Tuesday, November 23, 2010

Acts Linked to Organization

The promulgation of Employees’ State Insurance Act, 1948 envisaged an integrated need based social insurance scheme that would protect the interest of workers in contingencies such as sickness, maternity, temporary or permanent physical disablement, death due to employment injury resulting in loss of wages or earning capacity. the Act also guarantees reasonably good medical care to workers and their immediate dependants.

Following the promulgation of the ESI Act the Central Govt. set up the ESI Corporation to administer the Scheme. The Scheme, thereafter was first implemented at Kanpur and Delhi on 24th February 1952. The Act further absolved the employers of their obligations under the Maternity Benefit Act, 1961 and Workmen’s Compensation Act 1923. The benefit provided to the employees under the Act are also in conformity with ILO conventions.

Provident Fund Act

The Supreme Court has stated in Andhra University v. R.P.F.C. 1985 (51) FLR 605
(SC) that in construing the provisions of the Employees Provident Funds and
Miscellaneous Provisions Act 1952, it has to be borne in mind that it is a beneficent piece
of social welfare legislation aimed at promoting and securing the well-being of the
employees and the court will not adopt a narrow interpretation which will have the effect
of defeating the very object and purpose the Act. The preamble to the Act also states that
this is an Act to provide for the institution of:
(i) Provident Funds
(ii) Pension Fund and
(iii) Deposit Linked Insurance Fund
for employees in factories and other establishments. It is with this background that one must interpret the various provisions of the Act and the Scheme related to it.

The Employees Provident Funds and Miscellaneous Provisions Act 1952 applies to the whole of India except the State of Jammu and Kashmir (Section 2). This Act applies (Section 3) to:
(i) every establishment which is a factory engaged in any industry specified in Schedule I
and in which 20 or more persons are employed, and
(ii) any establishment employing 20 or more persons or class of such establishments
which the Central Government may, by notification in the official gazette specify.
The Central Government through the Employees Provident Fund Scheme 1952 {Section
3 (b)} has specified the establishments covered by the Act.

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 contractor in or in connection with the work of an
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act 1961, or under the standing orders of the establishment.
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.

• “Excluded Employee” has been defined in para 2(f) to mean an employee:
(i) who having been a member of the fund, withdrew the full amount of his
accumulations on retirement or emigration or
(ii) whose pay at the time he is otherwise entitled to become a member of the fund
exceeds Rs. 6,500.00 p.m.
The concept of employment essentially involves three ingredients:
(2) Employee and
(3) Contract of employment
The employment is the contract of service between the employer and the employee
where under the employees agrees to serve the employer subject to his control and
supervision. If there is no relation as employer and employee then it is not open to
anyone claim benefit under the statute. Even if a person is not wholly employed, if he is principally employed in connection with the functioning of the establishment he will be a person employed within the meaning of the Act.


The contribution envisaged under sec 6 read with notification dated 9th April 1997 and para 29 of the EPF Scheme, specifies that the rate of contribution under the E.P.F. Act as 12%. The employer has to deposit 12% of the basic wages, dearness allowance and retaining allowance (if any), on his part and an equivalent amount on behalf of theemployee, which is to be recovered from the employee’ salary (para 32 of EPF Scheme).
• For this section ‘dearness allowance’ shall be deemed to include the cash value of any food concession allowed to the employee. The ‘retaining allowance’ means an allowance payable for the time being to an employee for retaining his services, when the establishment is not working.
• Basic Wage {sec 2(b)}means emoluments which are earned by an employee while on duty or on leave or on holidays with wages. It includes cash value of food concession,
dearness allowance and any presents made by the employer.
• Encashment of leave does not fall under dearness allowance or retaining allowance or basic wages and is not to be considered in computing the amount to be deposited under the EPF Act.

Employees Pension Scheme
1. The Employees Pension Scheme was introduced w.e.f. 16th November 1995.
2. Contributions:
(i) The contribution envisaged under sec 6 is 8.33% of the basic wages, dearness
allowance and retaining allowance (if any) from the employer’s contribution.
{Sec.6A (2)(a)}.
(ii) Ceiling: The contribution of 8.33% has a ceiling of Rs. 541.00 p.m. w.e.f. 1st June
2001. This implies that there is a ceiling on the salary, D.A., and retaining allowance
of Rs. 6,500.00 in computing the contribution towards the pension scheme. {Para 3(2) of the E.P. Scheme}.

(iii) Central Government Contribution: It shall contribute 1.16% of the pay of the
members of the Employees Pension Scheme to the Fund {Para 3(2) of the Employees
Pension Scheme}.

Employees Deposit Linked Insurance Scheme:

This is a scheme to provide life insurance benefits t employees. The employer shall pay 0.5% of the salary comprising of basic wages, dearness allowance and retaining
allowance (if any), subject to a maximum salary of Rs. 6,500.00. In addition he has to
pay 0.01% as administrative charges. In the case of an exempted establishment the
inspection charge is 0.005%. The employee does not contribute to the Employees Deposit Linked Insurance Scheme.

Benefits to Employees

1. The employees are entitled to certain benefits by being members under the E.P.F. Act,
which can be seen to be the following:
(i) Income Tax deduction u/s 88 subject to certain conditions.
(ii) Full refund of P.F. with interest on retirement, resignation, retrenchment or death.
(iii) Partial withdrawal for the purposes of:
(a) Housing
(b) Marriage / Higher Education
(c) Temporary Unemployment
(d) Medical Treatment
(e) Natural Calamity
(f)Purchasing equipments for physically handicapped.
(iv) Partial withdrawal of 90% of the amounts standing to the credit of the member
before one year of retirement.
(v) Under EDLI, an amount equal to the average balance in PF of deceased member
subject to a maximum of Rs. 60,000.00.
(vi) Monthly pension under the Employees Pension Scheme 1995, on superannuation, retirement, permanent / total disablement, for widow / widower, for children, for orphan.
2. An important aspect is that there is a regular saving for the employee and a certain
social security.

No comments:

Post a Comment