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Unit 10: Provident Fund and Gratuity Payment Acts

Legislation for compulsory institution of contributory provident fund in industrial undertakings Notes
was discussed several times at tripartite meetings in which representatives of the Central and
State governments and of employers and workers took part. A large measure of agreement was
reached on the need for such legislation. A non-official Bill on this subject was introduced in the
Lok Sabha in 1948 to provide for the establishment and grant of provident fund to certain classes
of workers by their employers. The Bill was withdrawn only on an assurance by the government
that it would soon consider the introduction of a comprehensive bill. There was also a persistent
demand that the Central Government extend the benefits of Coal Mines Provident Fund Scheme
to workers employed in other industries. The view that the proposed legislation should be
undertaken was largely endorsed by the Conference of Provincial Labour Ministers' held in
January 1951. On 15th November 1951, the Government of India promulgated the Employees'
Provident Funds Ordinance which came into force on that date. It was subsequently replaced by
the Employees' Provident Funds Act passed on 4th March 1952.
Object of the Act

The Act was passed with a view to making some provision for the future of the industrial
worker after his retirement or for his dependents in case of his early death and of inculcating the
habit of saving among the workers. The object of the Act is to provide substantial security and
timely monetary assistance to industrial employees and their families when they are in distress
and/or unable to meet family and social obligations and to protect them in old age, disablement,
early death of the bread-winner and in some other contingencies.
The Act provides for a scheme for the institution of provident fund for specified classes of
employees. Accordingly, the Employees' Provident Fund Scheme was framed under Section 5 of
the Act, which came into force on 1st November 1952. On a review of the working of the scheme
over the years, it was found that provident fund was no doubt an effective old age and survivorship
benefit; but in the event of the premature death of an employee, the accumulations in the fund
were not adequate enough to render long-term financial protection to his family. This lacuna
led to the introduction of the Employees' Family Pension Scheme with effect from 1st March
1971. The Act was further amended in 1976 with a view to introducing Employees' Deposit
Linked Insurance Scheme, a measure to provide an insurance cover to the members of the
provident fund in covered establishments without the payment of any premium by these
members. Thus, three schemes have been framed under the Employees' Provident Funds and
Miscellaneous Provisions Act.

Applicability of the Act

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is applicable from the
date of functioning or date of set-up of establishments, provided the factory/establishment
employed twenty or more persons. The Act, however, does not apply to co-operative societies
employing less than 50 persons and working without the aid of power. The Central Government
is empowered to apply the provisions of this Act to any establishment employing less than 20
persons after giving not less than two months' notice of its intention to do so by a notification in
the Official Gazette. Once the Act is applied, it does not cease to be applicable, even if the number
of employees falls below 20. An establishment/factory, which is not otherwise coverable under
the Act, can be covered voluntarily with the mutual consent of the Act.

Employees Entitled

Every employee, including the one employed through a contractor, who is in receipt of wages
up to 6500/- p.m. shall be eligible for becoming a member of the funds.

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