Hi all,
I am working in a software company, and we are covered under the PF Act. Is there any provision for exempting any employee from PF? If yes, what is the procedure, and what are the compliances for that? The individual's salary is above the required limit of the PF Act.
Regards,
Deepika
From India, Delhi
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I am working in a software company, and we are covered under the PF Act. Is there any provision for exempting any employee from PF? If yes, what is the procedure, and what are the compliances for that? The individual's salary is above the required limit of the PF Act.
Regards,
Deepika
From India, Delhi
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Hi Deepika,
I hope this information would be useful to you.
Provident Fund: An individual member receiving Provident Fund benefits equal to or better than statutory provisions can apply for exemption in Form 1 under para 27. Employers can also apply for exemption for a class of employees who receive similar or better benefits than those provided by the statutory P.F. Scheme under P. 27A, subject to the conditions governing the grant of exemption. Furthermore, the employer has the option to seek exemption from the P.F. Scheme for the entire establishment if the majority of employees consent to the exemption, subject to certain conditions and formalities.
I hope this clarifies the process for you. Let me know if you need any further assistance.
From India, Pune
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14I hope this information would be useful to you.
Provident Fund: An individual member receiving Provident Fund benefits equal to or better than statutory provisions can apply for exemption in Form 1 under para 27. Employers can also apply for exemption for a class of employees who receive similar or better benefits than those provided by the statutory P.F. Scheme under P. 27A, subject to the conditions governing the grant of exemption. Furthermore, the employer has the option to seek exemption from the P.F. Scheme for the entire establishment if the majority of employees consent to the exemption, subject to certain conditions and formalities.
I hope this clarifies the process for you. Let me know if you need any further assistance.
From India, Pune
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Hi Santosh,
Thank you for your reply. You mentioned that if an employee's provisions are better than those required, what criteria determine if the provisions are indeed better? Additionally, is there any amount that the employer must pay if it secures exemptions for some of its employees?
From India, Delhi
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Thank you for your reply. You mentioned that if an employee's provisions are better than those required, what criteria determine if the provisions are indeed better? Additionally, is there any amount that the employer must pay if it secures exemptions for some of its employees?
From India, Delhi
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Hi,
It should be clearly understood that there is no way of getting out of paying provident fund benefits to an employee. One can get an exemption from the provisions under the Act provided better benefits are being provided by the organization.
Once you submit your scheme for getting the exemption, the EPF authority will examine the same with reference to the provisions under the Act, and on being satisfied, grant the exemption.
The best course in this regard is to get hold of the exempted scheme from a similarly placed organization like yours and use it as a guideline for formulating your scheme. The employer and the employee both have to contribute under the scheme, and the amount is deposited in a Fund. The investment of the amount so deposited in the Fund is to be in accordance with the provisions under the Act.
Cyril
From India, Nagpur
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It should be clearly understood that there is no way of getting out of paying provident fund benefits to an employee. One can get an exemption from the provisions under the Act provided better benefits are being provided by the organization.
Once you submit your scheme for getting the exemption, the EPF authority will examine the same with reference to the provisions under the Act, and on being satisfied, grant the exemption.
The best course in this regard is to get hold of the exempted scheme from a similarly placed organization like yours and use it as a guideline for formulating your scheme. The employer and the employee both have to contribute under the scheme, and the amount is deposited in a Fund. The investment of the amount so deposited in the Fund is to be in accordance with the provisions under the Act.
Cyril
From India, Nagpur
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Hi All,
I agree with the comment made by Cyril that there is no way out. Getting the entire establishment out of PF coverage is next to impossible now. Earlier, an organization could apply for its own PF trust.
As far as I remember, the competent authority has not approved any PF trust in the last 15 years.
As per the PF Act, once the PF contribution has been deducted, you continue to be a member until you join an organization which is not covered/exempted (has its own PF trust) under the act.
The only way to exempt an employee is to induct him/her at a basic level which is higher than the PF wages, i.e., 6500/- today.
This does not mean that an employee whose PF wages were 6000/- and due to the increment, the PF wages have gone beyond 6500/- shall be exempted; he will continue to be a member.
The only difference is that you may restrict the PF contribution up to this amount. In other words, the employer need not contribute to PF or deduct PF contribution from the employee on PF wages (BASIC salary) exceeding 6500/- p.m.
I hope this sheds some light.
Best wishes,
Sunil Joshi
From United States, Bedford
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I agree with the comment made by Cyril that there is no way out. Getting the entire establishment out of PF coverage is next to impossible now. Earlier, an organization could apply for its own PF trust.
As far as I remember, the competent authority has not approved any PF trust in the last 15 years.
As per the PF Act, once the PF contribution has been deducted, you continue to be a member until you join an organization which is not covered/exempted (has its own PF trust) under the act.
The only way to exempt an employee is to induct him/her at a basic level which is higher than the PF wages, i.e., 6500/- today.
This does not mean that an employee whose PF wages were 6000/- and due to the increment, the PF wages have gone beyond 6500/- shall be exempted; he will continue to be a member.
The only difference is that you may restrict the PF contribution up to this amount. In other words, the employer need not contribute to PF or deduct PF contribution from the employee on PF wages (BASIC salary) exceeding 6500/- p.m.
I hope this sheds some light.
Best wishes,
Sunil Joshi
From United States, Bedford
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Hi Cyril,
Thank you for the useful piece of information. I have a question regarding exempted employees. Do we also need to maintain a fund for them and make deposits similar to the benefits provided under PF and Pension schemes? If so, how are the payments from this fund processed for employees after their superannuation, resignation, etc.?
