EPF & MP Act, 1952

The Provident Fund Scheme established under the EPF & MP Act is a cornerstone of the legislation. It mandates both employers and employees to make monthly contributions, thus nurturing a corpus that employees can tap into for financial stability during various stages of their lives. Below are some quick pointers about the PF scheme:

• Background: The Provident Fund scheme predates the EPF & MP Act, having been initiated by some organizations before 1952. However, the Act formalized and standardized the scheme for the welfare of employees.
• Applicability: Applies to establishments with 20+ employees and specified industries.
• Contributions: Employees contribute 12%, employers contribute 12% (3.67% to PF, 8.33% to Pension Fund), max wage ceiling Rs. 15,000.
• Withdrawals: Allowed for marriage, house purchase, medical emergencies via Form 19.
• Online Facility: Allows online management with digital signature certificate.
• Administrative Charges: Employers remit minimum Rs. 500 monthly.

In addition to the Provident Fund Scheme, the Act also envisions a Pension Scheme, offering a pension to employees post-retirement. This scheme provides a safety net for retired employees, ensuring a regular income stream during their sunset years. Eligibility for pension benefits is typically based on the duration and consistency of contributions made by the employee and employer during the individual’s working years. The following are the highlights of the scheme:

• Background: Introduced under Section 6A of the EPF & MP Act, the Employees’ Pension Scheme provides pension benefits to employees with a minimum of 10 years of contributory service.
• Eligibility: Requires 10 years contributory service, age 58, retirement, disability, or eligible for children/orphan pension.
• Calculation of Pension: The monthly pension amount is calculated based on the pensionable salary and years of contributory service. The formula used is:

• Reduction in Pension: If the contributory service is less than 20 years but more than 10 years, the pension amount is determined as if the member has rendered eligible service of 20 years. However, the amount is reduced at a rate of 3% for every year of service less than 20, subject to a maximum reduction of 25%.
• Contributions: Employers contribute 8.33% of employee’s wage.

The EPF & MP Act incorporates an Insurance Scheme to provide financial assistance to the families of employees in case of the employee’s untimely demise. This scheme offers a measure of security to dependents, mitigating the financial hardships that may arise due to the loss of the primary breadwinner. Benefits under the Insurance Scheme serve as a crucial lifeline, offering support and stability during challenging times.

• Background: The Employees’ Deposit-linked Insurance Scheme was framed in 1976 and came into force on August 1, 1976, under the EPF & MP Act.
• Applicability: Covers all members of the Provident Fund Scheme.
• Contributions: 1% of total emoluments.
• Administrative Expenses: Employers pay 0.01% of pay, min Rs. 2 per month.
• Nomination: Automatically nominated under PF Scheme.
• Exemption from the Scheme: Establishments having a scheme providing greater benefits than the Employees’ Deposit-linked Insurance Scheme may be exempted from this scheme.

The Employees’ Provident Fund Organization (EPFO) is a statutory body under the Ministry of Labour and Employment, responsible for enforcing the EPF&MP Act, 1952, and managing social security schemes for Indian workers. It comprises the Central Board of Trustees (CBT) overseeing operations, zonal offices for nationwide service delivery, and implements the Universal Account Number (UAN) system, simplifying EPF management for members by consolidating multiple Member Identification Numbers (Member IDs) into a single 12-digit identifier.

The 10% rate of contribution applies to specific categories of establishments and industries as outlined below:

• Establishments with less than 20 employees Sick industrial companies experiencing financial distress or operational challenges.
• Any establishment that has accumulated losses equal to or exceeding its entire net worth at the end of any financial year is subject to the 10% rate of contribution.
• Specific industries including
• Jute factories
• Beedi (cigarette) manufacturing units
• Brick manufacturing facilities
• Coir product manufacturing units
• Guar gum factorie