Unit no 3

Bonus is a reward that is paid to an employee for his good work towards the organisation. The
basic objective to give bonus is to share the profit earned by the organisation amongst the
employees and staff members. In India there is a principle law relating to this procedure of
payment of bonus to the employees and that principle law is named as Payment of Bonus Act,
1965.

The Payment of Bonus Act applies to every factory and establishment employing not less than
20 persons on any day during the accounting year. The establishments covered under the Act
shall continue to pay bonus even if the number of employees fall below 20 subsequently.

Eligibility: Every employee not drawing salary/wages beyond Rs. 10,000 per month who has
worked for not less than 30 days in an accounting year, shall be eligible for bonus for minimum
of 8.33% of the salary/wages even if there is loss in the establishment whereas a maximum of
20% of the employee’s salary/wages is payable as bonus in an accounting year. However, in
case of the employees whose salary/wages range between Rs. 3500 to Rs. 10,000 per month
for the purpose of payment of bonus, their salaries/wages would be deemed to be Rs. 3500.

There are provisions and benefits for newly formed establishments as well. As per these
provisions/benefits, the first five accounting years following the accounting year in which the
employer sells goods/renders services, bonus is payable only in respect of the accounting year,
in which profits are made but the provisions of set on and set off would not apply.

Applicability: The Act is applicable in whole of India where 10 or more workers are working, or
were working on any day of the preceding 12 months with the aid of power. Or whereon 20 or
more workers are working or were working on any day of preceding 12 months without the aid
of power.

Calculation of bonus: Salary/wages and dearness allowance (DA) are included while
calculating bonus. However, other allowances such as over-time, house rent, incentive or
commission are not included.

Forfeiture of Bonus: An employee who is dismissed from service on the grounds of fraud,
riotous or violent behaviour at the premises of the establishment or for the theft,
misappropriation or sabotage of any of the property of the establishment as mentioned in the
Act. This shall not only disqualify him from receiving the bonus for the accounting year in which
he was dismissed but also for the past years which were remained unpaid to him.

Time limit for payment of bonus: It is mentioned in the Act that all amounts payable to an
employee by the way of bonus are to be paid in cash. It is also mentioned that within 8 months
from the close of the accounting year the bonus should be paid to the employees. In exception
to where there is dispute regarding payment of bonus pending before an authority (Under
Industrial Disputes Act) within 1 month from the date on which the award becomes enforceable
or settlement comes into operation, in respect of such dispute.

There is a proposed amendment in the Payment of Bonus Act in the year 2010, but which is still
under proposal and has not come into force. The amendment bill is known as “The Payment of
Bonus (Amendment) Bill, 2010” and will come into force on a date when Central Government
may notify it by official gazette.

ayment of Bonus Act- Payment of Bonus

under The Payment of Bonus Act ,1965
The payment of Bonus Act provides for payment of bonus to
persons employed in certain establishments of the basis of profits or
on the basis of production or productivity and for matters connected
therewith.

It extends to the whole of India and is applicable to every factory

and to every other establishment where 20 or more workmen are
employed on any day during an accounting year
Eligibility For Bonus
Every employee receiving salary or wages upto RS. 3,500 p.m. and
engaged in any kind of work whether skilled, unskilled, managerial,
supervisory etc. is entitled to bonus for every accounting year if he
has worked for at least 30 working days in that year.

However employees of L.I.C., Universities and Educational

institutions, Hospitals, Chamber of Commerce, R.B.I., IFCI, U.T.I.
Social Welfare institutions are not entitled to bonus under this Act.

DISQUALIFICATION FOR BONUS

Notwithstanding anything contained in the act, an employee shall be

disqualified from receiving bonus, if he is dismissed from service for
fraud or riotous or violent behaviour while in the premises of the
establishment or theft, misappropriation or sabotage of any
property of the establishment.
 Minimum/Maximum Bonus Payable
MINIMUM BONUS

1. The minimum bonus which an employer is required to pay even if

he suffers losses during the accounting year or there is no allocable
surplus is 8.33 % of the salary or wages during the accounting year,
or
2. Rs. 100 in case of employees above 15 years and Rs 60 in case of
employees below 15 years, at the beginning of the accounting year,

whichever is higher
MAXIMUM BONUS

If in an accounting year, the allocable surplus, calculated after

taking into account the amount ‘set on’ or the amount ‘set of’
exceeds the minimum bonus, the employer should pay bonus in
proportion to the salary or wages earned by the employee in that
accounting year subject to a maximum of 20% of such salary or
wages.