Regards, Deepika
From India, Delhi
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Thank you for the useful piece of information. I have a question regarding exempted employees. Do we also need to maintain a fund for them and make deposits similar to the benefits provided under PF and Pension schemes? If so, how are the payments from this fund processed for employees after their superannuation, resignation, etc.?
Regards, Deepika
From India, Delhi
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The system is like this:
1. Either you maintain your own PF fund (after approval and scrutiny from the PF commissioner).
2. Or you pay it to the government.
3. There is no third option - You have to pay PF for employees; you only have a choice of paying it to the government or to your own fund, which no company in the last 15 years has been allowed to constitute (as mentioned earlier in the replies).
PS - For the employees, it saves tax, so they are generally quite happy about it.
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1. Either you maintain your own PF fund (after approval and scrutiny from the PF commissioner).
2. Or you pay it to the government.
3. There is no third option - You have to pay PF for employees; you only have a choice of paying it to the government or to your own fund, which no company in the last 15 years has been allowed to constitute (as mentioned earlier in the replies).
PS - For the employees, it saves tax, so they are generally quite happy about it.
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If the person is a new joiner, with a salary above the prescribed limits, you may treat him as an excluded employee. In case the salary exceeds Rs. 6500 for an existing member, you have to apply for an exemption provided you are going to pay him some benefit equal to or higher than that prescribed in the PF Act. The thumb rule is "Once a Member, Always a Member".
Regards,
Ranjit J. Pandya
From India, Ahmadabad
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Regards,
Ranjit J. Pandya
From India, Ahmadabad
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Hi Deepika,
As explained, you have all the statutory obligations to fulfill even if you have an exempted fund. You are also liable for statutory inspections by the Provident Fund Authorities, regarding the implementation of the Scheme.
As an exempted organization, you are required to give non-refundable advances to employees, settle their provident fund on retirement, transfer the provident fund amount to the organization where the employee is joining, etc. The only difference in having your own Fund is that you operate the same with your own employees, and it is under your control. You have the responsibility of making the investments of the amount as per the guidelines under the Act.
In the case of a Government-operated Fund, the employer remits the employer and employees' contributions to the provident fund organization, maintains statutory registers, and handles the paperwork for forwarding cases for the settlement of claims.
The Government keeps a close watch on the exempted organizations to ensure they are remaining within the parameters of the approved scheme.
Cyril
From India, Nagpur
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As explained, you have all the statutory obligations to fulfill even if you have an exempted fund. You are also liable for statutory inspections by the Provident Fund Authorities, regarding the implementation of the Scheme.
As an exempted organization, you are required to give non-refundable advances to employees, settle their provident fund on retirement, transfer the provident fund amount to the organization where the employee is joining, etc. The only difference in having your own Fund is that you operate the same with your own employees, and it is under your control. You have the responsibility of making the investments of the amount as per the guidelines under the Act.
In the case of a Government-operated Fund, the employer remits the employer and employees' contributions to the provident fund organization, maintains statutory registers, and handles the paperwork for forwarding cases for the settlement of claims.
The Government keeps a close watch on the exempted organizations to ensure they are remaining within the parameters of the approved scheme.
Cyril
From India, Nagpur
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An employee drawing wages up to Rs 6500 p.m. are covered under the Act. The rate of contribution is 12% of wages of employee. The employer is also required to pay 12% contribution. Cyril
From India, Nagpur
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From India, Nagpur
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Hi,
Regarding PF, I have a query. In case of workforce, can we ask for exemption, and how do we handle such a case? We currently have 200 of the workforce and have not so far regularized, and we will be adding the same number of people. How do we handle such a case? What kind of offer letter can be given?
Lakshmi
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Regarding PF, I have a query. In case of workforce, can we ask for exemption, and how do we handle such a case? We currently have 200 of the workforce and have not so far regularized, and we will be adding the same number of people. How do we handle such a case? What kind of offer letter can be given?
Lakshmi
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Dear Deepika
Pl. find below highlights of the P.F. Act.
THE EMPLOYEE'S PROVIDENT FUND & MISCELLANEOUS PROVISION ACT 1952.
This act is applicable to every establishment where more than 10 employees are working & works is carried out with the help of electricity. This act is enacted for the benevolent purpose of the employee, when he retired from the services of the company he gets handsome return. A PF fund is created by the Government and equal contribution of employer & employee are deposited in the fund. At present 3.67 % of employer contribution + 12.00 % of employee's contribution are deposited in this fund & remaining 8.33 % deposited in Pension Fund. At present interest at the rate of 8.5 % is applicable.
Following forms / returns under PF / EPF.
1. Form no. 2 PF & FPF for new members.
2. 11 FPF – for New Members.
3. 13 PF – Transfer Form.
4. 31 Advance.
5. 5 Qualifying members – Monthly return.
6. 10 Leaving service – Monthly Return.
7. 12A® Showing Amounts deposited in various accounts i. e. 1,2,10,21 & 22.
8. Amount to be deposited on or before 15th of next month with challans.
9. Returns to be sent on or before 25th of next month.
10. A/c. No. 1 : EPF – 12 %
A/c. No. 10 : FPF – 8.33 %
A/c. No. 2 : Admn. Charges @ 1.1 % of gross salary.
11. Maximum limit for PF deduction = Rs.6500.00
12. (Permission required for deduction above Rs.6500=00 in prescribed form) EDLI
7 (IF) exemption to PF commissioner, contribution @ 0.5 % of gross salary to LIC as premium.
13 Monthly contribution card employees + employer's contribution (Annual Return) from
3A March to February.
14 6A Total contribution statement (Annual Return)
15 Inspection.
regards,
Vipul
From India, Thana
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Pl. find below highlights of the P.F. Act.
