Law and You > Labour Laws > The Code on Social Security, 2020 > Employees’ Provident Fund Schemes (Ss. 15 to 23 CSS, 2020)

The Code on Social Security, 2020 aimed to streamline and consolidate various social security laws in India, including those related to provident funds. The code sought to cover a wide range of social security benefits for workers, including provident fund schemes. The Code on Social Security, 2020, aimed to simplify and rationalize the existing social security framework in India, ensuring coverage for all types of workers, including those in the informal sector. It intended to provide universal social security coverage through various schemes, including provident funds, pension schemes, and insurance schemes. In this article let us discuss Employees’ Provident Fund Scheme under the Code on Social Security, 2020.

Kinds of Employees’ Provident Fund Schemes:

According to Section 15(1) of the Code on Social Security, 2020 the Central Government may, by notification—

• frame a scheme to be called the Employees’ Provident Fund Scheme for which the provident funds shall be established under Chapter III of the Code for employees or for any class of employees and specify the establishments or class of establishments to which the said scheme shall apply;
• frame a scheme to be called the Employees’ Pension Scheme for the purpose of providing for—
• superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to which Chapter III of the Code applies;
• widow or widower’s pension, children pension or orphan pension payable to the beneficiaries of such employees; and
• nominee pension;
• frame a scheme to be called the Employees’ Deposit Linked Insurance Scheme for the purpose of providing life insurance benefits to the employees of any establishment or class of establishments to which Chapter III of the Code applies; (d) frame any other scheme or schemes for the purposes of providing social security benefits under this Code to self-employed workers or any other class of persons; and

According to Section 15(1)(e) of the Code on Social Security, 2020 the Central Government may, by notification modify any of the above scheme by adding thereto, amending or varying therein, either prospectively or retrospectively.

According to Section 15(3) of the Code on Social Security, 2020 the schemes may provide that all or any of its provisions shall take effect either prospectively or retrospectively on and from such date as may be specified in that behalf in the scheme.

According to Section 15(2) of the Code on Social Security, 2020 subject to the provisions of Chapter III of the Code, the schemes referred to in clauses (a), (b) and (c) of sub-section (1) may provide for all or any of the matters respectively specified in Part A, Part B and Part C of the Fifth Schedule.

According to Section 16(2) of the Code on Social Security, 2020 the Provident Fund, the Pension Fund and the Insurance Fund shall vest in, and be administered by, the Central Board in such manner as may be specified in the respective schemes.

Employees’ Provident Fund Scheme (EPF):

The Employees’ Provident Fund Scheme is elaborated in Section 16(a) of the Code on Social Security.

• The Central Government may establish Employees’ Provident Fund Scheme.
• It is a mandatory savings scheme for employees in the organized sector. Both employers and employees contribute a certain percentage of the employee’s basic salary and dearness allowance. Contributions accumulate with interest and can be withdrawn upon retirement, resignation, or for specific purposes such as buying a house, medical emergencies, or education.
• According to Section 16(2) of the Code on Social Security, 2020 the Employees’ Provident Fund shall vest in, and be administered by, the Central Board in such manner as may be specified in the respective schemes.

Extent and Mode of Contribution:

• The contributions paid by the employer to the fund shall be ten per cent of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor), and
• The employee’s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten per cent of the wages, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section
• The Central Government, after making inquiry as it deems fit, may, by notification, specify rates of employees’ contributions and the period for which such rates shall apply for any class of employee.
• EPF contributions are tax-deductible up to a certain limit under the Income Tax Act.

Employees’ Pension Scheme (EPS):

The Employees’ Pension Scheme is elaborated in Section 16(b) of the Code on Social Security.

• The Central Government may establish Employees’ Pension Scheme.
• It provides a pension to employees upon retirement, incapacitation, or to survivors after death of employee.
• Contributions are made by the employer, and the pension amount is determined based on the employee’s pensionable service and average monthly salary.
• Employees become eligible for a pension after completing ten years of pensionable service.
• According to Section 16(2) of the Code on Social Security, 2020 the Pension Fund shall vest in, and be administered by, the Central Board in such manner as may be specified in the respective schemes.