TIME LIMIT FOR PAYMENT

The bonus should be paid in cash within 8 months from the close of
the accounting year or within one month from the date of
enforcement of the award or coming into operation of a settlement
following an industrial dispute regarding payment of bonus.

However if there is sufficient cause extension may be applied for.

Calculation of Bonus
The method for calculation of annual bouns is as follow:

1. Calculate the gross profit profit in the manner specified in-

i. First Schedule, in case of a banking company, or
ii. Second Schedule, in any other case.
2. Calculate the Available Surplus.

Available Surplus = A+B, where A = Gross Profit – Depreciation

admissible u/s 32 of the Income tax Act - Development allowance -
Direct taxes payable for the accounting year (calculated as per
Sec.7) – Sums specified in the Third Schedule.

B = Direct Taxes (calculated as per Sec. 7) in respect of gross

profits for the immediately preceding accounting year – Direct Taxes
in respect of such gross profits as reduced by the amount of bonus,
for the immediately preceding accounting year.

3. Calculate Allocable Surplus

Allocable Surplus = 60% of Available Surplus, 67% in case of foreign

companies.

4. Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the

amount of bonus in respect of an accounting year, allocable surplus
is computed after considering the amount of set on and set offf from
the previous years, as illustrated in Fourth Schedule.
5. The allocable surplus so computed is distributed amongst the
employees in proportion to salary or wages received by them during
the relevant accounting year.

In case of an employee receiving salary or wages above Rs. 2,500 the

bonus payable is to be calculated as if the salary or wages were Rs.
2,500 p.m. only.
Duties/Rights of Employer
DUTIES

1. To calculate and pay the annual bonus as required under the Act
2. To submit an annul return of bonus paid to employees during the
year, in Form D, to the Inspector, within 30 days of the expiry of
the time limit specified for payment of bonus.
3. To co-operate with the Inspector, produce before him the
registers/records maintained, and such other information as may be
required by them.
4. To get his account audited as per the directions of a Labour
Court/Tribunal or of any such other authority.

RIGHTS

An employer has the following rights:

1. Right to forfeit bonus of an employee, who has been dismissed from

service for fraud, riotous or violent behaviour, or theft,
misappropriation or sabotage of any property of the establishment.
2. Right to make permissible deductions from the bonus payable to an
employee, such as, festival/interim bonus paid and financial loss
caused by misconduct of the employee.
3. Right to refer any disputes relating to application or interpretation of
any provision of the Act, to the Labour Court or Labour Tribunal.

Rights of Employees

1. Right to claim bonus payable under the Act and to make an

application to the Government, for the recovery of bonus due and
unpaid, within one year of its becoming due.
2. Right to refer any dispute to the Labour Court/Tribunal Employees,
to whom the Payment of Bonus Act does not apply, cannot raise a
dispute regarding bonus under the Industrial Disputes Act.
3. Right to seek clarification and obtain information, on any item in the
accounts of the establishment.
 Recovery of Bonus Due

1. Where any bonus is due to an employee by way of bonus, employee

or any other person authorised by him can make an application to
the appropriate government for recovery of the money due.
2. If the government is satisfied that money is due to an employee by
way of bonus, it shall issue a certificate for that amount to the
collector who then recovers the money.
3. Such application shall be made within one year from the date on
which the money became due to the employee.
4. However the application may be entertained after a year if the
applicant shows that there was sufficient cause for not making the
application within time.

Offences and Penalties

For contravention of the provisions of the Act or rules the penalty is
imprisonment upto 6 months, or fine up to Rs.1000, or both.

For failure to comply with the directions or requisitions made the

penalty is imprisonment upto 6 months, or fine up to Rs.1000, or
both.