THE EMPLOYEE'S PROVIDENT FUND & MISCELLANEOUS PROVISION ACT 1952.
This act is applicable to every establishment where more than 10 employees are working & works is carried out with the help of electricity. This act is enacted for the benevolent purpose of the employee, when he retired from the services of the company he gets handsome return. A PF fund is created by the Government and equal contribution of employer & employee are deposited in the fund. At present 3.67 % of employer contribution + 12.00 % of employee's contribution are deposited in this fund & remaining 8.33 % deposited in Pension Fund. At present interest at the rate of 8.5 % is applicable.
Following forms / returns under PF / EPF.
1. Form no. 2 PF & FPF for new members.
2. 11 FPF – for New Members.
3. 13 PF – Transfer Form.
4. 31 Advance.
5. 5 Qualifying members – Monthly return.
6. 10 Leaving service – Monthly Return.
7. 12A® Showing Amounts deposited in various accounts i. e. 1,2,10,21 & 22.
8. Amount to be deposited on or before 15th of next month with challans.
9. Returns to be sent on or before 25th of next month.
10. A/c. No. 1 : EPF – 12 %
A/c. No. 10 : FPF – 8.33 %
A/c. No. 2 : Admn. Charges @ 1.1 % of gross salary.
11. Maximum limit for PF deduction = Rs.6500.00
12. (Permission required for deduction above Rs.6500=00 in prescribed form) EDLI
7 (IF) exemption to PF commissioner, contribution @ 0.5 % of gross salary to LIC as premium.
13 Monthly contribution card employees + employer's contribution (Annual Return) from
3A March to February.
14 6A Total contribution statement (Annual Return)
15 Inspection.
regards,
Vipul
From India, Thana
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Hi,
Deepika, kindly go through the enclosed portion of the PF Act; it may help you clear your query.
CHAPTER IV - MEMBERSHIP OF THE FUND
27. Exemption of an employee: A Commissioner may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme an employee to whom the scheme applies on receipt of an application in Form I from such an employee:
Provided that such an employee is entitled to benefits in the nature of Provident Fund, gratuity, or old age pension according to the rules of the factory or other establishment, and such benefits separately or jointly are on the whole not less favorable than the benefits provided under the Act and Scheme.
(2) Where an employee is exempted as aforesaid, the employer shall, in respect of such employee, maintain such account, submit such returns, provide such facilities for inspection, pay such inspection charges, and invest provident fund collections in such manner as the Central Government may direct.
(3) An employee exempted under subparagraph (1) may, by an application to the Commissioner, make a declaration that he shall become a member of the Fund.
(4) No employee shall be granted exemption or permitted to apply out of exemption more than once on each account.
27A. Exemption of class of employees -
(1) The appropriate Government may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme any class of employees to whom the Scheme applies:
Provided that such class of employees is entitled to benefits in the nature of Provident Fund, gratuity, or old age pension according to the rules of the factory or other establishment, and such benefits separately or jointly are on the whole not less favorable than the benefits provided under the Act and this Scheme.
(2) Where any class of employees is exempted as aforesaid, the employer shall, in respect of such class of employees, maintain such account, submit such returns, provide such facilities for inspection, pay such inspection charges, and invest provident fund collections in such manner as the Central Government may direct.
(3) A class of employees exempted under subparagraph (1) or the majority of employees constituting such class may, by an application to the Commissioner, make a declaration that the class of employees shall become members of the Fund.
(4) No class of employee shall be granted exemption or permitted to apply out of exemption more than once on each account.
(5) The provisions of this paragraph shall be deemed to have come into force with effect from the 14th October 1953.
Regards,
Rakesh
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Deepika, kindly go through the enclosed portion of the PF Act; it may help you clear your query.
CHAPTER IV - MEMBERSHIP OF THE FUND
27. Exemption of an employee: A Commissioner may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme an employee to whom the scheme applies on receipt of an application in Form I from such an employee:
Provided that such an employee is entitled to benefits in the nature of Provident Fund, gratuity, or old age pension according to the rules of the factory or other establishment, and such benefits separately or jointly are on the whole not less favorable than the benefits provided under the Act and Scheme.
(2) Where an employee is exempted as aforesaid, the employer shall, in respect of such employee, maintain such account, submit such returns, provide such facilities for inspection, pay such inspection charges, and invest provident fund collections in such manner as the Central Government may direct.
(3) An employee exempted under subparagraph (1) may, by an application to the Commissioner, make a declaration that he shall become a member of the Fund.
(4) No employee shall be granted exemption or permitted to apply out of exemption more than once on each account.
27A. Exemption of class of employees -
(1) The appropriate Government may, by order and subject to such conditions as may be specified in the order, exempt from the operation of all or any of the provisions of this Scheme any class of employees to whom the Scheme applies:
Provided that such class of employees is entitled to benefits in the nature of Provident Fund, gratuity, or old age pension according to the rules of the factory or other establishment, and such benefits separately or jointly are on the whole not less favorable than the benefits provided under the Act and this Scheme.
(2) Where any class of employees is exempted as aforesaid, the employer shall, in respect of such class of employees, maintain such account, submit such returns, provide such facilities for inspection, pay such inspection charges, and invest provident fund collections in such manner as the Central Government may direct.
(3) A class of employees exempted under subparagraph (1) or the majority of employees constituting such class may, by an application to the Commissioner, make a declaration that the class of employees shall become members of the Fund.
(4) No class of employee shall be granted exemption or permitted to apply out of exemption more than once on each account.
(5) The provisions of this paragraph shall be deemed to have come into force with effect from the 14th October 1953.
