Labour Laws
Employees Provident Fund Act
Applicability
It Applies:-

(i) to every establishment which is a factory engaged in any industry specified in Schedule- I and in which twenty or more persons are employed and

(ii) to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify, in this behalf.

It shall continue to apply notwithstanding that the number of persons employed therein at any time falls below twenty. Form for Registration under EPF is required to be submitted by an employer along with one or more of the documents mentioned in that form for obtaining Code Number at any time of the year.

Employees’ Provident Fund Organisation (EPFO) is managing three Schemes viz., EPF Scheme 1952, EPS 1995 and EDLI Scheme 1976. Coverage under the EPF Act means simultaneous coverage under all three Schemes, unless exemption is granted from a particular scheme. The date on which the establishment is brought under the coverage of EPF Act and the Code number (starting with KR/) is indicated in the coverage notice. The PF code number allotted is permanent and should be quoted in all returns and communications with the PF office.

Act not to apply to certain establishments:-

This Act shall not apply:–

  • to any establishment registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State relating to co-operative societies employing less than fifty persons and working without the aid of power; or
  • to any other establishment belonging to or under the control of the Central Government or a State Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any Scheme or rule framed by the Central Government or the State Government governing such benefits; or
  • to any other establishment set up under any Central, Provincial or State Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing such benefits;
Contribution to the Scheme

Employee Contribution- 12% 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 (or exceeding 12% at the option of Employee). Employer Contribution- 13.36% 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. Employer shall not be under an obligation to pay any contribution over and above his contribution.

Bifurcation of Employer Contribution
A/c No 1: PF contribution Account 3.67%
A/c No 2: PF Admin account* (wef from 01.01.2015, earlier it was 1.1%) 0.85%
A/c No 10: Employee’s Pension Scheme (EPS) account 8.33%
A/c No 21: Employees’ Deposit-linked Insurance Scheme (EDLIS) account 0.50%
A/c No 22: EDLIS admin account** 0.01%
Total 13.36%
  • Minimum monthly administrative charges will be Rs.25/- for every non-functional firm having no (PF) contributing member and Rs.200/- for any other establishments.
  • Minimum payable amount under EDLI Administrative charges is Rs.200/-. If the establishment has no contributory member in the month, the minimum administrative charge will be Rs.25/-

(For Admin Charges)-In case Establishment is exempted under PF Scheme, Inspection charges @0.18%, minimum Rs 5/- is payable in place of Admin charges. In case the establishment is exempted under EDLI Scheme, Inspection charges @0.005%, minimum Re.1/- is payable in place of Admin charges.

"Dearness allowance" shall be deemed to include also the cash value of any food concession allowed to the employee.

"Retaining allowance" means 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.

Mode of Payment of Contributions

Employer shall pay the Contribution to the Provident Fund within fifteen days of the close of every month by separate bank drafts or cheques on account of contributions and administrative charge. Provided that if the payment is made by a cheque, it should be drawn only on the local bank of the place in which deposits are made. No grace of 5 days with effect from Feb’2016 (i.e. Contributions for the month of Jan’2016).

Penalties:-

Whoever, for the purpose of avoiding any payment to be made by himself under this Act, the Scheme, the Pension Scheme or the Insurance Scheme or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment upto 1 year, or with fine of Rs. 5,000/-, or with both.

If a person fails to comply with the provision related to the Contribution to the fund, it shall be punishable with imprisonment upto 3 years but –

  • Min. one year and a fine of Rs. 10,000/- in case of default in payment of the employee’s contribution which has been deducted by the employer from the employee’s wages;
  • Min. six months and a fine of Rs. 5,000 in any other case: Provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term.
Offences by Companies:-

If the person committing an offence under this Act, the Scheme or the Pension Scheme or the Insurance Scheme is a company, every person who at the time the offence was committed was incharge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

Compliance Forms:-

Exemption from the Scheme- 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 to an individual employee to whom the Scheme applies on receipt of application in Form 1 from such an employee.

Preparation of Contribution Cards- The employer shall prepare a contribution card in Form 3A as may be appropriate, in respect of every employee in his employment at the commencement of the Scheme or who is taken into employment after that date and who is required or entitled to become or is a member of the Fund including those who produce an Account Number and in respect of whom no fresh Declaration Form is prepared. Provided that in the case of any such employee who has become a member of the Family Pension Fund under the Employees’ Family Pension Scheme, 1971, the aforesaid Forms shall also contain such particulars as are necessary to comply with the requirements of that Scheme. The details of wages & contributions in respect of each member, to be prepared financial year wise and it is to be submitted to the Provident Fund office by 30th of April of the following year. The contribution cards issued under this Scheme shall be current for one year.