In case of offences by companies, firms, body corporate or

association of individuals, its director, partner or a principal officer
responsible for the conduct of its business, as the case may be,
shall be deemed to be guilty of that offence and punished
accordingly, unless the person concerned proves that the offence
was committed without his knowledge or that he exercised all due
diligence

Find a Lawyer
Name
 Message
Email
City
Submit

Search Legal Articles by Area of Practice

 Business Law
 Govt. Agencies and Taxation
 Family Law
 Real Estate, Wills, Probate and Trust
 Immigration, Appeal and Others
 Civil Litigation and Others
 Employment, Criminal and Labour
o How the Law will take its course in Sheena Bora Murder Mystery
o Adulteration of Drugs
o Adulteration of Food or Drink Intended For Sale
o Adultery
o All about filing a Complaint and lodging FIR’s
o More
 Recent Judgments
 National & Social

2
ET ON AND SET OFF OF ALLOCABLE SURPLUS: (1) Where for any
accounting year, the allocable surplus exceeds the amount of maximum bonus
payable to the employees in the establishment under sec.11,then the excess
shall, subject to a limit of 20 percent of the total salary or a wage of the
employees employed in the establishment in that accounting year, be carried
forward for being set on in the succeeding accounting year and so on up to an
inclusive of the 4th accounting year to be utilized for the purpose of payment
of bonus in the fourth schedule. (2) Where for any accounting year, there is no
available surplus or allocable surplus in respect of that year falls short of the
amount of minimum bonus payable to the employees in establishment under
sec.10, and there is no amount or sufficient amount carried forward and set on
under sub-sec.(1) which could be utilized for the purpose of payment of the
minimum bonus, then, such minimum amount or the deficiency, as case may
be, shall be carried forward for being set off in the succeeding accounting year
and so on up to and inclusive of the forth accounting year in the manner
illustrated in the forth schedule. (3) The principle of set on and set off as
illustrated in the forth schedule shall apply to all other cases not coved by sub-
sec.(1) or sub-sec. (2) for the purpose of payment of bonus under this act. (4)
Where in any accounting year any amount has been carried forward and set on
or set off under this section, then in calculating bonus for the succeeding
accounting year, the amount of set on or set off carried forward from the
earliest accounting year shall first be taken into account. read more at:
https://www.citehr.com/451515-meaning-set-set-off-payment-bonus-act.html

eductions from Wages

Section 7 of the Payment of Wages Act, 1936, outlines the deductions
from wages permitted under the Act. An employer cannot make
deductions of any kind except those specified under the Act. In this
article, we will take a look at these rules pertaining to deductions from
wages.
 Source: Pixabay

Section 7 – Deductions from Wages

Notwithstanding the provisions of the Railways Act, 1989 (24 of 1989),
an employer must pay the wages of an employed person without
deductions of any kind except those specified under the Payment of
Wages Act, 1936. A deduction can be made only in the following
manner.
1. Fines (explained in Section 8)

2. Absence from duty (explained in Section 9)

3. Damage to or loss of goods expressly entrusted in the

employed person (explained in Section 10)

4. House-accommodation or other amenities or services that

the employer provides (explained in Section 11).
It is important to note that the term ‘services‘ does not imply the supply
of tools and also the raw materials required for fulfilling the job.

5. Recovery of Advances (explained in Section 12)

a. The recovery of loans made from any fund constituted

for labor welfare
b. Also, the recovery of loans granted for house-building or other
purposes
Additionally,

 The income tax that the employed person is liable to pay

 Any deduction under the order of the court or any other
competent authority
 Provident fund – subscription and also the repayment of advances
 Payments that the employee makes to cooperative societies
 Payment of premium of the life insurance policy to the Life
Insurance Corporation of India, of the employed person. Further,
this requires written authorization from the person employed.
 Payment of the contribution of the employed person towards any
fund that the employer or the trade union constitutes. This also
requires written authorization from the person employed.
 Payment of the fees for the membership of any trade union
registered under the Trade Union Act, 1926. Also, this requires
written authorization from the person employed as well.
 The payment of insurance premium on Fidelity Guarantee Bonds
 Recovery of losses which the railway administration sustains on
account of the employed person accepting counterfeit coins or
mutilated or forged currency notes.
 If the railway administration sustains losses due to the employed
person failing to invoice or bill or collect or account for the
appropriate charges, then the losses are recovered as deductions.
 Recovery of losses which the railway administration sustains on
account of the employed person incorrectly granting any rebates or
refunds
 A contribution that the employed person makes to the Prime
Minister’s National Relief Fund or any similar Fund which is notified
in the Official Gazette. Further, this needs written authorization
from the person employed.
 A contribution to an insurance scheme that the Central Government
may make for its employees