Regards,
Rakesh
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Hi Arti, Employer can pay 10/12% according to his wish and the employee can go upto 20% based on his financial background
From India, Madras
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From India, Madras
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Hi Deepika,
From my point of view, PF should be there for every one, because it is very much useful at a later stage. The benefit of this will be reaped after a long time.
The details of PF are as follows:-
Even if the provisions of PF Act are not applicable in a particular establishment, if employer and majority of employees agree, the Central Provident Fund Commissioner can apply the provisions to that establishment by issuing a notification in Official Gazette. [section 1(4)]. Once the provisions of Act become applicable, it continues to be applicable even if number of employees fall below 20. [section 1(5)].
Coverage of Act - The Act has been extended to * Factories * Mines other than coal mines * Hotels and restaurants * Plantation of tea, coffee, rubber [Tea factories in Assam have been excluded vide para 1(3)(a) of EPF Scheme] * Trading and commercial establishments engaged in purchase, sale or storage of goods * Establishments of exporters, importers, advertisers, stock exchanges * Canteens * Establishments of Attorneys, CA, ICWAs, Engineers and Contractors, architects and medical practitioners * Hospitals * Travel agencies * Banks doing business only in one State * General Insurance * Expert services * Clubs and societies rendering services to their members * Agricultural farms * Financial Establishments other than banks * Building and construction Industry * Poultry farming * University, college or schools. - - The Act has been extended w.e.f. 1.4.2001 vide notification dated 22.3.2001, to * courier services * Aircraft or airlines other than aircraft or airline owned or controlled by Government * Establishment engaged in rendering cleaning and sweeping services.
Once an establishment is covered under PF, all its departments and branches wherever they are situated are also covered.
Other non-factory establishments covered - Besides factories, other establishments employing 20 or more persons can be covered under the Act u/s 1(3)(b). Various notifications have been issued extending the provisions of PF Act to non-factory establishments. Some major among them are - plantation, mines, coffee, hotels and restaurants, cinema and theatres, trading and commercial establishments, laundry, canteens, establishments of attorneys/CA/ ICWA/engineers/ architects/medical practitioners, hospitals, financial establishments (other than IFCI, UTI, IDBI, SFC), building and construction industry, poultry, university, college, schools, scientific institutions etc.
Transitory provisions when Act is extended - It is possible that when PF Act is extended to certain establishment, some PF scheme may be already in existence. Such scheme will continue and the balance amount in such scheme to credit of the employee will be transferred to the Provident Fund under statutory scheme of PF Act. [section 15].
Establishment to include all departments and branches - Where an establishment consists of different departments or has branches, whether situate in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. [section 2A]. - - Thus, if factory is covered, the head office and branches will also be covered under the Act.
Act not applicable to certain establishments - As per section 16(1), the PF Act does not apply to (a) any establishment registered under Cooperative Societies Act or State law relating to cooperative societies, employing less than 50 persons and working without paid of power (b) to any establishment belonging to or under Control of Central Government or a State Government and whose employees are entitled to benefit of contributory provident fund or old age pension. (c) to any establishment set up under any Central or State Act and whose employees are entitled to benefit of contributory provident fund or old age pension..
Where PF Act is not applicable - The PF Act is not applicable to certain establishments—* Factories or establishments employing less than 20 employees. However, once Act becomes applicable, it continues to apply even if subsequently, the number is lower than 20 * Banks doing business in more than one State * Coal mines * Units established under Cooperative Societies Act employing less than 50 workers and working without aid of power * Other establishments belonging to or under control of Central Government or State Governments and whose employees are entitled to benefits of contributory provident fund or pension. * Tea factories in Assam * Exemption granted by Central Government by a special notification.
Administration of the Fund - Both employer and employee have to pay contribution at prescribed rates.. These amounts are credited to a fund. The fund vests in and is administered by Central Board. [section 5(1A)].
Employees covered under the scheme - As per section 2(f), “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 an establishment, and who gets his wages directly or indirectly from the employer. It 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 or under the standing orders of the establishment.
Thus, (a) Persons employed through contractor in connection with work of establishment are covered (b) Apprentices employed under Apprentices Act or under standing orders of establishment are excluded, i.e. they are not employees. [The model standing orders merely state that an ‘apprentice' is a learner who is paid an allowance during the period of his training].
Non-Eligible employees under PF - * Employee whose ‘pay' is more than Rs. 6,500 per month are not eligible. (It may be noted that limit of pay was Rs 5,000 upto 31.5.2001 and Rs. 3,500 upto 30th Sept., 94) * Apprentices as per certified standing orders or under Apprentices Act * Casual employees. However, employees employed through contractors have also to be covered under PF.
Employee to become member of Fund immediately on joining – Every employee employed in or in connection with work of a factory or establishment to which the Act applies is entitled and required to become member of Provident Fund, unless he is an excluded employee. [para 26(1) of EPF Scheme]. An employee who is drawing ‘pay' above prescribed limit (presently Rs 6,500) can become member with permission of Assistant PF Commissioner, if he and his employer agree. [para 26(6) of EPF Scheme].
Contribution by employer and employee - As per section 2(c) “contribution” means a contribution payable in respect of a member under a Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies.
As per section 6, contribution shall be paid by employer @ 10% of basic wages plus dearness allowance plus retaining allowance. This amount is defined as ‘pay' as per explanation to para 2(f)(ii) of EPF Scheme.
Equal contribution is payable by employee also. This contribution can be increased to 12% by Central Government and in fact, has been increased to 12% in most of the cases.
A person who is already a member continues to be a ‘member' even if his ‘pay' exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only. [para 26A(2) of EPF Scheme].
