Section 76: Non-payment and Evasion of Contributions

Overview

Section 76 of the Code on Social Security, 2020, addresses a critical aspect of all social security schemes – ensuring employers fulfil their obligations to contribute towards employee benefits. This section applies across various schemes consolidated under the Code, including Provident Fund (PF), Employees’ State Insurance (ESI), gratuity, maternity benefits, and other applicable social security provisions. It focuses specifically on the consequences of employers failing to remit the contributions deducted from employee wages or attempting to evade these contributions altogether.

Who is Covered?

• This section applies to all employers covered under the Code on Social Security, 2020. This generally includes establishments employing a specified number of employees (the threshold varies depending on the specific scheme – PF, ESI, etc.) and operating within the sectors covered by the Code.
• Employees covered are those who are eligible for benefits under the various schemes, determined by factors like wage ceilings, length of service, and the nature of employment (e.g., permanent, contract). The specific eligibility criteria are defined within the rules of each individual scheme.

Benefits and Contributions

• Employee Benefit: The benefits vary depending on the scheme. These include retirement savings (PF), health insurance (ESI), financial support during maternity, gratuity payments upon retirement or resignation, and other social security protections.
• Employer Contribution: Employers are legally obligated to contribute a specified percentage of their employees’ wages towards these social security schemes, in addition to the employee’s contribution (where applicable). The exact percentage varies based on the scheme and applicable regulations.
• Employee Contribution: Employees also contribute a portion of their wages to certain schemes, like PF and ESI.
• Government Contribution: In some schemes, the government may also contribute to enhance the benefits provided.

Procedure and Compliance

Employers must:

1. Deduct Contributions: Accurately deduct the required contributions from employees’ wages.
2. Register: Register with the relevant authorities for each applicable social security scheme.
3. Deposit Contributions: Deposit the deducted contributions, along with their own share, to the designated accounts within the prescribed timelines. These timelines are scheme-specific and detailed in the relevant rules.
4. Maintain Records: Maintain accurate records of all contributions deducted and deposited.
5. File Returns: File regular returns with the authorities, detailing the contributions made.

Section 76 emphasizes that failure to comply with these procedures constitutes a serious offence.

Practical Examples

• Example 1: An employee, Ramesh, works for a company covered under the EPF scheme for over five years. His employer regularly deducts 12% of his salary towards EPF and contributes an equal amount. This ensures Ramesh builds a substantial retirement corpus.
• Example 2: A factory owner, Mr. Sharma, deducts ESI contributions from his workers’ wages for six months but fails to deposit the funds with the ESI Corporation. This is a violation of Section 76. He could face significant fines, imprisonment, and be liable for recovering the unpaid contributions with interest and damages.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. For specific legal guidance, please consult with a qualified legal professional.