Limit on Deductions
As per Section 7(3) of the Payment of Wages Act, 1936, the total
amount of deductions cannot exceed:
 1. 75 percent of the wages when the deductions are wholly or partly
for payments to cooperative societies.
2. 50 percent of the wages in every other case

'Authorized Deductions' under the Payment of Wages Act, 1936 | Labor Law

Introduction -

The Payment of Wages Act 1936 is one of the most important labor welfare legislation which helps

to prevent exploitation of the labors. The Act allows deductions which can be made from the wages payable

to a worker. Section 7(3) of the Act lays down that the total amount of deduction which may be made

under subsection (2) in any wage period from the wages of any employed person shall not exceed - (1) In

case where such deductions are wholly or partly made for payment to the co-operative societies, 75% of

such a wages, and (2) In other cases, 50% of such wages. But any loss of wages the resulting from the

following imposition shall not be deemed to be deductions, namely -

(i) the withholding of increment or promotion (including stoppage of increment at efficiency bar);

(ii) the reduction to lower post or time scale or to a lower stage in scale; or

(iii) suspension, provided by the rules framed by the employer for the imposition of such penalty are in

conformity with the rules framed by the State Government in this behalf.

Authorized deductions :

The list is exhaustive and no other deduction from wages is permissible. The act allows the

following deductions -

(a) Fines -

Section 7(2) (a) of the said Act authorizes deduction by way of fines. Section 8 Lays down the rules
for the imposition of such fines. Section 8 says that "no fine shall be imposed on any employed person save

in respect of such acts and omissions on his part, as the employee has specified by notice.

(b) Deductions for absence from duty -

Section 7(2) (b) of the Act permits deductions for absence from duty. The Authorizes the employer

to make deduction for absence from duty. Such a deduction can be made only on account of the absence of

an employed person from the place or places, where according to the terms of employment he is required to

work, if he, though present in person refused to carry out his work in pursuance of a stay in strike or any

other cause which is not reasonable in the circumstances. Similarly, tool down strike without any Just Cause

amounts to absence from duty.

(c) Deductions for damage to or loss of goods -

The act also authorizes the employer to effect deductions for damage to or loss of goods. According

to Section 7(2) (c) If any money or goods entrusted to the employee is lost by his negligence or default, the

employer is entitled to deduct such loss.

See also...Methods of settlement of Industrial Disputes

(d) Deductions for services rendered -

According to Section (2) (d) The Act authorizes the employer to make deductions for house
accommodation supplied by the government or any housing board set up under any law for the time being

in force (whether the government or the board is the employer or not) or any other authority engaged in the

business of subsidising house-accommodation which may be specified in this behalf by the State

Government by notification in the Official Gazette.

(e) Deductions for amenities services -

Section 7(2)(e) The deductions may also be made for such amenities and services supplied by the

employer as the State Government or the authorized person in this behalf authorities the employer to

provide amenities or services. The word services for the above purpose does not include the supply of tools

and raw material required for the purpose of employment.

(f) Deductions for recovery of advances -

Section 7(2)(f) The Act authorizes the employer to make deductions for the advances made by him.

(including advances for traveling allowance or conveyance allowance)

(ff) Deductions for recovery of loans -

Section 7(2)(ff) The employer may make deduction for the recovery of loans together with interest

made from any fund constituted for the welfare of labor in accordance with the rules approved by the State

Government in this regard.

(fff) Deductions for recovery of loans granted for house-building -

Section 7(2)(fff) the deductions are also permitted to be made for the recovery of loans and interest
granted for house-building or other purposes in accordance with the rules approved by the State

Government.

(g) Deductions of income-tax payable by the employed person -

Section 7(2)(g) of the said Act permits an employer to make this deduction subject to the provisions

of the Income Tax Act.

Unit 2

he payment of Gratuity Act, came into existence on 21st August, 1972. The Act applied
to only certain establishments prior to its amendment. The gratuity was paid to persons
who are covered within the meaning of the term ‘employee’ under section 2(e) of the
Act, subject to the conditions mentioned in Section 4 of the Payment of Gratuity Act,
1972.

Under section 2(e) of the Act of 1972 the term ‘employee’ is defined as:
"employee" means any person (other than an apprentice) employed on wages, in any
establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do
any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work,
whether the terms of such employment are express or implied, and whether or not such
person is employed in a managerial or administrative capacity, but does not include any
such person who holds a post under the Central Government or a State Government
and is governed by any other Act or by any rules providing for payment of gratuity.