RPFC is liable under Consumer Protection Act - The Regional Provident Fund Commissioner is providing service under the Act and hence he is liable under Consumer Protection Act. - RPFC v. Shiv Kumar Joshi (1996) 4 CTJ 805 = 1996 LLR 641 (NCDRC 5 member bench) - confirmed in RPFC v. Shiv Kumar Joshi 1999 AIR SCW 4456 = 1999(7) SCALE 453 = 2000 LLR 217 = AIR 2000 SC 331 = 99 Comp Cas 347 = (2000) CLA-BL Supp 26 = 24 SCL 46 (SC).
Employees Provident Fund Scheme - This is the main scheme under the Act. Both employer and employee have to pay contribution to Provident Fund. The employer has to deduct contribution of employee from the salary of employee and has to pay both employees' contribution as well as employer's contribution by a challan in prescribed form. The amount has to be paid in approved bank.
Employee can pay higher contribution - Employee has to contribute 12/10% of his 'pay' as contribution. The employee can voluntarily pay higher contribution above the statutory rate. However, employer does not have to match the voluntary contribution, over and above the statutory rate. [para 26(2) of EPF Scheme].
Contribution payable under PF Scheme - The Principal Employer is liable to pay contribution of his own employees as well as employees employed through contractor. Principal Employer can recover from contractor the amount paid by him on behalf of contractor. The contribution is 12% of ‘pay' i.e. basic wages, plus dearness allowance, cash value of food concession and retaining allowance. Contribution of both employer and employee is same i.e. 12% each. [para 29 of EPF Scheme].
Employer has to pay his contribution to EPF. He cannot deduct his contribution from wages of the employee. [Para 31 of EPF Scheme]. However, he has to deduct employee's share from his salary and pay the same in EPF scheme. This deduction can be only from the wages pertaining to period for which contribution is paid. However, if there is accidental omission, the amount can be recovered later. Amount deducted from salary of employees is held in trust by the employer or contractor. [Para 32 of EPF Scheme].
Out of employer's contribution of 12/10%, the Employer's contribution of 8.33% will be diverted to Employees' Pension Scheme. The balance will be retained in the EPF scheme. Thus, on retirement, the employee will get his full share plus the balance of Employer's share retained to his credit in EPF account. [This diversion is only w.e.f. 16th November, 95. Earlier Employer's contribution to their credit will continue to remain to their credit].
Lower contribution in certain cases - The employer's and employee's contribution is 12% each. This is applicable to many of industries and establishments. However, this contribution is not applicable to - * any establishment employing less than 20 persons * any establishment registered with Board for Industrial and Financial Reconstruction (BIFR) as a sick company - the lower rate of contribution continues till its net worth is positive * any other establishment which has accumulated loss equal to or more than its assets and has also suffered cash loss in last two years. * Jute industry * Beedi industry * Brick industry * Coir industry other than the spinning sector * Guar gum factories. In these cases, the contribution is 10%.
Interest on account – PF Commissioner shall maintain account of each member of EPF scheme. [Para 59 of Scheme]. Interest is credited to the account of employee. The Interest is calculated on monthly running balance basis. Amount standing to credit at end of the month is considered for calculation of interest for the following month. The interest rate is declared every year by Central Government in consultation with Central Board of Trustees of Provident Fund. [Para 60 of EPF Scheme].
Employees' Pension Scheme - This scheme has been introduced w.e.f. 16th November, 95. The Scheme is applicable to all subscribers of Employers' Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.
Contribution - The employer's contribution of 8.33% will be diverted to the fund of Pension Scheme. Employee does not have to make any contribution. Employer's contribution is 12%/ 10%. In such cases, 8.33% is diverted to Pension scheme and balance 1.67%/3.67% as the case may be, will be in credit of employee's name in Provident Fund account. The 8.33% is on maximum salary of Rs. 6,500. If some employers are paying contribution on salary in excess of Rs. 6,500, the excess contribution will be credited to Provident Fund account and not to Pension scheme.
No separate administration charges or inspection charges are payable, as these are already paid along with Provident Fund contribution.
Benefits under the scheme - Members will get pension on superannuation or retirement from service and upon disablement during employment. Family pension will be available to widow/widower for life or till he/she remarries. In addition, children will be entitled to pension, upto 25 years of their age. In case of orphans, pension at enhanced rate is available upon death of widow/widower or ceasing payment of widow pension. Benefit of pension to children or orphan is only restricted for two children/orphans.
If the person is unmarried or has no family, pension is available to nominee for a specified period.
Commutation of Pension - The member can commute 33.33% of the pension, so as to receive hundred times the monthly pension so commuted as commuted value of pension. Balance will be paid on monthly basis.
Employees Deposit Linked Insurance Scheme - The purpose of the scheme is to provide life insurance benefits to employees who are already covered under PF/FPF. The employer has pay contribution equal to 0.50% of the total wages of employees In addition, administrative charges of 0.1% of total wages. [Notification No. AO 503(E) dated 28-7-1976 issued u/s 6C(2) of PF Act].
The employee does not contribute any amount to the scheme. The salary limit for coverage of employees is same as that of Provident Fund.
Exemption from the scheme can be obtained from RPFC if LIC Group Gratuity scheme is adopted by employer. If exemption is granted, only inspection charges @ 0.005% are payable to PF authorities.
Benefit to nominee of employee - If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs. 35,000, the insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of Rs. 35,000, subject to overall limit of Rs. 60,000. If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. [Increased to 35,000 and 60,000 w.e.f. 13.6.2000]
Regards,
Chandrasekar.
