Section 9: Employees’ Provident Fund Scheme

Overview

This section deals with the Employees’ Provident Fund (EPF), a crucial social security benefit designed to provide long-term financial security to employees upon retirement or cessation of employment. The EPF Scheme, established under the Code on Social Security, 2020, is a mandatory savings scheme intended to help employees build a financial cushion for their future.

Who is Covered?

• The Code aims to cover all employees engaged in organized sectors. Specific classes of employees and establishments covered will be detailed in rules framed by the Central Government.
• Eligibility conditions, such as minimum length of service or wage ceilings, will be specified in the rules. The Code intends to broaden coverage, but precise details are yet to be finalized.

Benefits and Contributions

• Benefit to Employee: The primary benefit is a lump-sum payment upon retirement, resignation, or termination of service, comprising the employee’s contribution, employer’s contribution, and accrued interest. Partial withdrawals are permitted for specific needs like housing, education, or medical expenses, as per the Scheme rules.
• Contribution Responsibilities: Both the employer and the employee contribute to the EPF. The exact contribution rates will be determined by the Central Government through notifications. Currently, a standard rate is 12% from both employer and employee, but this is subject to change under the new Code. The Government may also contribute in certain cases, such as for pension schemes linked to the EPF.

Procedure and Compliance

The Central Government will frame detailed rules regarding the operation of the EPF Scheme. Generally, the process involves:

1. Registration: Establishments covered under the Code must register with the EPF authorities.
2. Contribution Deduction: Employers are responsible for deducting the employee’s contribution from their wages and remitting both the employee’s and employer’s share to the EPF authorities within the prescribed timelines.
3. Account Maintenance: Each employee will have a unique EPF account number. The Code emphasizes digital record-keeping and Aadhaar-based authentication for account management.
4. Claim Settlement: Employees can file claims for withdrawals or transfers of their EPF accounts through the Unified Portal, ensuring a streamlined process.

Practical Examples

• Example 1: Employee Eligibility – Priya, a software engineer earning ₹60,000 per month, joins a company covered under the Code on Social Security, 2020. After completing three months of continuous service, she becomes eligible to contribute to the EPF and receive the employer’s matching contribution.
• Example 2: Employer Non-Compliance – A manufacturing unit fails to deposit the EPF contributions deducted from its employees’ salaries for six months. This constitutes a violation of the Code, and the employer may face penalties, including interest on delayed payments and potential legal action.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. The Code on Social Security, 2020, is a complex piece of legislation, and specific legal advice should be sought from a qualified professional.