Employees’ Provident Fund (EPF) Under the Social Security Code, 2020
Social Security & Welfare › EPF
1. Introduction
The Employees’ Provident Fund (EPF) is one of India’s most trusted long-term savings mechanisms for workers. Under the Social Security Code, 2020, EPF provisions have been consolidated, refined, and given a more transparent structure. Instead of being governed by a standalone Act, EPF now forms a substantial part of Chapter 3 (Sections 15–43) of the Social Security Code.
This restructuring aims to make PF coverage wider, compliance simpler, and worker savings more predictable. The government’s intention is clear: formalize the workforce and ensure every eligible employee has a secure financial cushion for retirement and emergencies.
Hindi insight:
EPF अब एक統ित और आधुनिक framework में शामिल है, ताकि हर कर्मचारी को भविष्य के लिए सुरक्षित बचत मिल सके।
2. Why EPF Was Folded Into the Social Security Code
The earlier Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 was strong, but it existed in a silo. Employers had to navigate multiple Acts for PF, ESI, gratuity, and other benefits, often resulting in confusion and misinterpretation.
By merging EPF into the Social Security Code, the government brought all social security-related benefits under one umbrella. This makes compliance smoother and significantly reduces disputes arising from differing definitions across multiple laws.
More importantly, the Code ensures that EPF interacts seamlessly with other benefits such as gratuity, compensation, and maternity payments, because all are grounded in the same wage definition.
3. Applicability of EPF Under the Code (Chapter 3, Section 20)
EPF applies to:
- Every establishment with 20 or more employees, or
- Any class of establishments notified by the government
Additionally, establishments with fewer than 20 employees may voluntarily opt-in, and once covered, they must follow the EPF rules consistently.
A key feature retained under the Code is the principle of “once covered, always covered”, meaning an establishment cannot withdraw from EPF simply because its employee strength dips temporarily.
Hindi explanation:
अगर किसी कंपनी में 20 या उससे अधिक कर्मचारी हैं, तो PF लागू होगा। एक बार लागू होने के बाद यह बंद नहीं किया जा सकता, भले ही संख्या घट जाए।
4. Composition of the PF System (Chapter 3, Sections 16–19)
The Code continues the well-established three-part structure:
- Provident Fund Scheme – long-term savings contributed by both employer and employee.
- Pension Scheme – monthly pension after retirement, sourced primarily from employer contributions.
- Deposit-Linked Insurance Scheme (EDLI) – insurance benefit to the employee’s family in case of death during service.
This triad ensures a blend of savings, security, and social insurance. By consolidating these under Chapter 3, the Code enhances administrative consistency and makes EPF more robust.
5. Contribution Structure (Section 22)
The contribution rules remain largely in line with earlier law:
- Employee contribution: typically 12% of wages
- Employer contribution: 12% of wages
- Out of the employer’s contribution, a portion gets diverted to the Pension Scheme.
However, under the new wage definition (Basic + DA ≥ 50% of total wages), contribution bases may increase for many employees. This naturally increases PF savings and strengthens long-term financial security.
Workers benefit the most, particularly those whose previous salary structures kept basic wages artificially low.
6. EPF and the New Wage Definition
One of the most significant changes introduced by the Social Security Code is the standardized wage definition. Since EPF contributions depend directly on “wages,” this reform has far-reaching implications.
For example, if an employee earns ₹35,000 per month but earlier had only ₹9,000 as basic pay, EPF used to be calculated on that ₹9,000. Under the Code, Basic + DA must be at least 50% of ₹35,000, which means ₹17,500 becomes the minimum wage base.
The impact is immediate:
EPF savings nearly double, and long-term retirement funds strengthen considerably.
Hindi:
नई वेतन परिभाषा PF को और मजबूत बनाती है क्योंकि मूल वेतन अब न्यूनतम 50% होगा, जिससे अधिक बचत सुनिश्चित होती है।
7. Administration by the Central Board (Sections 15–19)
The Code continues with a powerful, autonomous administrative structure through the Central Board of Trustees, which manages:
- PF collections
- Investments
- Payouts
- Interest declarations
- Audits
- Pension management
This governance framework is essential given the massive size of India’s PF corpus, one of the largest retirement savings pools in the world.
8. Withdrawals Under EPF (Section 23 & Scheme Rules)
Though the specifics of withdrawals are governed by the PF Scheme (carried forward into the Code), the Social Security Code reinforces the intent behind EPF: to serve as both a retirement fund and emergency support system.
Employees can withdraw:
- Partially for medical emergencies
- For housing purposes
- For marriage or education of children
- During unemployment (up to 75%)
- Fully at retirement
- Fully in case of permanent disablement
The Code preserves all these provisions while offering a unified legal foundation.
9. Impact on Employers
For employers, the Social Security Code introduces both clarity and responsibility. On the positive side, having a unified definition of wage removes confusion and potential disputes. Digital compliance and record-keeping requirements also simplify interactions with regulators.
However, many employers will see an increase in payroll cost because allowable allowances are capped at 50%, increasing mandatory contributions to PF. This is especially significant in industries that traditionally structured salaries with very low basic pay.
Still, the long-term benefits include fewer legal disputes, smoother audits, and a more compliant HR system.
10. Impact on Employees
Employees stand to gain significantly:
- Higher PF savings over their entire career
- Higher pension contributions
- Increased insurance coverage under EDLI
- Better transparency in contributions
- Stronger protection in case of disputes
- A more predictable retirement corpus
This strengthened social security foundation reduces financial risk during retirement and provides greater stability in emergencies.
11. Penalties for Non-Compliance (Chapter 12, Sections 135–142)
Non-payment or delayed payment of PF is treated as a serious offence under the Code.
Employers who default may face:
- Heavy financial penalties
- Interest on delayed payments
- Potential prosecution for willful or repeated defaults
The new penalty structure is graded, ensuring fairness while maintaining strict accountability.
12. Frequently Asked Questions (With Legal Link References)
FAQ 1: Is PF compulsory for all employees?
Yes. All eligible employees of covered establishments must be enrolled.
(Relevant: Chapter 3, Section 20)
FAQ 2: Can employees opt out of PF?
Only in very limited cases (e.g., if they joined with PF already in earlier job).
(Relevant: PF Scheme rules under Section 22)
FAQ 3: Does the Code change the PF interest rate?
No. Interest rates are still declared annually by the Central Board.
(Relevant: Section 17)
FAQ 4: Will my take-home salary reduce due to new wage rules?
Possibly yes, but the increase goes directly into your own retirement savings, not to the employer.
(Relevant: Wage definition under Section 2(y))
FAQ 5: What happens if my employer doesn’t deposit PF?
It is a punishable offence, and authorities can recover dues with penalties.
(Relevant: Chapter 12, Section 138)
13. Conclusion
EPF remains one of the strongest pillars of India’s social security ecosystem, and the Social Security Code, 2020 makes it even more reliable by modernizing definitions, consolidating schemes, and ensuring broader coverage. With the new wage structure, transparent administration, and a clear legal framework under Chapter 3, EPF is now positioned to offer stronger financial protection to millions of Indian workers.
For employees, this means a more secure future.
For employers, this means clearer compliance and reduced uncertainty.
EPF’s integration into the Social Security Code is not just a technical update — it is a long-term investment in the country’s workforce.