From India, Madras
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From my point of view, PF should be there for every one, because it is very much useful at a later stage. The benefit of this will be reaped after a long time.
The details of PF are as follows:-
Even if the provisions of PF Act are not applicable in a particular establishment, if employer and majority of employees agree, the Central Provident Fund Commissioner can apply the provisions to that establishment by issuing a notification in Official Gazette. [section 1(4)]. Once the provisions of Act become applicable, it continues to be applicable even if number of employees fall below 20. [section 1(5)].
Coverage of Act - The Act has been extended to * Factories * Mines other than coal mines * Hotels and restaurants * Plantation of tea, coffee, rubber [Tea factories in Assam have been excluded vide para 1(3)(a) of EPF Scheme] * Trading and commercial establishments engaged in purchase, sale or storage of goods * Establishments of exporters, importers, advertisers, stock exchanges * Canteens * Establishments of Attorneys, CA, ICWAs, Engineers and Contractors, architects and medical practitioners * Hospitals * Travel agencies * Banks doing business only in one State * General Insurance * Expert services * Clubs and societies rendering services to their members * Agricultural farms * Financial Establishments other than banks * Building and construction Industry * Poultry farming * University, college or schools. - - The Act has been extended w.e.f. 1.4.2001 vide notification dated 22.3.2001, to * courier services * Aircraft or airlines other than aircraft or airline owned or controlled by Government * Establishment engaged in rendering cleaning and sweeping services.
Once an establishment is covered under PF, all its departments and branches wherever they are situated are also covered.
Other non-factory establishments covered - Besides factories, other establishments employing 20 or more persons can be covered under the Act u/s 1(3)(b). Various notifications have been issued extending the provisions of PF Act to non-factory establishments. Some major among them are - plantation, mines, coffee, hotels and restaurants, cinema and theatres, trading and commercial establishments, laundry, canteens, establishments of attorneys/CA/ ICWA/engineers/ architects/medical practitioners, hospitals, financial establishments (other than IFCI, UTI, IDBI, SFC), building and construction industry, poultry, university, college, schools, scientific institutions etc.
Transitory provisions when Act is extended - It is possible that when PF Act is extended to certain establishment, some PF scheme may be already in existence. Such scheme will continue and the balance amount in such scheme to credit of the employee will be transferred to the Provident Fund under statutory scheme of PF Act. [section 15].
Establishment to include all departments and branches - Where an establishment consists of different departments or has branches, whether situate in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. [section 2A]. - - Thus, if factory is covered, the head office and branches will also be covered under the Act.
Act not applicable to certain establishments - As per section 16(1), the PF Act does not apply to (a) any establishment registered under Cooperative Societies Act or State law relating to cooperative societies, employing less than 50 persons and working without paid of power (b) to any establishment belonging to or under Control of Central Government or a State Government and whose employees are entitled to benefit of contributory provident fund or old age pension. (c) to any establishment set up under any Central or State Act and whose employees are entitled to benefit of contributory provident fund or old age pension..
Where PF Act is not applicable - The PF Act is not applicable to certain establishments—* Factories or establishments employing less than 20 employees. However, once Act becomes applicable, it continues to apply even if subsequently, the number is lower than 20 * Banks doing business in more than one State * Coal mines * Units established under Cooperative Societies Act employing less than 50 workers and working without aid of power * Other establishments belonging to or under control of Central Government or State Governments and whose employees are entitled to benefits of contributory provident fund or pension. * Tea factories in Assam * Exemption granted by Central Government by a special notification.
Administration of the Fund - Both employer and employee have to pay contribution at prescribed rates.. These amounts are credited to a fund. The fund vests in and is administered by Central Board. [section 5(1A)].
Employees covered under the scheme - As per section 2(f), “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 an establishment, and who gets his wages directly or indirectly from the employer. It 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 or under the standing orders of the establishment.
Thus, (a) Persons employed through contractor in connection with work of establishment are covered (b) Apprentices employed under Apprentices Act or under standing orders of establishment are excluded, i.e. they are not employees. [The model standing orders merely state that an ‘apprentice' is a learner who is paid an allowance during the period of his training].
Non-Eligible employees under PF - * Employee whose ‘pay' is more than Rs. 6,500 per month are not eligible. (It may be noted that limit of pay was Rs 5,000 upto 31.5.2001 and Rs. 3,500 upto 30th Sept., 94) * Apprentices as per certified standing orders or under Apprentices Act * Casual employees. However, employees employed through contractors have also to be covered under PF.
Employee to become member of Fund immediately on joining – Every employee employed in or in connection with work of a factory or establishment to which the Act applies is entitled and required to become member of Provident Fund, unless he is an excluded employee. [para 26(1) of EPF Scheme]. An employee who is drawing ‘pay' above prescribed limit (presently Rs 6,500) can become member with permission of Assistant PF Commissioner, if he and his employer agree. [para 26(6) of EPF Scheme].
Contribution by employer and employee - As per section 2(c) “contribution” means a contribution payable in respect of a member under a Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies.
As per section 6, contribution shall be paid by employer @ 10% of basic wages plus dearness allowance plus retaining allowance. This amount is defined as ‘pay' as per explanation to para 2(f)(ii) of EPF Scheme.
Equal contribution is payable by employee also. This contribution can be increased to 12% by Central Government and in fact, has been increased to 12% in most of the cases.
A person who is already a member continues to be a ‘member' even if his ‘pay' exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only. [para 26A(2) of EPF Scheme].
