Can I Claim My Employer's PF Contribution Despite Their 5-Year Rule? Seeking Clarity

Hi all,

I had earlier worked for more than 4.5 years for a Central PSU which has more than 600 employees and has been making profits. It has its own PF trust. 10% of my basic pay was deducted during my tenure, and my employer was also contributing the same amount. (My basic pay was more than 7500 at my joining, and my last basic was 15000 at the time of resignation). I have recently resigned and joined another company.

Upon my resignation, my old company settled my PF by giving me a cheque that only included my contribution along with interest. When I inquired about the employer's contribution, they referred to a rule set by my old company stating, "employer's contribution shall be given only if an employee works for a minimum period of 5 years in the company."

I would be grateful if you could clarify the following points:

1. Is there any provision for PSUs (Profit-making) to establish their own rules when the PF is managed by their own PF trust, superseding the Government rules?

2. Is there any rule, as per the act, that allows the employer to stipulate a timeframe for providing their contribution?

3. Can the trust settle the PF amount without the employee's consent (considering that employees always have the option to transfer the fund to a new employer), as I have heard that PF is typically settled only by EPFO.

In short, can I demand the employer's contribution despite their internal rule not permitting it before completing 5 years of service with the same company?

Please help me out. A significant amount of money is involved.

Regards,

RPV

Dear RPV,

I am concerned about how you took the P.F. cheque without verifying the actual amount. Every company is required to adhere to the EPF Act rules and regulations. If you would like to know more about these rules, please visit the EPF website at epfindia.nic.in, where you can find valuable information.

I hope you are able to resolve your issue soon.

Best,
Venkat

Hi Venkat,

Thanks for the response. I haven't collected the cheque yet. I will accept the same only when I get clarification of my doubts. I have gone through the EPFO website. But I couldn't find the required information there. I am not aware of any other source of information where I can get the specific info related to Public Sector Undertakings. Please advise me if there is any.

Thanks & Regards,
RPV

Dear RPV,

I am not entirely sure whether you will receive your full amount or not. However, according to section 16 of the ACT, any central/state government establishments with their own scheme of provident fund or pension are exempted from the EPF Act 1952.

Regards,
Amit Seth.

Hi Venket,

Does the PF percentage differ from company to company or is it a fixed percentage? I know this is a basic question that HR should not ask, but I still have doubts.

Regards,
Kantha

Dear Kantha,

There is a difference in PF% from company to company, subject to the provisions mentioned in the EPF Act. You can find out more details by reading the following:

In respect of establishments employing 20 or more persons and engaged in industries notified under Section 6 of the Act (other than establishments declared as sick), the contribution is 12% of the basic pay, DA, cash value of food concession, and retaining allowance, if any, subject to a maximum of Rs. 6500 per month. Voluntary higher contributions are also acceptable upon the joint request of the member and the employer. However, the rate of contribution is 10% in respect of the following categories of establishments:

1. Any establishment covered prior to 22.9.97 in which less than 20 persons are employed.
2. Any sick industrial company as defined in Clause (0) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act 1985, and which has been declared as such by the Board for Industrial and Financial Reconstruction.
3. Any establishment which has, at the end of any financial year, accumulated losses equal to or exceeding its entire net worth.
4. Any establishment engaged in the manufacturing of (a) Jute, (b) Beedi, (c) Brick, (d) Coir (other than the spinning sector), (e) Guar Gum Industries/Factories.

I hope this provides the answer to your question. 😊

Best regards,

Venkat

Hi Venkat,

I have gone through the EPFO website as suggested by you, and I confirm that my company was not in any of the categories mentioned in Section 16. It had more than 600 employees, was not a sick unit, and had not accumulated any losses during any financial year.

Can you please advise me on whether I can demand my employer's contribution?

Waiting for your reply.

Thanks & Regards,
RPV

Dear All,

Getting the employer's share is a matter of right as per the EPF Act. Earlier, employees were receiving a part of the employer's share if they left the job before completing the specified period of service. Now, a decision was made on December 30, 1989, by the Board of Trustees under the Chairmanship of the Labour Minister. The decision states that employees will be entitled to the full payment of employers' contributions along with interest, in addition to their own share.

An employee whose service is more than 6 months is eligible to receive the full share of their employer's contribution as well.

The formation of a PF trust is allowed to provide higher benefits and a speedy process of settlement to the employees. If any of the provisions of the EPF Act are contravened, then the Trust is liable to be dissolved and face penal charges by the EPFO.

Regards,
Suresh Ramalingam
Consultant - Legal & Compliance

Hi Mr. Suresh,

Thank you very much for the response. You have given me some hope of getting my employer's share. It would be great if you could kindly provide me with the relevant section in the EPF Act where the rule was changed to that effect. I would like to take up the matter with my previous employer.

Thanks a lot.

Regards, RPV

Hi all,

I was again denied the employer contribution. They stuck to the same rule of 5 years minimum service. Can anybody help me in getting my employer contribution?

I understood from sources that the PF Act of 1925 allows the employer to deny payment of their contribution if an employee doesn't serve for a minimum of 5 years. Is it right?

How can I know if a company falls under the purview of the PF Act 1925 or the PF Act 1952?

Regards,
RPV