Provident Fund - Procedures, Problems and Solutions

The employees' provident funds and miscellaneous provisions act, 1952

This act is an important piece of Labour Welfare legislation enacted by the Parliament to provide social security benefits to the workers. At present, the Act and the Schemes framed there under provide for three types of benefits -

1.  Contributory Provident Fund,

2.  Pensionary benefits to the employees / family members and

3.  Insurance cover to the members of the Provident Fund.

The object of the Act in 1952 was the institution of the compulsory contributory Provident Fund to the employees to which both the employee and the employer would contribute. The Employees' Provident Fund Scheme was accordingly framed under the Act and it came into effect from 1-11-1952. Initially the title of the Act was, "The Provident Fund Act 1952".

The provisions of the act extend to whole of India except the State of Jammu & Kashmir and also the State of Sikkim where it has not been notified so far after its annexation with the Union of India.

Applicability: All the establishments employing 20 or more persons (5 or more incase of Cinema Theatres) are brought under the purview of the Act from the very date of set up subject to fulfillment of other conditions. The provisions of the Act apply on its own force independently.

Those establishments which do not have the prescribed number of employees but willing to register themselves to provide the benefits of Provident Fund to their employees can register voluntarily with the Regional Provident Fund Office.

Definition of Wages: In this act, Wages means and includes Basic + Dearness Allowances, Cash value of food concession and Retaining allowances, if any.

Eligibility

1.  An employee at the time of joining the employment and getting wages up to Rs. 6,500/- is required to become a member.

2.   He / she is eligible for membership of fund from the very first date of joining a covered establishment.

Provident Fund Contribution: The provident fund contributions consist of contribution both by Employee and by Employer.

Employee Contribution:

Provident fund contribution is recovered @ 12% of wages from employees up to a maximum wage of Rs.6,500/- p.m. However, employees can contribute more than this statutory maximum which will be considered as Voluntary Contribution.

Voluntary Contribution

1. An employee can contribute voluntarily over and above the stipulated rate of PF contribution by opting for Voluntary PF scheme at any rate as he / she desires i.e up to 100% of Wages.

2. However, the contribution to VPF should be a certain % of wages and not a fixed amount.

3. But the employer is not bound to contribute at the enhanced rate.

4. It is suggested that the enhancement can be done at the beginning of the financial year for comfort level of calculation.

Employer Contribution

1. Employer is also required to contribute towards provident fund; the deduction rate is same as employee's contribution i.e. 12% of the wages.

2. Of this 12%, 3.67% goes to Provident Fund and the balance of 8.33% goes to Pension Fund.

Pension Fund

To avail pension benefit, the member

1.       should have completed 10 years of continuous service or

2.       he / she should have attained the age of 50 years or more.

3.       He / she doesn't receive any other EPF pension

The member will receive the Pension amount on a monthly basis after attaining the age of 58.

If the employee does not fall in the above criteria, he can withdraw the benefit. 

Contd.. in next issue

Bala Murugan V CFO Cogzidel Consultancy Services Pvt Ltd E-mail : bala@cogzidel.com www.cogzidel.in

Issue BG95 Feb09