RPFC is liable under Consumer Protection Act - The Regional Provident Fund Commissioner is providing service under the Act and hence he is liable under Consumer Protection Act. - RPFC v. Shiv Kumar Joshi (1996) 4 CTJ 805 = 1996 LLR 641 (NCDRC 5 member bench) - confirmed in RPFC v. Shiv Kumar Joshi 1999 AIR SCW 4456 = 1999(7) SCALE 453 = 2000 LLR 217 = AIR 2000 SC 331 = 99 Comp Cas 347 = (2000) CLA-BL Supp 26 = 24 SCL 46 (SC).
Employees Provident Fund Scheme - This is the main scheme under the Act. Both employer and employee have to pay contribution to Provident Fund. The employer has to deduct contribution of employee from the salary of employee and has to pay both employees' contribution as well as employer's contribution by a challan in prescribed form. The amount has to be paid in approved bank.
Employee can pay higher contribution - Employee has to contribute 12/10% of his 'pay' as contribution. The employee can voluntarily pay higher contribution above the statutory rate. However, employer does not have to match the voluntary contribution, over and above the statutory rate. [para 26(2) of EPF Scheme].
Contribution payable under PF Scheme - The Principal Employer is liable to pay contribution of his own employees as well as employees employed through contractor. Principal Employer can recover from contractor the amount paid by him on behalf of contractor. The contribution is 12% of ‘pay' i.e. basic wages, plus dearness allowance, cash value of food concession and retaining allowance. Contribution of both employer and employee is same i.e. 12% each. [para 29 of EPF Scheme].
Employer has to pay his contribution to EPF. He cannot deduct his contribution from wages of the employee. [Para 31 of EPF Scheme]. However, he has to deduct employee's share from his salary and pay the same in EPF scheme. This deduction can be only from the wages pertaining to period for which contribution is paid. However, if there is accidental omission, the amount can be recovered later. Amount deducted from salary of employees is held in trust by the employer or contractor. [Para 32 of EPF Scheme].
Out of employer's contribution of 12/10%, the Employer's contribution of 8.33% will be diverted to Employees' Pension Scheme. The balance will be retained in the EPF scheme. Thus, on retirement, the employee will get his full share plus the balance of Employer's share retained to his credit in EPF account. [This diversion is only w.e.f. 16th November, 95. Earlier Employer's contribution to their credit will continue to remain to their credit].
Lower contribution in certain cases - The employer's and employee's contribution is 12% each. This is applicable to many of industries and establishments. However, this contribution is not applicable to - * any establishment employing less than 20 persons * any establishment registered with Board for Industrial and Financial Reconstruction (BIFR) as a sick company - the lower rate of contribution continues till its net worth is positive * any other establishment which has accumulated loss equal to or more than its assets and has also suffered cash loss in last two years. * Jute industry * Beedi industry * Brick industry * Coir industry other than the spinning sector * Guar gum factories. In these cases, the contribution is 10%.
Interest on account – PF Commissioner shall maintain account of each member of EPF scheme. [Para 59 of Scheme]. Interest is credited to the account of employee. The Interest is calculated on monthly running balance basis. Amount standing to credit at end of the month is considered for calculation of interest for the following month. The interest rate is declared every year by Central Government in consultation with Central Board of Trustees of Provident Fund. [Para 60 of EPF Scheme].
Employees' Pension Scheme - This scheme has been introduced w.e.f. 16th November, 95. The Scheme is applicable to all subscribers of Employers' Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.
Contribution - The employer's contribution of 8.33% will be diverted to the fund of Pension Scheme. Employee does not have to make any contribution. Employer's contribution is 12%/ 10%. In such cases, 8.33% is diverted to Pension scheme and balance 1.67%/3.67% as the case may be, will be in credit of employee's name in Provident Fund account. The 8.33% is on maximum salary of Rs. 6,500. If some employers are paying contribution on salary in excess of Rs. 6,500, the excess contribution will be credited to Provident Fund account and not to Pension scheme.
No separate administration charges or inspection charges are payable, as these are already paid along with Provident Fund contribution.
Benefits under the scheme - Members will get pension on superannuation or retirement from service and upon disablement during employment. Family pension will be available to widow/widower for life or till he/she remarries. In addition, children will be entitled to pension, upto 25 years of their age. In case of orphans, pension at enhanced rate is available upon death of widow/widower or ceasing payment of widow pension. Benefit of pension to children or orphan is only restricted for two children/orphans.
If the person is unmarried or has no family, pension is available to nominee for a specified period.
Commutation of Pension - The member can commute 33.33% of the pension, so as to receive hundred times the monthly pension so commuted as commuted value of pension. Balance will be paid on monthly basis.
Employees Deposit Linked Insurance Scheme - The purpose of the scheme is to provide life insurance benefits to employees who are already covered under PF/FPF. The employer has pay contribution equal to 0.50% of the total wages of employees In addition, administrative charges of 0.1% of total wages. [Notification No. AO 503(E) dated 28-7-1976 issued u/s 6C(2) of PF Act].
The employee does not contribute any amount to the scheme. The salary limit for coverage of employees is same as that of Provident Fund.
Exemption from the scheme can be obtained from RPFC if LIC Group Gratuity scheme is adopted by employer. If exemption is granted, only inspection charges @ 0.005% are payable to PF authorities.
Benefit to nominee of employee - If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs. 35,000, the insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of Rs. 35,000, subject to overall limit of Rs. 60,000. If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. [Increased to 35,000 and 60,000 w.e.f. 13.6.2000]
Regards,
Chandrasekar.
From India, Madras
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Hi,
I have a query to ask. If the entire organization is covered under the PF Act and a few employees are working on a temporary basis, then will it be mandatory to cover them under the PF Act as well, or can they be exempted?