According to this definition the service of a teacher does not come under the category
of an employee to get gratuity. The dispute of payment of gratuity to the teachers is
very old in relation to claiming to be employees within the definition of the Act.

This issue was decided by the Supreme Court in the case A. Sundarambal vs. Govt. of
Goa and Daman & Diu [1988(4) SCC 42]. It was held that the work of the teacher is to
impart education; they are not covered within the definition of ‘employee’ as they are
not doing skilled, semi-skilled and unskilled work. They have been denied gratuity on
this ground.
In Ahmadabad Private Primary Teacher’s Associates vs. Administrative Officer and
Others [AIR 2004 SC 1426]. The Supreme Court again ruled that teachers are not
entitled to gratuity as they are not covered under the definition of ‘employee’ as given
under section 2(e) of the Act.

Keeping in mind the several decisions of the Hon’ble Supreme Court and keeping in
mind the interest of the teachers the Central Government of India decided to redress
the disputes. Accordingly, the Act was amended on 31.12.2009 with effect from
3.04.1997 which specified an education institution, as an establishment under the act,
in which 10 or more persons are employed on or were employed on any date preceding
12 months as a class of establishment to which the said act shall apply with effect from
the date of publication of the notification of the Act.

The amended definition of ‘employee’ is defined as;

“employee” means any person (other than an apprentice) who is employed for wages,
whether the terms of such employment are express or implied, in any kind of work,
manual or otherwise, in or in connection with the work of a factory, mine, oilfield,
plantation, port, railway company, shop or other establishment, to which this Act
applies, but does not include any such person who holds a post under the Central
Government or a State Government and is governed by any other Act or by any rules
providing for payment of gratuity.

In the present definition, the nature of work includes any kind of work, manual or
otherwise in or in connection with the establishment to which the Act applies. Therefore
the teachers are covered within the definition of ‘employee’ under section 2(e) of the
amended Act.

Under section 4(1) of the Act, gratuity shall be payable to an employee on the
termination of his employment after he has rendered continuous service for not less
than five years-

● On his superannuation, or

● On his retirement or resignation, or

● On his death or disablement due to accident or disease.

Therefore any person to be called an employee under the act must satisfy the definition
of ‘employee’ given under section 2(e) and must fulfill the condition i.e. continuous
service for not less than five years on the date of termination of his service as provided
under section 4(1) of the Act.

For computation of gratuity amount, the service period as a teacher should be taken
into account from 3.04.1997 because the service period completed by teachers before
3.04.1997 excludes them from the definition of an employee. Therefore, services
rendered by the teachers prior to 3.04.1997 shall be treated as services rendered as a
non-employee for the purpose of gratuity.

HE PAYMENT OF GRATUITY ACT, 1972

(AMENDED 2018)
Gratuity is defined as a benefit given by the employer to the employee for rendering services
continuously for five years or more. It is a mandatory and monetary benefit usually given at the
time of employee separation from organization or retirement. But there are certain rules which
make an employee eligible to receive gratuity.

Employment / Labour Laws in India (Latest Amendments included)

HRM linkage with Labour laws>>

 Workmen's Compensation Act, 1923

 Factories Act, 1948
 Payment of Gratuity Act, 1972
o Gratuity withdrawal form I
 Payment of Wages Act, 1936 ((THE PAYMENT OF WAGES (AMENDMENT) ACT,
2017))

 Trade Union Act, 1926

 Industrial Disputes Act, 1947
o Lockout (Industry)
o Layoff / Laid off and Retrenchment
o Labour Courts for disputes in India
 Employee State Insurance Act, [ESI] 1948
 Payment of Bonus Act, 1965
 THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT,
1952
o How to calculate Employees' Provident Fund balance and interest
  Child Labour (Prohibition & Regulation) Act, 1986
 Contract Labour (Regulation and Abolition) Act, 1970
 Industrial employment (standing orders) Act, 1946)
 Maternity Benefit Act,1961 (Maternity Benefit (Amendment) Act, 2017)
o Maternity leave laws
 Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)
Act, 2013
 Rights of Persons with Disabilities Act, 2016

Who is called as dependent?

