Hi, this is my request to all of you that please share your valuable knowledge to me. what is Gratuity? And what is PF. Please define them.
From India, Kolkata
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From India, Kolkata
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Dear Mr. Uday Kumar Mishra,
The definition and process of PF are mentioned below for your kind information.
EMPLOYEE PROVIDENT FUND & MISCELLANEOUS PROVISIONS ACT, 1952:
Which establishments are covered by the Act? The Act is applicable:
- To every factory engaged in any industry specified in Schedule I to the Act and employing 20 or more persons.
- To every other establishment employing 20 or more persons specified by the Central Government in this behalf.
Any establishment to which the Act applies shall continue to be governed by the Act even if the number of persons employed therein at any time falls below 20. {Section 1(3) & (5)}
Sec.1
Sec.2 (b): "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:
- The cash value of any food concession.
- 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.
- Any presents made by the employer.
Production bonus is outside the definition of basic wages since the word "bonus" in clause (ii) of sec.2 (b) has been used without any qualification. Bright & Roof Co. (1) Ltd. V. Union of India 1962 II LLJ 490.
Overtime is something done not on time but thereafter. If extra work is done on time, it would not come within the definition of overtime. In other words, extra payment for work done beyond the fixed norm and done during normal hours is wages.
Section 6. Contribution and matters which may be provided for in schemes:
The contribution which shall be paid by the employer to the Fund shall be [ten percent] of the basic wages, [dearness allowance and retaining allowance (if any), for the time being payable to each of the employees (whether employed by him directly or by or through a contractor), and the employee's contributions shall be equal to the contribution payable by the employer in respect of him and may, 10[if any employee so desires, be an amount exceeding 10a[ten percent] of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]:
12[Provided that in its application to any establishment or class of establishments which the Central Government, after making such enquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words 11[ten percent], at both places where they occur, the words 11[twelve percent] shall be substituted]:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.
Explanation 1: For the purpose of this Section 'retaining allowance' means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.
Section 12. Employer not to reduce wages, etc:
No employer in relation to (an establishment) to which any 21b[Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to 21a[the Fund or the Insurance Fund] or any changes under this Act or the 21b[Scheme or the Insurance Scheme] reduce whether directly or indirectly, the wages of any employee to whom the 21b[Scheme or the Insurance Scheme] applies or the total quantum of benefit in the nature of old age pension, gratuity 21a{Provident fund or life Insurance] to which the employee is entitled under the terms of his employment, express or implied.
Not only is there no provision for permitting the reduction of wages by the employer, but there is also a strict prohibition under Sec. 12 so that the employer is prohibited from doing so. It would also follow that until a reduction by an appropriate order has been granted by the Commissioner, the employees also cannot contribute less than what they were doing earlier. Consolidate Cropn. Protection (P) Ltd. V. Hemchandra Rao 1977 LIC 251.
Section 2 (f) "Excluded employee" means:
- An employee who, having been a member of the Fund, withdrew the full amount of his accumulations in the Fund under 6[clause (a) or (c) of [sub-paragraph (1)of Paragraph 69;[
- An employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds 8[six thousand and five hundred rupees] per month.
**Explanation: "Pay" includes basic wages with the dearness allowances, 9[retaining allowance (if any) and cash value of food concessions admissible thereon;]
- An apprentice.
Explanation: An apprentice means a person who, according to the certified standing order applicable to the factory or establishment, is an apprentice, or who is declared to be an apprentice by the authority specified in this behalf by the appropriate Government.
CHAPTER IV: MEMBERSHIP OF THE FUND
26. Class of employees entitled and required to join the fund:
- Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee, shall be entitled and required to become a member of the Fund from the day this paragraph comes into force in such factory or other establishment.
- Every employee employed in or in connection with the work of a factory or other establishment to which the Scheme applies, other than an excluded employee, shall also be entitled and required to become a member of the Fund from the day this paragraph comes into force in such factory or other establishment if on the date of such coming into force, such employee is a subscriber to a provident fund maintained in respect of the factory or other establishment or in respect of any other factory or establishment (to which the Act applies) under the same employer.
