Employee Provident Fund Act
Employee Provident Fund Act The Act was amended by the Ministry of Labor and Employment in effect from 1st September 2014. It made several amendments to the schemes formulated under the act. There has been an evident enhancement in the applicability, scope and benefits of the Employee Provident Fund Act due to amendments proposed in Provident fund Scheme, Pension Scheme and Insurance Scheme by Government of India made by the Union Minister of Finance in his Union Budget Speech (FY 2014-2015).
The major change brought about an increased liability on the employers who shall now be responsible for the enrolment of additional eligible employees and will undertake the duty tocontributetowardsthe increased statutory wage ceiling. The major amendments proposed are the eligibility limit for membership to the Provident Fund Scheme, the increase in the cap on employee-employer contribution, exclusion of new employees from having monthly pay more than Rs.15000, the option of contributing pension based on a higher salary, and more.
The objective of the amendment lies in the fact that it was a long due amendment that last revised the monthly income limits for Provident Fund Act in the year 2001. With regard to the growth rate concerning salaries and wages in the past 15 years, the next revision should also not be very far. PRODUCT LIABILITY 2019
The changes are consequential as an increase in the cap for eligibility to pay results in an increase in provident fund contribution and insurance schemes too.
The nature of changes brought about under the scheme can be summarised as under:
- Under the Provident Fund Scheme amending the definition of the term given in the clause 2 (f), “excluded employee” now excludes the members drawing wages that exceed Rs.15000 per month from the scope of provisions of the Provident Fund Scheme. Hence, the wage ceiling for an employee for eligibility to a Provident Fund Scheme has substantially increased from Rs.6500 per month to Rs.15000 per month.
Interestingly, this ceiling does not apply to “international workers”. Although, the “international workers” of countries whom India has not executed a social security agreement and working for a covered establishment in India are required to become a member of the Provident Fund Scheme irrespective of the number of their monthly payments.
· Under the Insurance Scheme, the calculation of contribution payable per month shall be on Rs.15000, not Rs.6500 as was given in clause 26 (A) of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. Secondly, in case of the death of a member operating from the effect from the date of amendment or after the amendment, there has been an increment of 20% for the available assurance benefits. This Increment in assurance benefits is in addition to the existing provisions for admissible assurance benefits.
- Under the Pension Scheme due to the Provident Fund Scheme, which increased the wage ceiling to Rs15000/-, a new employee who shall join from the commencement of the amendment or after that shall not be eligible for a voluntary contribution to the Pension Scheme. The provision is only for a new employee and the old employees shall continue to contribute 8.33% of their monthly payments. There is a clear revision with the increment in the ceiling for maximum pensionable salary for determination of monthly pension. The minimum pension that would be paid to any existing or future member will be Rs1000/- from the financial year 2014-2015.
- Another amendment has been that the duration of the contribution period of the pensionable salary shall be calculated on the average monthly pay of 60 months that was 12 months before the amendment.
The impact of amendments is twofold, as now there is coverage of more employees and secondly, there is a higher contribution that may be payable for each employee. Only time would tell the effectiveness of the proposed amendments.
 The Employees Provident Funds Scheme, 1952
 The Employees Pension Scheme, 1995
 The Employees Deposit-linked Insurance Scheme, 1976