Provident Fund

Labour Laws

Employees Provident Fund Scheme, 1952

Prior to 1952, in India there was no statutory requirement for providing retrial/post service economic support to the workers and their families employed by the establishments falling in Industrial and Commercial sectors. The Employees Provident Fund Act, 1952 (since renamed as the Employees Provident Fund and Misc. Provisions Act, 1952) was enacted by the Parliament and the Employees Provident Fund Scheme, 1952 was notified by the Government effective from November, 1952. The Scheme provided for creation of Contributory Provident Fund System on compulsory basis wherein the employer of the establishment and the employee concerned will contribute at equal rate. Contribution accretion with interest to the credit in members account becomes payable to the member in lump sum on quitting service or to the nominee/legal heirs of the member in the vent of his death. Besides terminal payment on retirement/leaving the job, the member could make partial withdrawal while service for specified purposes

1. Applicability

The Scheme applies to establishments belonging to notified category of Industries/Class of establishments employing 20 or more persons. In case of Cinema Theatre establishments, 5 employees and 50 employees in respect of cooperative Societies working without the aid of power shall attract the provision of the Scheme.

Provisions also exist for coverage on voluntary basis on joint request by the employer and majority of the employees of establishments of non-applicable category. So also, the Central Government has the power to extend the coverage.

The Central Government has further specified various organizations, which are subject to the Employees Provident Fund Scheme, 1952. Such organization are listed below :

(i) Educational, scientific research and training institutions
(ii) Establishments known as hospitals
(iii) Societies, clubs or associations which render services to their members without charging any fee over and above the subscription fee or membership fee.
(iv) Establishments rendering expert services
(v) Financial establishments (other than banks) engaged in the activities of borrowing, lending, advancing of money and dealing with other monetary transactions with a view to earn interest.
(vi) Establishments engaged in poultry farming
(vii) Establishments engaged in cattle feed industry
(viii)Agricultural farms, fruits, orchards, botanical gardens and zoological gardens.


From the above it is clear that the voluntary organization is subject to the provisions of Employees Provident Fund Scheme, 1952

2. Membership

Every employee, other than an excluded employee, need be enrolled to the membership of the fund from the very day of employment. Membership is necessary for all categories of employees irrespective of their being permanent, temporary, casual, whole time, part time or otherwise, and shall include the persons engaged by or through contractors, if any.

  1. Every employee employed in or in connection with the work of the factory or other establishments to which the EPF Scheme applies except an excluded employee i.e. drawing a salary exceeding Rs.15,000 p.m.
  2. Every employee is required to join the fund from the date of joining the factory or establishment
  3. Every excluded employee on his ceasing to be excluded employee i.e. makes an application jointly with the employer.

3. Employer

An ‘Employer’ means – sec. 2(e) :

  1. in relation to an establishment, which is a factory, the owner or occupier including the agent, the legal representative of a deceased owner or occupier and
  2. in relation to any other establishments, the person or authority who has ultimate control over the affairs of the establishment or the manager or managing director if entrusted with affairs of the establishment.

4. Employee

An employee – sec. 2(f), means any employee who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets wages directly or indirectly from the employer and includes any person:

(i)employed by or through a contactor in or in connection with the work an establishment
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961, or under the standing orders of the

An apprentice means a person who according to the certified standing orders applicable to a factory or establishment, is an apprentice or who is declared to be an apprentice by the authority specified by the appropriate government

Accordingly personal or domestic servants are not employees under the Act.

5. Contractor’s employees

It has been held by the court in Enfield India v RPFC 2000 (85) FLR 519(Mad) a person doing work of the principal employer, even though employed covered by the definition

“Excluded Employee” has been defined in para 2(f) to mean an employee:

  1. who having been a member of the fund, withdrew the full amount of his accumulations on retirement or emigration or
  2. Whose pay at the time he is otherwise entitled to become a member of the fund exceeds Rs. 15,000 p.m.

6. Contribution

Contribution is payable monthly by the employer and employee both at equal rate. The employer is required to deposit both the shares of contribution including those of contractor’s employees, if any. The employer is authorized to recover the employees share from the salary of the employees share from the contractor concerned:

Basic rate provident fund contribution is @ 10% of the basic wage/ salary and the higher rate is @12%. Basic rate is applicable on 5 industries namely Beedi, Brick, Jute, Coir and Guargum Industries. In respect of other establishments engaging less than 20 employees or which are sick units, basic rate of contribution shall be payable.

Out employer’s share of contribution, 8.33% equivalent is to be diverted to pension fund a/c while the balance of employer’s share of contribution and the employees’ share of contribution in toto will be credited to PF account.

7. Circumstances in which mode of final payment to employee

Accumulations in the provident fund account of a member becomes payable for final settlement under following situations:

(i)On retirement from service after attaining the age of 55 years
(ii) On retirement as a result of total and permanent disablement rendering in capacity to work
(iii) Immediately before migration from India for permanent settlement abroad or for taking employment abroad;
(iv) Termination of service upon mass or individual retrenchment
(v) Termination of service under a voluntary retirement scheme; and
(vi) Termination of job and remaining unemployed for over two months or leaving the job from a covered establishment and joining an establishment not covered by P.F.

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