Section 10: EPF Contributions by Employer and Employee

Overview

Section 10 of the Code on Social Security, 2020 deals with the Employees’ Provident Fund (EPF), a crucial social security benefit for employees in India. The EPF is a retirement savings scheme designed to provide financial security to employees after they retire or leave employment. It operates on a contribution basis, with both the employer and employee contributing a specified percentage of the employee’s wages.

Who is Covered?

• Generally, the EPF scheme covers establishments employing 20 or more persons. However, the Code allows for voluntary coverage of establishments with fewer than 20 employees.
• All employees drawing wages up to a certain limit (as notified by the government) are eligible. The wage ceiling is subject to change, so it’s important to refer to the latest notifications.
• Eligibility isn’t typically tied to length of service, though certain benefits within the EPF scheme may have service-related requirements.

Benefits and Contributions

• Benefit to the Employee: The primary benefit is a lump-sum retirement fund accumulated through regular contributions and interest earned. Employees also benefit from insurance cover under the Employees’ Deposit Linked Insurance (EDLI) scheme.
• Employer Contribution: Employers are required to contribute a specified percentage of the employee’s wages to the EPF. The exact percentage is determined by the government and may be subject to change.
• Employee Contribution: Employees are also required to contribute a specified percentage of their wages to the EPF. This contribution is deducted from their salary.
• Government Contribution: The Code allows for government contributions in certain circumstances, such as providing financial assistance to establishments facing economic hardship or supporting specific schemes.

Procedure and Compliance

Contributions are typically made monthly through designated channels. Employers must register with the EPF organization and obtain a unique establishment code. Here’s a simplified process:

1. Registration: Employers register their establishments with the EPF organization.
2. Wage Calculation: Wages are calculated as per the provisions of the Payment of Wages Act, 1936, and any subsequent amendments.
3. Contribution Calculation: The employer and employee contributions are calculated based on the calculated wages and the prescribed percentages.
4. Deposit: Contributions are deposited with the EPF organization electronically through designated payment gateways.
5. Filing Returns: Employers are required to file regular returns detailing the contributions made and employee details.

Practical Examples

• Example 1: Employee Eligibility – Ramesh works at a company with over 20 employees and earns a monthly wage below the prescribed limit. He is automatically eligible for EPF membership and both he and his employer must contribute to the fund.
• Example 2: Employer Non-Compliance – A company fails to deposit the EPF contributions deducted from its employees’ salaries for three consecutive months. This constitutes a violation of the Code and can lead to penalties, including interest charges and legal action.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. Laws and regulations are subject to change, and it is recommended to consult with a legal professional for specific guidance.