Contribution of Employee’s Provident Fund: What is the Contribution Rates Under Employee’s Provident Fund Scheme, 1952 (Legal Analysis)

Contribution of Employee’s Provident Fund: What is the Contribution Rates Under Employee’s Provident Fund Scheme, 1952 (Legal Analysis)

Under Para 29 of the Scheme,

The contributions payable by the employer under the Scheme shall be at the rate of 12% of the basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any)] payable to each employee to whom the Scheme applies.

The contribution payable by the employee under the Scheme shall be equal to the contribution payable by the employer in respect of such employee.

The contributions shall be calculated on the basis of basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any) actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis.

Each contribution shall be calculated to the nearest rupee, 50 paise or more to be counted as the next higher rupee and fraction of a rupee less than 50 paise to be ignored.

  PRESENT RATES OF CONTRIBUTION

BY	CONTRIBUTION ACCOUNTS			ADMINISTRATION ACCOUNTS
	EPF	EPS	EDLI	EPF@@	EDLI @@
EMPLOYEE	12% /10% ##	0	0	0	0
EMPLOYER	Difference of Employee’s Share – Pensions Amount	8.33% ##	0.5% ##	0.50% !!	0

10% rate is applicable for

1.      Any establishment in which less than 20 employees are employed.

2.      Any sick industrial company and which has been declared as such by the Board for Industrial and Financial reconstruction Any establishment which has at the end of any financial year, accumulated losses equal to or exceeding its entire net worth and

3.      Any establishment in following industries:-Jute, Beedi, Brick, Coir and Guar gum Factories.

## Contribution is rounded to the nearest rupee for each employee, for the employee share, pension contribution and EDLI contribution. The Employer Share is difference of the EE Share (payable as per statute) and Pension Contribution.

!!  Monthly  payable amount  under EPF Administrative charges is rounded to the nearest rupee and a minimum    of Rs 500/- is payable. Note:- If the establishment has no contributory member in the month, the minimum administrative charge will be Rs 75/-

@@ In case Establishment is exempted under PF Scheme, Inspection charges @0.18%, minimum Rs 5/- is payable in place of Admin charges. In case the Establishment is exempted under EDLI Scheme, Inspection charges @ 0.005%, minimum Re 1/- is payable in place of Admin charges.

Notes:

UNDER EPF

The contributions are payable on maximum wage ceiling of Rs. 15000/-. The employee can pay at a higher rate and in such case employer is not under any obligation to pay at such higher rate. To pay contribution on higher wages, a joint request from Employee and employer is required [Para 26(6) of EPF Scheme]. In such case employer has to pay administrative charges on the higher wages (wages above 15000/-). For an International Worker, wage ceiling of 15000/- is not applicable.

UNDER EPS

1.      Contribution is payable out of the employer’s share of PF and no contribution is payable by employee.

2.      Pension contribution not to be paid:

3.      When an employee crosses 58 years of age and is in service (EPS membership ceases on completion of 58 years). When an EPS pensioner is drawing Reduced Pension and re-joins as an employee.

In both the cases the Pension Contribution @8.33% is to be added to the Employer Share of PF. (Pension contribution is not to be diverted and total employer share goes to the PF). In case an employee, who is not existing EPF/EP member joins on or after 01-09-2014 with wages above Rs 15000/- In these cases the pension contribution part will be added to employee share, EPF.

In all other cases Pension Contribution is payable. A member joining after 50 years age, if not a pensioner does not have choice of not getting the Pension Contribution on grounds that he will not complete 10 years of eligible service. The social security cover is applicable till he/she is a member.

For International Worker, higher wage ceiling of 15000/- is not applicable from 11-09- 2010.

Note:- In case an existing EPS member (as on 01-09-2014)whose Pension contribution was paid erstwhile EPS wage ceiling of 6500/- contribution to contribution above Rs 15000/- wage ceiling from 01-09-2014 he will have to give a fresh consent  and an amount of 1.16% on wages above 15000/- will have to be contributed by him in pension Fund (A/C No 10) through the employer.

UNDER EDLI:

1.      Contribution to be paid on up to maximum wage ceiling of 15000/- even if PF is paid on higher wages.

2.      Each contribution is to be rounded to nearest rupee. (Example for each employee getting wages above 15000, amount will be 75/-).

3.    EDLI contribution to be paid even if member has crossed 58 years age and pension contribution is not payable. This is to be paid as long as the member is in service and PF is being paid.

Payment of Contribution:

The employer shall, in the first instance, pay both the contribution payable by himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member employed by him directly or by or through a contractor, the contribution payable by such member (in this Scheme referred to as the member's contribution).

In respect of employees employed by or through a contractor, the contractor shall recover the contribution payable by such employee (in this Scheme referred to as the member's contribution) and shall pay to the principal employer the amount of member's contribution so deducted together with an equal amount of contribution (in this Scheme referred to as the employer's contribution) and also administrative charges.

It shall be the responsibility of the principal employer to pay both the contribution payable by him in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor and also administrative charges.

Notwithstanding any contract to the contrary the employer shall not be entitled to deduct the employer's contribution from the wage of a member or otherwise to recover it from him.