Is EPF Applicable on Employer-Paid Maternity Benefits Under the Maternity Benefit Act 1961? Let's Discuss!

Hi all, whether EPF is payable on Maternity Benefit (MB) paid by the employer pursuant to the provisions of the Maternity Benefit Act 1961.

Definition of wages under EPF Act

Going by the definition of wages under the EPF Act, it provides:

“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.

Now, the question is whether Maternity Benefit paid should be considered as paid in accordance with the terms of the contract of employment.

Though MB is not directly arising out of the employment contract, in most cases, it is because of a legal requirement. However, when maternity benefit is paid, the components of salary like basic, DA, etc., are shown as per the agreed CTC. Therefore, I feel it will be considered wages, and PF will be applicable.

Maternity Benefit paid by ESI

On the contrary, in case MB is paid by ESI as per the ESI Act, it will not be wages since it is not pursuant to the employment contract and is not paid by the employer as well. It is directly paid by the ESI department and out of the purview of the employment contract. Therefore, PF and ESI need not be paid on MB paid by ESI under the ESI Act.

Your views, please.

Dear Rashmi, the specialty of every labor law concerning employee benefits is that it introduces certain additional beneficial aspects of employment in the form of new rights to employees and imposes new obligations on the part of employers if the contract of employment is devoid of such aspects. Therefore, the first and foremost assumption we have to adopt in a critical analysis of any statutory provision is that we have to re-read the contract accordingly.

Thus, coming to the employer's contractual obligation to pay salary for the authorized period of leave of absence due to maternity gets reinforced by the provision for payment of maternity benefit for the 26 weeks of absence by the MBA, 1961. In my opinion, therefore, it is leave salary only, and as such, the contribution to EPF on that part of maternity benefit becomes mandatory.

When the ESIA, 1948 becomes applicable to the case, the ESIC becomes a sort of indemnifier for the employer and insurer for the employee, and the eventual payment for the period of absence due to maternity becomes the insurance benefit only.

This is the reasoning from my perception in favor of your view.