Extent and Mode of Contribution:

In the manner specified in that scheme by that Government into which there shall be paid, from time to time, in respect of every employee who is a member of the Pension Scheme,—

• such sums from the employer’s contribution under clause (a) not exceeding eight and one-third per cent of the wages or such per cent of wages as may be notified by the Central Government;
• such sums payable as contribution to the Pension Fund, as may be specified in the Pension Scheme, by the employers of the exempted establishments under section 143 to which the pension scheme applies;
• such sums as the Central Government after due appropriation by Parliament by law in this behalf, specify

Employees’ Deposit Linked Insurance Scheme (EDLI):

The Employees’ Deposit Linked Insurance Scheme is elaborated in Section 16(c) of the Code on Social Security.

• It provides life insurance coverage to EPF members.
• The insurance amount is linked to the EPF balance of the deceased member, subject to certain limits.
• It offers financial protection to the family members of the deceased employee in case of untimely death while in service.
• According to Section 16(2) of the Code on Social Security, 2020 the Insurance Fund shall vest in, and be administered by, the Central Board in such manner as may be specified in the respective schemes.

Extent and Mode of Contribution:

In the manner specified in that scheme by that Government into which there shall be paid by the employer from time to time in respect of every such employee in relation to whom he is the employer, such amount,

• Not being more than one per cent of the wages or such per cent of wages as may be notified by the Central Government for the time being payable in relation to such employee.
• The employer shall pay into the Insurance Fund such further sums of money, not exceeding one-fourth of the contribution which he is required to make under this clause, as the Central Government may, from time to time, determine to meet all the expenses in connection with the administration of the Insurance Scheme other than the expenses towards the cost of any benefits provided by or under the Insurance Scheme.

Salient Features Schemes:

• Accumulation plus interest upon retirement and death
• Partial withdrawals allowed for education, marriage, illness and house construction
• Housing scheme for EPFO members to achieve the Prime Minister’s vision of Housing for all by 2022.

Contribution in Respect of Employees and Contractors:

According to Section 17(1) of the Code on Social Security, 2020 the amount of contribution (that is to say, the employer’s contribution as well as the employee’s contribution in pursuance of any scheme and the employer’s contribution in pursuance of the Insurance Scheme) and any charge for meeting the cost of administering the fund paid or payable by an employer in respect of an employee employed by or through a contractor may be recovered by such employer from the contractor, either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

According to Section 17(2) of the Code on Social Security, 2020 a contractor from whom the amounts mentioned in sub-section (1) may be recovered in respect of any employee employed by or through him may recover from such employee, the employee’s contribution under any scheme by deduction from the wages payable to such employee.

According to Section 17(3) of the Code on Social Security, 2020 notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer’s contribution or the charges referred to in sub-section (1) from the wages payable to an employee employed by or through him or otherwise to recover such contribution or charges from such employee.

Fund to be Recognised under Income-Tax Act, 1961:

According to Section 18 of the Code on Social Security, 2020 for the purposes of the Income-tax Act, 1961, the Provident Fund shall be deemed to be a recognised provident fund within the meaning of clause (38) of section 2 of that Act: Provided that nothing contained in the said Act shall operate to render ineffective any provision of the Provident Fund Scheme (under which the Provident Fund is established) which is repugnant to any of the provisions of that Act or of the rules made thereunder.

Priority of Payment of Contributions over Other Debts:

According to Section 19 of the Code on Social Security, 2020 notwithstanding anything contained in any other law for the time being in force, any amount due under Chapter III of the Code shall be the charge on the assets of the establishment to which it relates and shall be paid in priority in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016.

Chapter Not to Apply to Certain Establishments:

20. (1) This Chapter shall not apply—

• According to Section 20(1)(a) of the Code on Social Security, 2020 shall not apply to any establishment registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State relating to co-operative societies employing less than fifty persons and working without the aid of power; or
• According to Section 20(1)(b) of the Code on Social Security, 2020 shall not apply to any other establishment belonging to or under the control of the Central Government or a State Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits; or
• According to Section 20(1)(c) of the Code on Social Security, 2020 shall not apply to any other establishment set up under any Central or State or any other law for the time being in force and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that law governing such benefits; or
• According to Section 20(1)(d) of the Code on Social Security, 2020 shall not apply to the employees who, immediately before the commencement of this Code, were receiving benefits of Provident Fund under any Central or State enactment.
• According to Section 20(2) of the Code on Social Security, 2020 if the Central Government is of the opinion that having regard to the financial position of any class of establishment or other circumstances of the case, it is necessary or expedient so to do, it may, by notification and subject to such conditions, as may be specified in the notification, exempt, whether prospectively or retrospectively, that class of establishments from the operation of this Chapter for such period as may be specified in the notification.

