As per Preamble to the Act, the EPF Act is enacted to provide for the institution of provident funds, pension fund and deposit lined insurance fund for employees in factories and other establishments. The Employees Provident Funds & Miscellaneous Provisions Act is a social security legislation to provide for provident fund, family pension and insurance to employees.
Employee has to pay contribution towards the fund. Employer also pays equal contribution. The employee gets a lump sum amount when he retires, which will be useful to him after retirement. The Act covers three schemes i. e.
- PF ( Provident Fund Scheme )
- FPF ( Family Pension Fund Scheme )
- EDLI ( Employees Deposit Linked Insurance Scheme )
The EPF Act contains basic provisions in respect of applicability, eligibility, damages, appeals, recovery etc. The three schemes formed by Central Government under the Act make provisions in respect of those schemes.
It is also compulsory to persons, who were subscribers as on 16th November, 95. Contribution:
- The employer’s contribution of 8. 33% will be diverted to the fund 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 to till he/she remarries.
- In addition, children will be entitled to pension, up to 25 years or their age.
- In case of orphans, pension at enhanced rate is available up on 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. 01% of total wages. [Notification no. AO 503(E) dated 28th July 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 employment, his nominee of 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.
The percentage of contributions made to PF & EPF authorities are as under.
- By all Employees12% of Basic wages
- By the Employer 12% of Basic wages and 1. 61% as administrative charges.
Thus company will bear an additional burden of 13. 61% to comply with PF/EPF monthly on the basic wages for the welfare of our employees. Check PF of Sub-Contractors:- Is there any firm and logic way to look to it that sub-contractor complies with the PF formalities. Consider the case of a company who hires say machines engaging 9nos of employees on contract basis. The monthly EFP challan provided by sub-contractor is of full Manpower with him.