Awaiting a reply,
Akshada
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I have a query to ask. If the entire organization is covered under the PF Act and a few employees are working on a temporary basis, then will it be mandatory to cover them under the PF Act as well, or can they be exempted?
Awaiting a reply,
Akshada
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Hi Akshada,
Yes, the temporary employees will also have to be covered under the Act. Only those who come under the category of 'EXCLUDED EMPLOYEES' are not covered.
The employees are covered from the date of joining.
Cyril
From India, Nagpur
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Yes, the temporary employees will also have to be covered under the Act. Only those who come under the category of 'EXCLUDED EMPLOYEES' are not covered.
The employees are covered from the date of joining.
Cyril
From India, Nagpur
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Hi,
I don't think there should be any confusion between exemption and excluded employees. When we seek and get exemption, it is implied that our exempted scheme offers better benefits than what is provided under the Act and the Scheme. We are free to cover persons drawing any salary as 'employees' under the exempted scheme.
In the case of statutory provisions, the coverage is only up to Rs 6500 p.m. However, employees drawing pay above the limit can become a member of the scheme when both the employer and the employee make a joint application and the PF authority agrees to it - para 26(6) of the scheme.
Cyril
From India, Nagpur
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I don't think there should be any confusion between exemption and excluded employees. When we seek and get exemption, it is implied that our exempted scheme offers better benefits than what is provided under the Act and the Scheme. We are free to cover persons drawing any salary as 'employees' under the exempted scheme.
In the case of statutory provisions, the coverage is only up to Rs 6500 p.m. However, employees drawing pay above the limit can become a member of the scheme when both the employer and the employee make a joint application and the PF authority agrees to it - para 26(6) of the scheme.
Cyril
From India, Nagpur
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is it opetional or not..... a employer and employee does not want to covered himself under P.F.Act whether his salary is more than 6500
From India, Delhi
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From India, Delhi
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Dear Arti,
PF Employer contribution is 12% of Basic Salary + DA. The employee contribution is also the same rate of 12% of Basic Salary + DA. In my opinion, PF is very beneficial to all employees.
Regards,
Saranya
From India, Madras
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PF Employer contribution is 12% of Basic Salary + DA. The employee contribution is also the same rate of 12% of Basic Salary + DA. In my opinion, PF is very beneficial to all employees.
Regards,
Saranya
From India, Madras
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Guidance Requested, Please
We would like to request your guidance on the following two issues:
1. Whether the procedure and permission under Para 26(6) of the PF Scheme are for equal contributions by the employee and the employer beyond the salary limit of 6500 per month, or is it only to pay the administrative charges?
2. Can an employer be compelled to continue making their contribution of the amount that the employer had statutorily agreed upon as per the procedure and permission under Para 26(6) of the PF Scheme and had been making in the past?
We look forward to your kind guidance and reply.
Thank you.
Yours sincerely,
From India, Ahmadabad
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We would like to request your guidance on the following two issues:
1. Whether the procedure and permission under Para 26(6) of the PF Scheme are for equal contributions by the employee and the employer beyond the salary limit of 6500 per month, or is it only to pay the administrative charges?
2. Can an employer be compelled to continue making their contribution of the amount that the employer had statutorily agreed upon as per the procedure and permission under Para 26(6) of the PF Scheme and had been making in the past?
We look forward to your kind guidance and reply.
Thank you.
Yours sincerely,
From India, Ahmadabad
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Guidance Requested Please
We would like to request your guidance on the following two issues:
1. Whether the procedure and permission under Para 26(6) of the PF Scheme are for equal contributions by the employee and the employer beyond the salary limit of 6500 per month, or is it only to pay the administrative charges?
2. Can an employer be compelled to continue making their contribution of the amount that the employer had statutorily agreed upon as per the procedure and permission under Para 26(6) of the PF Scheme and had been contributing to in the past?
We look forward to your kind guidance/reply.
Thanking You,
Yours sincerely,
From India, Ahmadabad
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We would like to request your guidance on the following two issues:
1. Whether the procedure and permission under Para 26(6) of the PF Scheme are for equal contributions by the employee and the employer beyond the salary limit of 6500 per month, or is it only to pay the administrative charges?
2. Can an employer be compelled to continue making their contribution of the amount that the employer had statutorily agreed upon as per the procedure and permission under Para 26(6) of the PF Scheme and had been contributing to in the past?
We look forward to your kind guidance/reply.
Thanking You,
Yours sincerely,
From India, Ahmadabad
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At present, we deposit contributions for PF, EPS, EDLI, and other administrative charges at our income tax-recognized trust. As per the new rule (notification) of the IT Act, we are required to register under the EPF and MP Act, 1952. However, our management wishes to continue depositing PF, EPS, EDLI, and other administrative charges at our own trust. Please guide me and inform me of the steps we should take.
From India, Mumbai
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From India, Mumbai
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Arthi, Employees Contribution= 12% Employers Contribution= 12%+1.61%(Admin Charges) Regards, S.Parama
From India, Madras
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From India, Madras
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Hello friends, I need your help with an employee matter. Suppose an employee is currently receiving PF benefits after an increment, and his salary is now above 6500. I want to restrict his PF benefits. What are the procedures and forms required for this? Please advise me urgently. Thank you.
From India, Delhi
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From India, Delhi
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Hi, we are a manpower company deputing engineers to project sites on a contract basis. All our engineers earn a basic monthly remuneration of Rs. 25,000 and above. If an engineer requests us to deduct PF, are we also liable as employers to contribute our share? Please reply with the relevant section of the Provident Fund Act.
Regards.
From India, Mumbai
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Regards.
From India, Mumbai
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Handling transfer of PF in new software.pdf