Factory” means any premises, including the precincts thereof, in any part of which a
manufacturing process is being carried on or is ordinarily so carried on, whether with the aid of
power or without the aid of power

- “Fund” means the provident fund established under a Scheme

- “Industry” means any industry specified in Schedule I, and includes any other industry added
to the Schedule by notification under section 4

(i) “Insurance Fund” means the Deposit-linked Insurance Fund established under sub-section (2)
of section 6C

(ii) “Insurance Scheme” means the Employees” Deposit-linked Insurance Scheme framed under
sub-section (1) of section 6C

(iii) “manufacture” or “manufacturing process” means any process for making, altering,
repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing
or otherwise treating or adapting any article or substance with a view to its use, sale, transport,
delivery or disposal

- “Member” means a member of the Fund

- “Occupier of a factory” means the person who has ultimate control over the affairs of the
factory, and, where the said affairs are entrusted to a managing agent, such agent shall be
deemed to be the occupier of the factory

“Pension Fund” means the Employees’ Pension Fund established under sub-section (2) of
section 6A

“Pension Scheme” means the Employees’ Pension Scheme framed under sub-section (1) of
section 6A

“Prescribed” means prescribed by rules made under this Act

“Recovery Officer” means any officer of the Central Government, State Government or the
Board of Trustees constituted under section 5A, who may be authorised by the Central
Government, by notification in the Official Gazette, to exercise the powers of a Recovery Officer
under this Act

- “Scheme” means the Employees’ Provident Fund Scheme framed under section 5

- “Superannuation”, in relation to an employee, who is the member of the Pension Scheme

means the attainment, by the said employee, of the age of fifty-eight years

- “Tribunal” means the Industrial Tribunal referred to in section 7 D

SCHEMES UNDER THE ACT

The following three schemes have been framed under the Act by the Central Government:

(a) The Employees’ Provident Fund Schemes, 1952;

(b) The Employees’ Pension Scheme, 1995; and

(c) The Employees’ Deposit-Linked Insurance Scheme; 1976.

The three schemes mentioned above confer significant social security benefits on workers and
their dependents.

EMPLOYEES PROVIDENT FUND SCHEME

The Central Government has framed a Scheme called Employees Provident Fund Scheme. The
Fund vests in and is administered by the Central Board constituted under Section 5A.

Purpose & Significance:

The Employees' Provident Fund (EPF) serves a vital role in providing retirement savings and
long-term financial stability to employees. The primary purpose is to create a systematic and
mandatory savings mechanism throughout an employee's working life, ensuring that they have a
substantial financial corpus upon retirement. This systematic savings approach aims to:

1. Facilitate Retirement Planning:

EPF encourages individuals to plan for their retirement by contributing a portion of their income
during their working years. This helps in building a financial safety net for the post-retirement
phase.

2. Ensure Financial Security:

By creating a mandatory savings mechanism, EPF aims to ensure financial security for
employees during their non-working years. The accumulated funds provide a source of income
when they cease active employment.

3. Long-Term Financial Stability:

EPF contributes to the long-term financial stability of employees, allowing them to meet their
financial needs during various life stages, such as education, housing, and healthcare, even
before retirement.

Contribution Details:

EPF operates on a contributory model, with both employees and employers making contributions
to the fund. The contributions are calculated as a percentage of the employee's basic salary and
dearness allowance.

1. Employee Contributions (12%):

- Employees are required to contribute 12% of their basic salary and dearness allowance towards
the EPF. This contribution is deducted from the employee's salary and directly credited to their
EPF account.

2. Employer Contributions (12%):

- Employers also contribute 12% of the employee's basic salary and dearness allowance to the
EPF. This employer contribution complements the employee's savings, effectively doubling the
amount deposited into the EPF account.

Contribution Calculation:

The 12% contributions are broken down into specific components:

1. Employee's Share (3.67%):

- Out of the 12% contribution, 3.67% is allocated to the Employee Provident Fund (EPF).

2. Employer's Share (8.33%):

- The remaining 8.33% is allocated to the Employee Pension Scheme (EPS). Understanding this
breakdown is essential as it influences the allocation of funds between the EPF and EPS,
providing a comprehensive approach to both provident fund savings and pension benefits.

Withdrawal Options:

EPF provides flexibility for employees to withdraw funds under various circumstances.
Withdrawal can be made under the following conditions:

1. Retirement:

Upon reaching the age of 58, employees are eligible to withdraw the entire accumulated balance
in their EPF account.

2. Resignation or Job Change:

If an employee is unemployed for a continuous period of two months, they can choose to
withdraw the EPF balance.

3. Medical Emergencies:

In case of serious illnesses or disabilities, employees can make partial withdrawals for medical
treatments.

4. Housing, Education, Marriage:

EPF allows partial withdrawals for specific needs like housing, education, or marriage. The
amount that can be withdrawn depends on the purpose, and employees need to submit supporting
documents to justify the withdrawal.