To boost the ailing economy and ameliorate the conditions of poor and migrant workers, the Finance Ministry had, on March 26, 2020, announced a relief package of Rs. 1.70 lakh crore under Pradhan Mantri Garib Kalyan Yojana (“PMGKY”). Whilst the detailed breakup or modality was not specified, the Finance Ministry had, during such announcement, declared that the Central Government would be paying the contributions payable by the employer and the employee under the Employees’ Provident Funds and Miscellaneous Provident Act, 1952 (“EPF Act”) for a period of three (3) months.
To implement the aforesaid package, the Ministry of Labour, Government of India, has, vide Office Memo No. C-I/Misc./2020-2021/Vol. II/Pt./6 dated April 9, 2020, approved a scheme with guidelines for implementation of the proposal (“Scheme”). This update provides a brief overview of the Scheme and attempts to clarify some issues which may arise in the implementation of the Scheme.
Scope of the Scheme
Under the Scheme, the Central Government proposes to pay the entire contribution payable under the EPF Act by an employer (12% of wages) and an employee (12% of wages), totalling 24% of the monthly wages for the wage months of March 2020, April 2020 and May 2020.
Who are the Eligible-Establishments?
An establishment, to be covered under the Scheme, would have to fulfil the following conditions:
Who are the Eligible Employees?
An employee to be eligible has to meet the following criteria:
What are the Instructions for availing the Scheme?
To avail the benefit of the Scheme, employers of an eligible establishment has to comply with the following steps:
Apart from the Scheme, EPFO has already come up with an FAQ on the Scheme (“EPFO FAQ”). The following section addresses some of the other Frequently Asked Questions in the context of the Scheme not covered in the FAQ provided by the department:
In terms of Section 2(f) of the EPF Act, an employee would mean any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer, and includes any person —
I) employed by or through a contractor in or in connection with the work of the establishment;
ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment.
Yes. However, in the event the contractor has an independent code, based on the jurisprudence developed, one may be able to argue that such contractor would be deemed to be principal employer vis-à-vis its employees and hence, the employees engaged through such contractor cannot be considered as employees of the principal employer.
In other words, where the contractor has an independent code under the EPF Act, the employer of the establishment would not be required to calculate such person engaged through the contractor towards employees engaged in the establishment.
The threshold of Rs. 15,000 (Rupees Fifteen Thousand) is actually derived from the threshold specified under the EPF Scheme Pension Scheme and EDLI Scheme, for determining if an employee would qualify as an excluded employee under the relevant schemes. If one examines the definition of excluded employee under the schemes, it would be apparent that only if a person’s wages exceeds Rs. 15,000 (Rupees Fifteen Thousand) per month, would such person be treated as excluded employee.
Unfortunately, the drafting of the Scheme specifies eligibility criteria as wages less than Rs. 15,000 (Rupees Fifteen Thousand) per month, and is a departure from the manner in which excluded employees are identified.
The wage is calculated by adding the basic wages, dearness allowance, retaining allowance (an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services) and cash value of any food concession.
To ascertain what constitutes basic wages, one may refer to the decision of Supreme Court in the case of RPFC (II) West Bengal v. Vivekananda Vidyamandir [Civil Appeal No. 6221 of 2011, decided on February 28, 2019], where it was held that where an emolument paid is universally, necessarily and ordinarily paid to all across the board such emoluments would qualify as basic wages, irrespective of the terminology used to denote such payment.
No. If the UAN of the employee is not seeded with his/her Aadhaar, such person may not be entitled to the benefit of the Scheme, despite meeting the wage threshold. Notably, the EPFO FAQ notes that such seeding of UAN with Aadhaar would also be possible during lockdown.
Further, if the employee is a beneficiary of similar other schemes, such employee would not be eligible for the benefit of the Scheme.
The Scheme mentions that for an employee to be eligible under the Scheme, he would have to be a member of the EPF Scheme and Pension Scheme. However, EPFO FAQ seems to have suggested that even an exempted establishment would be entitled to the benefit of the Scheme if the same meets the criteria for an eligible establishment under the Scheme. Considering that members of an exempted establishment would not be required to be a member of the EPF Fund, it appears that even when an employee is not a member of the Fund, such an employee would be entitled to avail the benefit.
This update has been contributed by Arka Majumdar (Partner).Download Pdf
11, 1st Floor, Free Press House
215, Nariman Point
Mumbai – 400021
9 – 10 Bahadur Shah Zafar Marg
Delhi – 110002
68 Nandidurga Road
Bengaluru – 560046
3rd Floor, 27B Camac Street
Kolkata – 700016
Ahmedabad – 380054
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.