The main purpose and concept of gratuity is to help the workman after the retirement, whether
the retirement is a result of the rules of superannuation or physical disability or impairment of
the vital part of the body. Gratuity is the amount which is not connected with any consideration
and has to be considered as something given freely for the service the employee has rendered
to the organization for more than 5 years.

DEFINITIONS [Sec 2]

(a) "appropriate Government" means, -

(i) in relation to an establishment -

(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government,
(d) of a major port, mine, oilfield or railway company, the Central Government,

(ii) in any other case, the State Government;

(b) "Completed year of service" means continuous service for one year;

(e) “employee” means any person (other than an apprentice) who is employed for wages,
whether the terms of such employment are express or implied, in any kind of work, manual or
otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway
company, shop or other establishment, to which this Act applies, but does not include any such
person who holds a post under the Central Government or a State Government and is governed
by any other Act or by any rules providing for payment of gratuity.

(c) "Continuous service" means continuous service as defined in section 2A;

(K)"notification" means a notification published in the Official Gazette and the expression
"notified" shall be construed accordingly;'.
(q) "Retirement" means termination of the service of an employee otherwise than on
superannuation;

(r) "superannuation", in relation to an employee, means the attainment by the employee of

such age as is fixed in the contract or conditions of service at the age on the attainment of which
the employee shall vacate the employment;

(s) "wages" means all emoluments which are earned by an employee while on duty or on leave
in accordance with the terms and conditions of his employment and which are paid or are
payable to him in cash and includes dearness allowance but does not include any bonus,
commission, house rent allowance, overtime wages and any other allowance.

APPLICABILITY

 Every factory (as defined in Factories Act), mine, oilfield, plantation, port and railway.
 Every shop or establishment to which Shops & Establishment Act of a State applies in
which 10 or more persons are employed at any time during the year end.
 Any establishment employing 10 or more persons as may be notified by the Central
Government.
 Once Act applies, it continues to apply even if employment strength falls below 10.

In Regional Provident fund Commissioner v. The Regional Labour Commissioner and others
(1985 II labour Law Journal 63), an upper divisional clerk working in the establishment of
regional Provident fund Commissioner resigned his job in March 1982 after rendering service for
more than nine years, and claimed that the tea under this act. The High Court of Karnataka held
that the said establishment falls within the definition of an establishment under tThe Payment of
Gratuity Act, 1972 and the employee was entitled to gratuity, nowwithstanding the fact that he
resign the job.Woo Woo

In Arasuri Ambajimata Mandir devasthan Trust v. Jaitabhai Patel, Shramjivi general Works
union ( 1983 (3) Supp. labour law general 1129), it was held at the though the post in Temple
trust is controlled by state government., It is not a post under State government. So as to fall
under the exclusion under section 2 (e) and hence it falls under the definition of employee and is
entitled to gratuity under the act. which means though the temple is not mentioned in the section
(e) of the act, court held that it is applicable under this act.

Government Servant Not Entitled To Full Pension/Gratuity

During Pending Disciplinary/Judicial Proceedings:
Allahabad HC
Download Judgement

The Allahabad High Court has held that a Government servant is not entitled to full
pension/death cum-retirement gratuity on/or during pending disciplinary/judicial proceedings
against the government servant.

The full bench comprising of Justice Pankaj Mithal, Justice Suneet Kumar and Justice Rohit
Ranjan Agarwal observed that the entitlement to full pension /death-cum-retirement gratuity to
the government servant is subject to the outcome of the disciplinary/judicial proceedings and
issue of final orders thereon by the competent authority. The bench was considering a reference
to it on the issue of entitlement of the government servant to receive death cum-retirement
gratuity on superannuation or otherwise pending judicial proceedings.

