Employees Provident Fund Act, 1952 is applicable to whole of India except Jammu & Kashmir.

APPLICABILITY OF THE ACT

It is applicable to:

1. Every factory engaged in any industry specified in Schedule 1 in which 20 or more persons are employed;
2. Every other establishment employing 20 or more persons or class of such establishments which the Central Government may notify
3. Any other establishment so notified by the Central Government even if employing less than 20 persons

Every employee, including the one employed through a contractor (but excluding an apprentice engaged under the Apprentices Act or under the standing orders of the establishment and casual labourers), who is in receipt of wages up to Rs. 6,500 p.m., shall be eligible for becoming a member of the funds.

TYPES OF PROVIDENT FUND

• Statutory Provident Fund (SPF)
• Public Provident Fund (PPF)
• Recognized Provident Fund (RPF)
• Unrecognized Provident Fund (URPF)

Statutory Provident Fund (SPF)

This Fund is mainly meant for Government/University/Educational Institutes (affiliated to university) employees.

Public Provident Fund (PPF)

Any member of the public weather employed or not can invest in PPF. Minimum Contribution in this fund is Rs. 500 & Maximum amount is 1, 50,000 per year. The contributions made to the scheme along with the interests are repayable after 15 years unless extended. The rate of interest, at present, under the scheme is 8% p.a.

Recognized Provident Fund (RPF)

Any person who employees 20 or more employees is under an obligation to register himself under Employees Provident Fund Act,1952. Any person can register himself voluntarily whether they had less than 20 employees.

Unrecognized Provident Fund (URPF)

A scheme started by the employer and the employees in an establishment approved by the commissioner of Income Tax is called an unrecognized provident fund.

PROVIDENT FUND CONTRIBUTION RATE

Contribution of Provident Fund paid by employer and employee is 12% (basic pay + dearness allowance + retaining allowance). Equal contribution is paid by the employer & employee. The establishment with employees less than 20 persons shall be restricted to contribute 10% for both employee & employer contributions.

It is voluntary for the employees who drawn a salary less than 15000 per month to became the member of EPF. The employee who drawn a salary more than 15000 per month at the time of joining is not required to make Provident Fund contribution. If they want to become the member of EPF, then they require approval of the Employer & Assistant PF Commissioner.

BREAKUP OF EMPLOYEES PROVIDENT FUND CONTRIBUTION

• 12% of the employee’s salary goes towards the EPF.
• Whereas the employer’s contribution is divided as below:
  • 67% goes towards contribution for Employees Provident Fund (EPF)
  • 33% goes towards contribution for Employees Pension scheme (EPS)
  • 5% goes towards contribution for Employees Deposit Linked Insurance Scheme (EDLI)
  • 1% goes towards contribution for EPF administration charges
  • 1% goes towards contribution for EDLI administration charges

Therefore, the employer contribution is 13.61%. The premium and management charges are borne by the employer and the maximum limit is 0.5% of Rs.15,000.

UNIVERSAL ACCOUNT NUMBER

It is a 12 digit number allotted to the employee who is contributed to EPF. It remains same throughout the life of the employee. It does not change with the change of Job. It will help in easy transfer and withdrawals of claims. Along with the service of Online Passbook, SMS Service on each deposit of contribution & online KYC update can be provided on the basis of UAN.

RECENT CHANGES IN EMPLOYEES PROVIDENT FUND ACT

Prior to the amendment, every employee had to contribute 12% of his or her basic salary towards EPF as a statutory mandate. An equal contribution was made by the employer too.

But in the union budget 2018, the EPF contribution rate for the newly recruited female employees has been reduced from 12% to 8%. This privilege will be available to the new female employees for the first three years of employment.

The contribution from the employer’s end towards EPF, although, will continue to be at the rate of 12%. Additionally, the government has proposed to contribute 12% of the wages of new employees towards EPF; this is applicable to all the sectors of the economy for the next three years.