Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 Employees’ Provident Fund or EPF is a collection of funds contributed by the employer and his employee regularly on a monthly basis. The EPF is basically a retirement benefits scheme and aims at promoting savings to be used post-retirement by various employees all over the country. The employee gets a lump sum amount including self and employer's contribution with interest on both. Early withdrawal is discouraged. Factories and Establishments with 20 or more people are required by law to register for the EPF scheme, while those with fewer than 20 people can also register voluntarily. A registered factory/establishment continues to be under the purview of the Act even if the employee strength falls below the required minimum. Here people include employees, contractors, paid Interns in calculating this number of 20. Apprentice covered under Apprenticeship Act and Interns who are not getting stipends are not considered while coming on this number of 20. It is mandatory for employees whose Basic + Dearness Allowance is less than Rs. 15,000 a month and employees whose Basic + Dearness Allowance is more than Rs. 15,000 per month they have an option to choose. Contributions: Case 1: Basic pay + Dearness Allowance < INR 15,000/ per month. Contribution Amount 12% of the basic salary by Employee 12% of the basic salary by Employer Case 2: Basic pay + Dearness Allowance > INR 15,000/ per month. Contribution Amount - Not mandatory Also the Employer has an option to contribute 12% of 15,000 (i.e. 1800) or 12% of Basic salary. Same option is available with the employees. However, the employer is not liable to match the extra contributions by employees. Few employers were intentionally keeping Basic low to reduce their contribution. As per recent guidelines Basic + DA has to be at least 50% of total salary. Note: 10 % instead of 12% in case of Voluntary establishments that employ less than 20 persons. For checking the eligibility Basic + DA is considered however for calculation of contribution amount more components are there. As per act, Basic salary for PF includes (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance, if any, However it is not very clear in law what does it mean by retaining allowance. Hence different companies interpret it differently. Reference Material - https://www2.deloitte.com/content/dam/Deloitte/in/Documents/tax/in-tax-provident-fund-applicability-allowances-noexp.pdf Now which allowances to cover in calculating contributions. If there is proof that the company is giving allowance then can exempt that else should be included here. Example: House Rent Allowance (HRA), If you are collecting Rent slips then can remove it from Basic salary calculations Hence the final structure for PF varies from company to company. Usually companies give HRA that is why you will see that most companies do not include HRA in calculating contribution amount. All employees are eligible for becoming a member of PF who are employed in an establishment (includes employees employed through contractors, daily rated, piece rated, temporary, casual, freelancers, consultants etc.) Here it is important to check the terms of employment. Example if a Consultant is bound to work with this Employer only and the relationship is of an Employer and Employee then Consultant will get PF benefits. However if the terms of conditions are of equals then he will not get the benefits of PF. Now many employers believe that only Full-time employees are covered in PF and when they need to hire a 20th person then many employers show him as a consultant but terms and conditions are same as of other employees. This is a wrong practice. The contribution made by the employee goes totally towards the provident fund of the employee. Employees can check the balance using any of these options- Umang App, EPFO Member e-Sewa portal, SMS or a missed call. Universal Account Number - UAN UAN stands for Universal Account Number to be allotted by EPFO. The UAN acts as an umbrella for the multiple Member Ids allotted to an individual by different establishments. Earlier, when an individual joined a new organization, he was assigned a new PF account number which made it very difficult to get a proper estimate of the PF. To sort this issue, UAN was introduced. Hence the idea is to link multiple Member Identification Numbers (Member Id) allotted to a single member under single Universal Account Number. This helps the member to view details of all the Member Identification Numbers (Member Id) linked to it. If a member is already allotted Universal Account Number (UAN) then he / she is required to provide the same on joining a new establishment to enable the employer to in-turn mark the new allotted Member Identification Number (Member Id) to the already allotted Universal Identification Number (UAN). With the help of UAN, the employee can easily withdraw and transfer funds. Pf website: www.epfindia.gov.in One-Stop-Shop for Labour Law Compliance : https://shramsuvidha.gov.in/home https://shramsuvidha.gov.in/userManual.action (Reading Material) In Unified Shram Suvidha Portal Registration under Five central Labour Act viz. EPF/ESI/CLRA/BOCW/ISMW is being provided under 'Ease of Doing Business' initiative of Government of India. (1) The Employees Provident Funds And Miscellaneous Provision's Act (EPF) Act-1952. (2) Employees' State Insurance Act (ESI) ACT-1948. (3) Contract Labour (Regulation and Abolition) Act-1970. (4) Building and Other Construction Workers (BOCW) Act -1996. (5) Inter-State Migrant Workmen (ISMW) Act-1979. License: (1) CLRA Act (2) ISMW Act You can register your establishment under these Acts. Depending on the duration, delayed payment now attracts penalty of between 5% and 25% on the shortfall of payment of dues. However, the delay also attracts interest at the rate of 12% per annum, which will continue to attract in case of delayed payment. In covid situation, "As of now, the penalty reprieve is for three wage months – March, April and May. However, the interest part will remain. Interest is levied at just 1% per month," said Central provident fund commissioner Sunil Barthwal. ECR - Electronic Challan-cum-Return - Has details of calculations while uploading pf details online FAQs: Question: Can I change my voluntary contribution percentage at any time? Answer: You can change your voluntary contribution only at the start of the financial year. Once the change is opted for, it must run throughout the year and cannot be changed until the end of the financial year. Question: Can an employee opt out of the Schemes under EPF Act? Answer: An employee with a basic salary of over Rs. 15,000 and who has never been a member of EPF can opt out of the scheme. But once they become a member, they cannot opt out of the scheme. Aatmnirbhar Bharat Abhiyan 3.0 New Incentives for Businesses covered in PF to boost Employment If an establishment has less than 1000 employees, 24% PF (12% Employees share and 12% Employers share) shall be paid by the Government for their new employees employed on or after 01.10.2020. This benefit shall be for a period of two years from the date of employment If employees are more than 1000, then only 12% Employees share shall be paid by the Government. Employer continues to pay their 12% share Conditions: • Scheme is for employees with monthly wages less than Rs.15,000/- • If establishment has less than 50 employees, minimum 2 new employees be added • If you have more than 50 employees, you should employ minimum 5 or more new • New means, First time PF Registration, on or after 01.10.2020 • Also, if any old employee lost or left job between 01.03.2020 to 30.09.2020, then on re-employment after 1.10.20 he shall get the benefit • Businesses which are not yet covered in PF but do so now shall get the benefit for ALL their employees • Scheme open till 30.06.2021 • This is huge incentive by the Government to encourage businesses to add new employees and also to establishments not yet registered with EPFO to do so • Example, if an employee is at 14,999/- then Rs.1800/- (12% employee share) and Rs.1800/- (12% employer share), total Rs.3600/- per month shall be paid by the Government for 2 years • Total of 3600X24= Rs.86,400 • Both Employer and Employee get benefit of upto Rs.43,200/- each year in 2 years • It means PF shall not be deducted from new eligible employees • Ironically, it means that New eligible employees get Rs.1800/- per month more than existing old employees presently drawing less than Rs.15,000/- wages per month, for 2 years • It also means that Employees who left on or after 01.03.2020 and rejoin after 01.10.2020 shall get this incentive of upto Rs.1800/- pm but if any loyal employee stayed back and continued to work or joined before 01.10.2020 shall not be eligible for this benefit. • nonetheless It is a grand incentive for new businesses that employ 20 or more employees on or before 30th June 2021 • It’s also a grand incentive for existing businesses not yet covered in PF (employees less than 20) or those who have avoided or evaded PF registration. Till now enforcement department of PF would not only recover old PF dues, they would also recover interest and penalty. But now, there’s this huge incentive for such units to get voluntarily covered in PF. Example: Suppose one is able to adds 20 employees, it will mean benefit of upto Rs.43,200 X 20 X 2= Rs.17,28,000/- in 2 years And for new employees that one adds till 30.06.2021, each employee shall get additional benefit of Rs.43,200/- per year. The employees can also get benefit of 24% of basic wages upto Rs.3600/- per month as this amount shall be deposited in their PF account by the Government for 2 years.