Duties of Employers:-
Form 5 is a monthly report which provides the details of the employees newly joining the Provident Fund scheme during the given month which should be submitted within fifteen days of the close of each month. If there is no Employee joined during the month, then Employer should send a ‘NIL’ return.
Form 5A Every employer in relation to a factory or other establishment to which the Act applies on the date of coming into force of the Employees’ Provident Funds (Tenth Amendment) Scheme, 1961, or is applied after that date, shall furnish [in duplicate] to the Regional Commissioner in Form No. 5A immediately on the receipt of coverage notice, [particulars of all the branches and departments, owners], occupiers, directors, partners, manager or any other person or persons who have the ultimate control over the affairs of such factory or establishment and also send intimation of any change in such particulars, within fifteen days of such change, to the Regional Commissioner by registered post.
Form 6 Every employer shall within one month from the date of expiration of the period of currency of the contribution cards in respect of members employed by him, send the contribution cards to the Commissioner together with a statement in Form 6.
Form 6A The employer shall send to the Commissioner within one month of the close of the period of currency, a consolidated Annual Contribution Statement, showing the total amount of recoveries made during the period of currency from the wages of each member and the total amount contributed by the employer in respect of each such member for the said period. The employer shall maintain on his record duplicate copies of the aforesaid monthly abstract and consolidated annual contribution statement for production at the time of inspection by the Inspector.
Form 9 Any person aggrieved by an order made under sub-section (1) of section 7-A and who desires to obtain a review of such order may apply for a review of that order, as provided in sub-section (1) of section 7B of the Act in Form 9 to the officer who passed such order. Provided that no application for review of an order will be entertained by the concerned officer, unless the application for review is submitted within 45 days from the date of making such order.
Form 10 is a monthly report that provides the details of the employees exiting from the Provident Fund scheme during the given month. If there is no Employee left during the month, then Employer should send a ‘NIL’ return.
Form 10C & 19 To claim withdrawal from pension fund, member is required to submit Form 10C. The member should submit Form 19 to withdraw his provident fund dues on leaving service/retirement/termination.
Form 11- The Central Board shall maintain proper accounts of its income and expenditure, including its administrative accounts, in Form 10, and the balance sheet in Form 11. The accounts shall be prepared for the financial year and the books shall be balanced on the 31st March each year.
Form 12-

The employer shall forward to the Commissioner, within twenty-five days of the close of the month, a monthly abstract showing the aggregate amount of recoveries made from the wages of all the members and the aggregate amount contributed by the employer in respect of all such members for the month: Provided that an employer shall send a Nil return, if no such recoveries have been made from the employees.

Provided further that in the case of any such employee who has become a member of the pension fund under the Employees’ Pension Scheme, 1995, the aforesaid form shall also contain such particulars as are necessary to comply with the requirements of that Scheme.

Form 12A- Monthly report to be submitted by the employer that provides the details of the PF Payments made to the respective PF Accounts of the employees during the given month within twenty-five days of the close of the month.
Form 13- When an employee joins new company and he wishes to transfer his previous company provident fund amount, he should inform the HR department or Accounts department of the new company. The employer will issue Form 13, in which the member has to fill the details of previous company like –name, address, PF account number and address of the provident fund office where the account was held. On form 13, the signature of the previous employer is not required. Once he fills the required details and submit it to the current employer, the current employer will forward it to the provident fund office for transferring process. The time taken for transferring the fund from one account to other account normally takes about 40 days from date of submission.
Form 14- Where a member desires that premium due on a policy of LIC taken by him on his own life should be financed from his Provident Fund account, he may apply in Form-14. On receipt of such application, the Commissioner, or, where so authorised by the Commissioner, any other officer subordinate to him may make payment on behalf of the member to the LIC of India towards premium due on his policy. Provided that no such payment shall be made unless the premium is payable yearly.
Form 15- The Commissioner, or where so authorised by the Commissioner, any officer subordinate to him, may on an application from a member in Form 16 and subject to the conditions prescribed in that paragraph sanction from the amount standing to the credit of the member in the fund, a withdrawal from the Fund for the purchase of a dwelling house/flat or for the construction of a dwelling house including the acquisition of a suitable site for the purpose.

Form 16- If an employee-member dies, his/her nominee/heir/beneficiary will have to submit the Form-20 based on when he/she dies to claim the EPF balance in the employee’s account. Form 20 will have to be submitted for final settlement and along with this the requisite forms will have to be submitted to claim pension and insurance. The forms to be submitted will depend on when the employee dies:
  1. Below 58 years of age
    (A)While in service - Form 20 and Form 10D (for monthly pension) and Form 51F (for insurance claim - EDLI)
  2. Above 58 years of age
  3. (a) 10 years’ service completed - Form 20 and Form 10D (for monthly pension) and Form 51 for insurance claim (EDLI)
    (b) 10 years’ service not completed - Form 20 and Form 10C (for pension withdrawal benefit) and Form 51F (for insurance claim -EDLI)
Form 31- For the use of Provident Fund members to avail advances/withdrawals as provided in the scheme. This is used for acquiring loans, withdrawals or advances from an employee’s provident fund account. Under normal circumstances, the advance amount need not be refunded. All the same, if the advance amount is not used, it should be refunded along with interest. Also, it is important to note that a certain sum of minimum EPF balance is required to be maintained in the provident fund account of an employee prior to calculation of the admissible advance amount, subject to the the eligibility criteria for each condition. The list of reasons for which advanced may be taken by an employee are listed below:
  • Housing loan repayment
  • Education
  • House repair
  • Wedding
  • Medical treatment
  • Construction of a dwelling
  • Plot purchase
  • Lockout
  • House alteration
  • Physically handicapped
  • Abnormal conditions such as natural calamities
  • Cut in supply of electricity
Payment of Bonus Act :-

Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than 30 working days in that year. Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for

Eligibility for Bonus
  • Fraud
  • Riotous or violent behaviour while on the premises of the establishment
  • Theft, Misappropriation or Sabotage of any property of the establishment
Payment of minimum bonus

Minimum bonus shall be 8.33% of the salary or wage earned by the employee during the accounting year or Rs.100/-, whichever is higher, whether or not the employer has any allocable surplus in the accounting year.

Provided that where an employee has not completed 15 years of age at the beginning of the accounting year, the provisions of this section shall have effect in relation to such employee as if for the words "Rs.100/-", the words "Rs.60/-" were substituted.

Payment of maximum bonus

Where in respect of any accounting year referred to in section 10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent. of such salary or wage.

In computing the allocable surplus under this section, the amount set on or the amount set off under the provisions of section 15 shall be taken into account in accordance with the provisions of that section.

Time-limit for payment of bonus:-

[All amounts] payable to an employee by way of bonus under this Act shall be paid in cash by his employer--

  • where there is a dispute regarding payment of bonus pending before any authority under section 22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute;
  • in any other case, within a period of eight months from the close of the accounting year. Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit; so, however, that the total period so extended shall not in any case exceed two years.
Non-Applicability of the Act:-

Nothing in this Act shall apply to-

  • Employees employed by any insurer carrying on general insurance business and the employees employed by the Life Insurance Corporation of India
  • Seamen as defined in clause (42) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958)
  • Employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), and employed by registered or listed employers
  • Employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority
  • Employees employed by-
    (a) The Indian Red Cross Society or any other institution of a like nature (including its branches)
    (b) Universities and other educational institutions
    (c) Institutions (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit.
  • Employees employed by the Reserve Bank of India
  • Employees employed by-
    (a) The Industrial Finance Corporation of India
    (b) Any Financial Corporation established under section 3, or any Joint Financial Corporation established under section 3A, of the State Financial Corporations Act, 1951
    (c) The Deposit Insurance Corporation (d) The National Bank for Agriculture and Rural Development
    (e) The Unit Trust of India
    (f) The Industrial Development Bank of India (g) the Indian Red Cross Society or any other institution of a like nature (including its branches)
    (h) The Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989
    (i) The National Housing Bank
    (j) any other financial institution (other than a banking company) being an establishment in public sector, which the Central Government may, by notification in the Official Gazette, specify, having regard to-
    (i) Its capital structure
    (i) Its objectives and the nature of its activities
    (i) The nature and extent of financial assistance or any concession given to it by the Government
    (i) Any other relevant factor
  • Employees employed by inland water transport establishments operating on routes passing through any other country.
Penalty:-

If any person--

  • Contravenes any of the provisions of this Act or any rule made thereunder
  • to whom a direction is given or a requisition is made under this Act fails to comply with the direction or requisition, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to Rs.1,000/-, or with both.
Maintenance of registers:-

Every employer shall prepare and maintain the following registers, namely

  • A register showing the computation of the allocable surplus referred to in clause (4) of section 2, in Form A
  • A register showing the set-on and set-off of the allocable surplus, under section 15, in Form B.
  • A register showing the set-on and set-off of the allocable surplus, under section 15, in Form B.
  • A register showing the details of the amount of bonus due to each of the employees, the deductions under sections 17 and 18 and the amount actually disbursed, in Form C.
Annual returns:-

Every employer shall send a return in Form D to the Inspector so as to reach him within 30 days after the expiry of the time limit specified for payment of bonus, which is 8 months from the close of the financial year.

Payment of Gratuity Act:-

Applicability of the Act-

It shall apply to-
  • Every factory, Mine, Oilfield, Plantation, Port and Railway Company
  • Every Shop or Establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, On any day of the preceding twelve months
  • Such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, As the Central Government may, By notification, Specify in this behalf

A shop or establishment to which this Act has become applicable shall continue to be governed by this Act, notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.

Payment of Gratuity-

Minimum bonus shall be 8.33% of the salary or wage earned by the employee during the accounting year or Rs.100/-, whichever is higher, whether or not the employer has any allocable surplus in the accounting year.

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-

  • On his superannuation
  • On his retirement or resignation
  • On his death or disablement due to accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement

Provided further that in case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is minor, the share of such minor, shall be deposited with the Controlling Authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

Explanation- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned. Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account.

Provided further that in the case of an employee who is employed in a seasonal establishment, and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.

Explanation-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.

(3) Maximum Amount of Gratuity paid shall be Rs. 10,00,000/-