Provided that where the Scheme applies to a factory or other establishment on the expiry of cancellation of an order of exemption under section 17 of the Act, every employee who but for the exemption would have become and continued as a member of the Fund, shall become a member of the fund forthwith.
(6) Notwithstanding anything contained in this paragraph, an officer not below the rank of an Assistant Provident Fund Commissioner may, on the joint request in writing, of any employee of a factory or other establishment to which this scheme applies and his employer, enroll such employee as a member or allow him to contribute on more than 16[rupees six thousand and five hundred] of his pay per month if he is already a member of the Fund and thereupon such employee shall be entitled to the benefit and shall be subject to the conditions of the Fund, provided that the employer gives an undertaking in writing that he shall pay the administrative charges payable and shall comply with all statutory provisions in respect of such employee.
CONCLUSION:
***The authority cannot ask us to pay an amount over and above Rs.6500.00 pm (Refer section 26); simultaneously we need to keep a 'joint declaration form' in case of each employee earning more than Rs.6500.00 (Basic+D.A.+Food All.)
And Gratuity: It is a retirement benefit to be paid to the employees, usually at the time of retirement. One becomes eligible for gratuity after completion of 5 years of service.
The formula for calculation of Gratuity is as follows:
Gratuity Calculation In India = [(Basic Pay + D.A) x 15 days x No. of years of service] / 26
Where 15 is considered as the half-month salary and 26 is considered to be the number of working days in a month excluding 4 Sundays which you will have in most of the months.
Hope this will help you to understand PF and Gratuity.
Regards.
From India, Ranchi
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78The definition and process of PF are mentioned below for your kind information.
EMPLOYEE PROVIDENT FUND & MISCELLANEOUS PROVISIONS ACT, 1952:
Which establishments are covered by the Act? The Act is applicable:
- To every factory engaged in any industry specified in Schedule I to the Act and employing 20 or more persons.
- To every other establishment employing 20 or more persons specified by the Central Government in this behalf.
Any establishment to which the Act applies shall continue to be governed by the Act even if the number of persons employed therein at any time falls below 20. {Section 1(3) & (5)}
Sec.1
Sec.2 (b): "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:
- The cash value of any food concession.
- 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.
- Any presents made by the employer.
Production bonus is outside the definition of basic wages since the word "bonus" in clause (ii) of sec.2 (b) has been used without any qualification. Bright & Roof Co. (1) Ltd. V. Union of India 1962 II LLJ 490.
Overtime is something done not on time but thereafter. If extra work is done on time, it would not come within the definition of overtime. In other words, extra payment for work done beyond the fixed norm and done during normal hours is wages.
Section 6. Contribution and matters which may be provided for in schemes:
The contribution which shall be paid by the employer to the Fund shall be [ten percent] of the basic wages, [dearness allowance and retaining allowance (if any), for the time being payable to each of the employees (whether employed by him directly or by or through a contractor), and the employee's contributions shall be equal to the contribution payable by the employer in respect of him and may, 10[if any employee so desires, be an amount exceeding 10a[ten percent] of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]:
12[Provided that in its application to any establishment or class of establishments which the Central Government, after making such enquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words 11[ten percent], at both places where they occur, the words 11[twelve percent] shall be substituted]:
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.
Explanation 1: For the purpose of this Section 'retaining allowance' means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.
Section 12. Employer not to reduce wages, etc:
No employer in relation to (an establishment) to which any 21b[Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to 21a[the Fund or the Insurance Fund] or any changes under this Act or the 21b[Scheme or the Insurance Scheme] reduce whether directly or indirectly, the wages of any employee to whom the 21b[Scheme or the Insurance Scheme] applies or the total quantum of benefit in the nature of old age pension, gratuity 21a{Provident fund or life Insurance] to which the employee is entitled under the terms of his employment, express or implied.
