Employee Provident Fund-(EPF)-Q&A

This writeup aims to address the common day-to-day problems that employees often encounter regarding the EPF and provide solutions to these issues through frequently asked questions (FAQs). It recognizes that employees, as well as HR professionals responsible for managing EPF for their staff and workers, may face various challenges and uncertainties related to EPF rules and procedures.

1. What is the applicability of the EPF Act 1952?

 The EPF Act applies to establishments with 20 or more employees and to employees earning wages up to ₹15,000 per month (as of Jan-2024).

2. Can establishments with less than 20 employees voluntarily opt for EPF coverage?

Yes, establishments with less than 20 employees can voluntarily opt for EPF coverage if they wish to provide retirement benefits and social security to their employees. Refer to Section 1(4) of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

3. What happens if the number of employees in an establishment covered under the EPF Act falls below twenty (20)?

An establishment to which the EPF Act applies shall continue to be governed by the Act, regardless of the number of persons employed therein at any given time. Refer to Section 1(5) of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

4. Is it mandatory for employees to contribute to the EPF scheme?

Yes, both the employer and the employee are required to contribute a specific percentage of the employee’s wages to the EPF scheme as per the EPF Act’s provisions once they are obliged to Govern EPF rules.

5. What does it mean when the EPF Act states that different departments or branches of an establishment shall be treated as parts of the same establishment?

According to the EPF Act, if an establishment consists of different departments or has branches, whether located in the same place or different places, all such departments or branches are considered interconnected and treated as parts of a single establishment. –. Refer to Section 2(A) of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. 

6. Is there any provision for reduced contributions in the EPF Act?

Yes, as per Section 6 of The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. EPF exempted the below industries.

The 10% rate applies to the following:

1. Establishments with less than 20 employees.
2. The Board for Industrial and Financial Reconstruction declared sick industrial companies as such.
3. Establishments with accumulated losses equal to or exceeding their entire  net worth at the end of a   financial year.

4. Establishments in the jute, beedi, brick, coir, and guar gum factory industries.
5. What is Form 5A of EPF used for, and is this an online or offline process?

Form 5A for EPF is a document that acts as a statement of who owns a company. It’s usually given to the EPFO when a company starts using EPF programs for the first time. This form gives details about the people who own, partner with, or direct the company’s activities.

Form 5A Return should be updated as and when there is a change in ownership, name of the establishment, Address, Bank Account, Mobile Number, E-mail, etc.

Submission of Form 5A is an online process. Once the PF code is assigned and registration is completed, employers need to electronically submit Form 5A through their establishment’s login credentials. This Form 5A should be properly endorsed by a digital signature certificate (DSC) or an electronic signature (e-sign).

8. Should all the registers/records under this act be maintained in digital formats?

Indeed, by the directive dated October 31, 2016, numbered CAIU/011(59)2016/MOL, by EPFO, which provides clear instructions, “If an employer or establishment presents registers or records in an electronic format and ensures that they are accessible to the Inspector or Authority for future reference, then that employer or establishment doesn’t need to provide physical printouts or hard copies of these documents.” Consequently, it is required that all employers and establishments adhere to online document maintenance as stipulated by this act.

9. What is the role of Digital Signature Certificates (DSC) in the context of certificates? And how it is useful in EPFO?

Digital Signature Certificates (DSC) serve as the electronic counterpart to physical or paper certificates. Digital Signature Certificates will be employed to digitally validate online claims and electronically verify member information for submitted claims. 

10. What is the purpose of E-Sign?

E-Sign is a digital service accessible on the internet that allows an Aadhaar holder to electronically sign documents. E-SIGN to be registered for non-DSC holder.

11. Can an employer legally stop paying Employees’ Provident Fund (EPF) contributions for an employee who has reached the age of 58?

The employer cannot halt the payment of EPF contributions for an employee who is either 58 or 60 years old. It is a legal obligation for the employer to consistently contribute to the EPF until the employee reaches the age of 60, irrespective of whether the employee has crossed the age of 55 or 60. An exception to this rule arises if the employee is part of the Employees’ Pension Scheme (EPS) and has chosen to opt out of the EPF. In such a situation, the employer has the option to cease EPF contributions after the employee turns 55 years old.

12. Can an employer legally deduct their share of the Employee Provident Fund (EPF) contribution from an employee’s salary?

The answer is no. An employer cannot legally deduct their share of the EPF contribution from an employee’s salary. The EPF Act states that the employer’s share of the EPF contribution is a statutory obligation and cannot be recovered from the employee’s salary.

The employer is required to contribute 12% of the basic salary and dearness allowance of every employee to the EPF account. This contribution is made by the employer, and it is not deducted from the employee’s salary.

If an employer deducts their share of the EPF contribution from an employee’s salary, it is a criminal offense. The employer can be fined up to Rs. 10,000 and/or imprisoned for up to six months as per Sec 14A under offense by Companies.

13. Is the member eligible to receive complete interest on delayed deposits of PF contributions made by the employer?

Employees who are members of the Employees’ Provident Fund (EPF) are entitled to interest on the EPF contributions that are belatedly deposited by their employer.

The interest is calculated on the amount of EPF contribution that was due, but not paid, for each month that it was delayed. The interest is paid to the employee when the employer finally deposits the EPF contribution.

14. Shall the employer incur penal interest under section 7Q and penal damages under section 14B of the Act, respectively for late deposit of contributions?

Section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) states that an employer is liable to pay simple interest at the rate of 12% per annum on any EPF contribution that is belatedly deposited. The interest is calculated on the amount of EPF contribution that was due, but not paid, for each month that it was delayed.

Section 14B of the EPF Act states that an employer is liable to pay damages to the employee for any loss that the employee incurs as a result of the employer’s failure to deposit the EPF contribution on time. The damages are restricted to up to 100% of the amount in arrears.

So, if an employer is late in depositing the EPF contribution, they will be liable to pay both penal interest under Section 7Q and penal damages under Section 14B of the EPF Act.

It’s worth emphasizing that the penal interest and penal damages are separate from the regular interest accumulated on the EPF balance. This implies that if the employer delays the EPF contribution, the employee might be eligible for a substantial sum in terms of interest and damages.

15. The deduction has been made from the employee’s wages, but the employer has not forwarded the payment to the EPF. How can this situation be resolved?

The Employees’ Provident Fund Organization will utilize the punitive measures outlined in the Act to retrieve the outstanding payments from the employer. The EPFO also has the option to file a complaint with the police under sections 406/409 of the Indian Penal Code to initiate action against these employers.

#EPFAct1952 #EmployeeProvidentFund #EPFOIndia #EPFCompliance #EPFRules #ProvidentFund #EPFContribution #EmployerCompliance #EPFRegistration #EPFGuidelines #Form5A #DigitalSignature #EPFODigital #EPFPenalty #LaborLaws #EPFInterest #EPFOPenalties #EPFDeductions #EPFEmployerObligations #SocialSecurity #IndianLaborLaws #EPFODocuments #EPFOESign #EPFAgeLimit #EPFOnline #EPFORegistration #EPFReturns #EPFViolations #EPFOPenalInterest #WorkforceCompliance

———————————–♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠♠————————————