The Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a piece of beneficial legislation that aims at making provisions for the future of a workman and/or for his dependents in the event of his retirement, early death etc. The Provident Fund Act also aims to provide for family pension and insurance to employees. An employee, under the Provident Fund Act has to pay a contribution towards the fund (12% of his wages), the employer also pays an equal contribution i.e. 12% of the employee’s wages. Thus, the employee gets a lump sum amount when he retires, which shall be useful to him after retirement.
The Provident Fund Act applies to factories and establishments employing 20 or more persons, it can be made applicable by the Central Government to establishments employing less than 20 persons or if the majority of employees agree. The Provident Fund Act is also applicable to all persons who are employed directly or indirectly through contractors in any kind of work. The Act applies to employees drawing a salary not exceeding Rs. 6,500/- per month.
There are three schemes framed under the Provident Fund Act, these are;
- The Employees’ Provident Funds Schemes, 1952;
- The Employees’ Pension Scheme, 1995 and
- The Employees’ Deposit Linked Insurance Scheme, 1976
Employees Provident Fund Scheme – This is the main scheme under the Act. Both the employer and employees have to pay a contribution to Provident Fund. The employer has to deduct the contribution of employee from the salary of the employee and has to pay both employees’ contribution as well as employer’s contribution by a challan in a prescribed form. The employee can voluntarily pay higher contribution above the statutory rate.
Employees’ Pension Scheme – This Scheme is applicable to all subscribers of Employers’ Provident Fund. By virtue of this 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 or till he/she remarries.
Employees Deposit Linked Insurance Scheme – The Central Government with the motive of providing additional Social Security in the form of life insurance to the family of the deceased member of the Provident Fund, introduced the 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 and in addition, administrative charges of 0.1% of total wages as per [Notification No. AO 503(E) dated 28-7-1976 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. The Scheme applies to all the establishments to which the Employees’ Provident Fund Scheme applies.
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