Not only is there no provision for permitting the reduction of wages by the employer, but there is also a strict prohibition under Sec. 12 so that the employer is prohibited from doing so. It would also follow that until a reduction by an appropriate order has been granted by the Commissioner, the employees also cannot contribute less than what they were doing earlier. Consolidate Cropn. Protection (P) Ltd. V. Hemchandra Rao 1977 LIC 251.
Section 2 (f) "Excluded employee" means:
- An employee who, having been a member of the Fund, withdrew the full amount of his accumulations in the Fund under 6[clause (a) or (c) of [sub-paragraph (1)of Paragraph 69;[
- An employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds 8[six thousand and five hundred rupees] per month.
**Explanation: "Pay" includes basic wages with the dearness allowances, 9[retaining allowance (if any) and cash value of food concessions admissible thereon;]
- An apprentice.
Explanation: An apprentice means a person who, according to the certified standing order applicable to the factory or establishment, is an apprentice, or who is declared to be an apprentice by the authority specified in this behalf by the appropriate Government.
CHAPTER IV: MEMBERSHIP OF THE FUND
26. Class of employees entitled and required to join the fund:
- Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee, shall be entitled and required to become a member of the Fund from the day this paragraph comes into force in such factory or other establishment.
- Every employee employed in or in connection with the work of a factory or other establishment to which the Scheme applies, other than an excluded employee, shall also be entitled and required to become a member of the Fund from the day this paragraph comes into force in such factory or other establishment if on the date of such coming into force, such employee is a subscriber to a provident fund maintained in respect of the factory or other establishment or in respect of any other factory or establishment (to which the Act applies) under the same employer.
Provided that where the Scheme applies to a factory or other establishment on the expiry of cancellation of an order of exemption under section 17 of the Act, every employee who but for the exemption would have become and continued as a member of the Fund, shall become a member of the fund forthwith.
(6) Notwithstanding anything contained in this paragraph, an officer not below the rank of an Assistant Provident Fund Commissioner may, on the joint request in writing, of any employee of a factory or other establishment to which this scheme applies and his employer, enroll such employee as a member or allow him to contribute on more than 16[rupees six thousand and five hundred] of his pay per month if he is already a member of the Fund and thereupon such employee shall be entitled to the benefit and shall be subject to the conditions of the Fund, provided that the employer gives an undertaking in writing that he shall pay the administrative charges payable and shall comply with all statutory provisions in respect of such employee.
CONCLUSION:
***The authority cannot ask us to pay an amount over and above Rs.6500.00 pm (Refer section 26); simultaneously we need to keep a 'joint declaration form' in case of each employee earning more than Rs.6500.00 (Basic+D.A.+Food All.)
And Gratuity: It is a retirement benefit to be paid to the employees, usually at the time of retirement. One becomes eligible for gratuity after completion of 5 years of service.
The formula for calculation of Gratuity is as follows:
Gratuity Calculation In India = [(Basic Pay + D.A) x 15 days x No. of years of service] / 26
Where 15 is considered as the half-month salary and 26 is considered to be the number of working days in a month excluding 4 Sundays which you will have in most of the months.
Hope this will help you to understand PF and Gratuity.
Regards.
From India, Ranchi
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Dear Sh. Mishra,
Mr. Malay has already explained the facts, but I can only say PF stands for Provident Fund, which is an employee-employer contribution and is the only asset for the future. As far as Gratuity is concerned, it is the reward from the employer to the employee for services rendered for a minimum of 5 years.
Thanks & Regards,
Sumit Kumar Saxena
From India, Ghaziabad
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Mr. Malay has already explained the facts, but I can only say PF stands for Provident Fund, which is an employee-employer contribution and is the only asset for the future. As far as Gratuity is concerned, it is the reward from the employer to the employee for services rendered for a minimum of 5 years.
Thanks & Regards,
Sumit Kumar Saxena
From India, Ghaziabad
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Provident Fund - Excluded Employee - Definition.pdf
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