Authorising Certain Employers to Maintain Provident Fund Accounts:

• According to Section 21(1) of the Code on Social Security, 2020 the Central Government may, on an application made to it in this behalf by the employer and the majority of employees in relation to an establishment employing one hundred or more persons, authorise the employer by an order in writing, to maintain a provident fund account in relation to the establishment, in such manner as may be prescribed by the Central Government and subject to such terms and conditions as may be specified in the Provident Fund Scheme: Provided that no authorisation shall be made under this sub-section if the employer of such establishment had committed any default in the payment of provident fund contribution or had committed any other offence under this Code during the three years immediately preceding the date of such authorisation.
• According to Section 21(2) of the Code on Social Security, 2020 where an establishment is authorised to maintain a provident fund account under sub-section (1), the employer in relation to such establishment shall maintain such account, submit such return, deposit the contribution in such manner, provide for such facilities for inspection, pay such administrative charges, and abide by such other terms and conditions, as may be specified in the Provident Fund Scheme.
• According to Section 21(3) of the Code on Social Security, 2020 any authorisation made under this section may be cancelled by the Central Government by order in writing if the employer fails to comply with any of the terms and conditions of the authorisation or where he commits any offence under any provision of this Code: Provided that before cancelling the authorisation, the Central Government shall give the employer a reasonable opportunity of being heard.

Transfer of Accounts:

According to Section 22 of the Code on Social Security, 2020 where an employee,—

(a) employed in an establishment to which this Chapter applies, relinquishes his employment therefrom and obtains employment in any other establishment to which this Chapter applies or not; or

(b) employed in an establishment to which this Chapter does not apply, relinquishes his employment therefrom and obtains employment in an establishment to which this Chapter applies,

then, his accumulated amount in provident fund account or pension account, as the case may be, shall be transferred or dealt with in the manner as may be specified in the Provident Fund Scheme or the Pension Scheme, as the case may be.

Appeal to Tribunal:

According to Section 23(1) of the Code on Social Security, 2020 any person aggrieved by an order passed by any authority in regard to the following matters may prefer an appeal to the Tribunal constituted by the Central Government, namely:—

(a) determination and assessment of dues under section 125 relating to Chapter III; and

(b) levy of damages under section 128 relating to Chapter III.

According to Section 23(2) of the Code on Social Security, 2020 every appeal under sub-section (1) shall be filed in such form and manner, within such time and accompanied by such fees as may be prescribed by the Central Government.

According to Section 23(3) of the Code on Social Security, 2020 no appeal under clause (a) of sub-section (1) by the employer shall be entertained by the Tribunal unless he has deposited with Social Security Organisation concerned twenty-five per cent. of the amount due from him as determined by an officer under section 125.

According to Section 23(4) of the Code on Social Security, 2020 the Tribunal shall endeavour to decide the appeal within a period of one year from the date on which the appeal has been preferred.

Conclusion:

The Employees’ Provident Fund Organisation (EPFO) administers several crucial social security schemes aimed at providing financial stability and protection to employees in the organized sector in India.

The Employees’ Provident Fund (EPF) scheme serves as a mandatory savings platform where both employers and employees contribute a portion of the employee’s salary, accumulating over time with attractive interest rates. This corpus can be utilized by employees for retirement, housing, medical emergencies, education, or other specified purposes.

The Employees’ Pension Scheme (EPS) complements the EPF scheme by providing a pension to employees upon retirement, incapacitation, or death, ensuring a steady income during post-retirement years.

Additionally, the Employees’ Deposit Linked Insurance Scheme (EDLI) offers life insurance coverage to EPF members, providing financial security to their families in case of the member’s untimely demise.

Moreover, schemes like Atal Pension Yojana (APY) cater to workers in the unorganized sector, offering them an opportunity to build a pension corpus and secure their future post-retirement.

These schemes collectively form an integral part of the Indian social security framework, offering tax benefits, competitive interest rates, and insurance coverage to millions of employees and their families. They play a vital role in promoting financial inclusion, ensuring social security, and fostering a culture of savings among the workforce, contributing to the overall economic well-being of the nation.

Related Topics:

• Board of Trustees of Employees’ Provident Fund  (S. 4 CSS, 2020)
• Employees Provident Fund Organisation (EPFO) (S. 14 CSS, 2020)

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