The court upheld a division bench judgment view that the term 'pension' would include 'gratuity'
particularly in Article 351, 351-A of the Civil Service Regulations. Referring to these regulations,
the bench observed:

 Future good conduct is implied condition of ever grant of pension. Full pension is not to
be given as a matter of course, or unless the service rendered has been thoroughly
satisfactory.
 Article 351 and/or 351-A can be invoked by the State Government or the Governor, as
the case may be, if the pensioner (a) be convicted of serious crime; (b) be guilty of grave
misconduct (c) caused pecuniary loss to the government in service. The power can be
exercised in either of the eventualities. The action thereunder is punitive.
 Pendency of disciplinary/judicial proceedings on the date of retirement, or instituted after
retirement, provisional pension equal to maximum pension as mandated under Article
919-A may be sanctioned to the government servant for the period upto conclusion of
the proceedings.
 No gratuity is payable to the government servant during pendency of disciplinary/judicial
proceedings/enquiry by Administrative Tribunal, until conclusion of the
proceedings/enquiry and orders being passed thereon by the competent authority.
 The Regulations mandates that government servant is entitled to provisional pension
equal to maximum pension during pendency of the proceedings until conclusion. The
Regulations does not mandate the entitlement of full pension/gratuity on the ground of
'hardship' being faced by the pensioner pending proceedings.
 The nature of the charge/allegations against the government servant cannot be gone
into during pendency of the proceedings. The government servant whether guilty of
 'serious crime' and/or 'grave misconduct' in the opinion of the competent authority can
be assessed/considered while passing final orders upon conclusion of the
disciplinary/judicial proceedings.
 The impact on pension/gratuity would arise after the competent authority has had the
occasion to consider and issue final orders upon conclusion of the proceedings. The
cause to the government servant arises thereafter and not at the stage pending
proceedings/enquiry.

Teachers entitled to Gratuity under

Payment of Gratuity Act, Supreme
Court [Read Judgment]

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.2530 OF 2012

Birla Institute of Technology ....Appellant(s)

VERSUS

The State of Jharkhand & Ors. ...Respondent(s)

The Supreme Court today held that teachers are entitled to gratuity under the Payment of
Gratuity Act, 1972 (Act). A Bench of Justices Abhay Manohar Sapre and Indu Malhotra recalled
its previous judgment that had laid down that teachers do not fall within the scope of the
definition of ’employees’ under the Act.

In its judgment rendered on January 7 2019, a Bench of Justices Abhay Manohar Sapre and
Indu Malhotra had placed reliance on the case of Ahmadabad Pvt. Primary Teachers
Association v. Administrative Officer and Others [(2004) 1 SCC 755] to hold that teachers do not
fall within the scope of the definition of ‘employee’ under Section 2 (e) of the Act.

The Court had thus, allowed the appeal filed by Birla Institute of Technology and set aside the
judgment of the Jharkhand High Court.

The operation of this judgment was, however, suo motu stayed by the Court just two days after
the pronouncement of the judgment. The Court noted in that order that it was not apprised of the
amendment brought to the Act by the Parliament in 2009. In its order, the Court said,

“Keeping in view the amendment made in the definition of Section 2(e), which as stated above
was not brought to the notice of the Bench, this issue was not considered though had relevance
for deciding the question involved in the appeal. It is for this reason, we prima facie find error in
the judgment and, therefore, are inclined to stay the operation of our judgment dated
07.01.2019 passed in this appeal.”

The definition of the word “employee” under the Gratuity Act was amended through an
amendment brought in by the Parliament in 2009. This amendment was given a retrospective
effect from April of 1997. It was not brought to the Court’s notice the first time the appeal was
heard.

When the matter was reheard, the Court was informed that the submissions regarding
precluding teachers from the scope of the definition of ‘employee’ stemmed from the precedent
in Ahmedabad Pvt Primary Teachers Association case. However, the said issue was no longer
res integra after the statutory amendment.

The reason for the Parliament to amend the provisions of Gratuity Act to bring teachers under
the purview of the Act was clear from the Statement of Objects and reasons of the Amendment
Bill which reads,

“Keeping in view the observations of the Hon’ble Supreme Court, it is proposed to widen the
definition of ‘employee’ under the said Act in order to extend the benefit of gratuity to the
teachers.”

This amendment was given a retrospective effect starting from April 3, 1997. The amended
definition of the word ‘employee’ is,

“(e) “employee” means any person (other than an apprentice) who is employed for wages,
whether the terms of such employment are express or implied, in any kind of work, manual or
otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway
company, shop or other establishment to which this Act applies, but does not include any such
person who holds a post under the Central Government or a State Government and is governed
by any other Act or by any rules providing for payment of gratuity.”
In light of this amendment, the Court noted that decision in Ahmedabad Pvt Primary Teachers
Association loses its binding effect. The Court thus dismissed the appeal with costs of Rs.
25,000.
Payment of Gratuity Act not applicable to
temples in Karnataka
[Read Judgment]
The Karnataka High Court on Thursday clarified that the Payment of Gratuity Act, 1972 (Gratuity
Act) would not apply to temples in the State. Consequently, temple employees are not eligible to
claim gratuity under the 1972 Act, the Court ruled.

