Sometimes you might be puzzled by deductions on your pay slip. Is a large sum being deducted for my PF? How would I benefit from it? What is my investment? How am I protected by it? We help you understanding the scheme and its functionality better.
Backgrounder How it works Disputes & Settlements Aim The Employees' Provident Fund aims to provide social security and to help employees increase savings, which will benefit workers after they retire, or their family members after their death. To the employers, it helps to ensure a steady workforce, which will increase productivity. It also gives the government a substantial sum for investment.
Applicability The Employees' Provident Fund was established by an Act in 1952. It was originally intended to cover workers in factories with a workforce of over 50 people. It now applies to establishments of more than 20 people, and has been extended to cover a wide range of organisations, specified in Schedule 1 of the Act. It was also extended to cover plantations (tea, coffee, rubber, pepper or cardamom) employing 50 or more workers. The government can also specify establishments to be covered by the Act, which have fewer than 20 employees.
Any business to which this Act applies continues to be covered by it even if the number of workers falls below 20.
The persons employed should be generally required by the establishment for its regular business. The term "employee" means any person who is employed for wages of any kind, paid either directly or indirectly by the employer. It includes casual or temporary workmen, trainees, apprentices etc. Persons taken on briefly for some temporary or emergency work are not included. However if a number of persons are required for the regular work of the establishment, the Act does not cease to apply just because the employment may fall short of a complete year. In fact, if an establishment employs 20 or more people for just one day, it is sufficient condition to ensure the applicability of the Act.
Establishments which are not covered by the conditions of the Act can apply for coverage on a voluntary basis if a majority of employees are in favour. Such establishments are required to comply with the provisions of the Act at par with other covered establishment and cannot opt out of coverage on a subsequent date.
Exemptions Subject to various conditions, the government can grant exemptions to the establishments, which it feels, are providing sufficient pension and gratuity benefits to its employees.
Exemption once granted can be cancelled for contravention of any of the prescribed conditions governing exemption and on such cancellation the establishment would be required to comply with the provisions of statutory schemes. The Act provides for imprisonment upto six months and a fine of Rs 5000 for failure to comply with the conditions under which exemption was granted.