A Full Bench comprising Justices BV Nagarathna, KN Phaneendra and BA Patil passed a

judgment to this effect, upon finding that temples in Karnataka do not fall under the definition of
"establishment" or "commercial establishment", to which the Gratuity Act is applicable. The
Court arrived at this conclusion on finding that temples were not treated as an "establishment"
as defined in the Karnataka's Shops and Commercial Establishments legislation.

Section 1(3)(b) of the Gratuity Act provides that it would apply to all establishments employing
ten or more persons. The term "establishment" would be defined as per the prevailing State
laws, the Section further states. At present, the only legislation defining an "establishment" in
Karnataka is the Karnataka Shops and Commercial Establishments Act, 1961.

Adverting to the said definition, the Court a ‘Temple’ as defined in Clause (27) of Section 2 of
the Karnataka Hindu Religious Institutions and Charitable Endowments Act, 1997, does not
answer the description of “commercial establishment” within the meaning of Clause (e) of
Section 2 of the Karnataka Shops and Commercial Establishments Act, 1961.

Hence, the Payment of Gratuity Act would be inapplicable to Temples.

The Court ruled,

"The definition of establishment is exhaustive and not inclusive, it means a shop or a

commercial establishment… it is apparent that, it does not extend to a temple. In other words, a
temple is not a shop…a temple is excluded from the definition of commercial establishment, as
it is not notified by the State Government and hence, is not included within the latter portion of
the definition as of now...

....temple would not come within the expression of commercial establishment. A temple is a
religious institution used as a place of public religious worship dedicated to or for the benefit of
or used as of right by the Hindu community or any section thereof as a place of public religious
worship ... the appellant being a temple cannot by any stretch of imagination be construed as an
establishment under the provisions of the Act of 1961. No other enactment is brought to our
notice which deals with shops and commercial establishment for beneficial consideration.

... a ‘Temple’ as defined in Clause (27) of Section 2 of the Karnataka Hindu Religious
Institutions and Charitable Endowments Act, 1997, does not answer the description of
“commercial establishment” within the meaning of Clause (e) of Section 2 of the Karnataka
Shops and Commercial Establishments Act, 1961 and hence, the Payment of Gratuity Act, 1972
is inapplicable to it..."

The ruling was passed in an appeal filed by the Mookambhika Temple, Kollur challenging the
decisions allowing a former temple employee, Raviraja Shetty, to claim gratuity.

Advocate K Anandarama appeared for the Mookambhika Temple. Raviraja Shetty was
represented by Advocate T Mohandas Shetty. Additional Government Advocate SS Mahendra
appeared for the labour authority and the appellate authority under the Payment of Gratuity Act,
1972.

Factual Background

After his retirement, Shetty had made a claim for payment of gratuity under the Act. To this end,
he obtained favourable verdicts from the Deputy Chief Labour Commissioner and the Appellate
Authority under the Payment of Gratuity Act. This prompted the Mookambhika Temple to go on
appeal before the High Court.

A single judge rejected the temple's plea, finding that it was already established that a temple
would also fall under the definition of "establishment" under the 1972 Act. In this regard,
reference was made to a Karnataka High Court Division Bench judgment in Management of
Venkataramana Swamy Temple and Sri Hale Mariyamma Temple, Kapu, Udupi District v.
Deputy Labour Commissioner.

On further appeal, however, the temple contended that the Venkataramana Swamy case was
decided on an erroneous application of an Orissa High Court judgment in the case of
Administrator, Shree Jagannath Temple, Puri v. Jagannath Padhi & others.

In the Jagannath Temple case, the Orissa High Court found that the expression “Temple Trust”
was included under the Shops and Commercial Establishments Act operating in the State of
Orissa. However, as pointed out by the appellant-temple, the Orissa High Court judgment was
based on the fact that the State Shops and Establishments legislation operating in Orissa
defined temples as establishments. This was not the case in Karnataka.

Temples in Karnataka do not constitute "establishments", Venkataramana Swamy case is Per

Incuriam
The Full Bench found merit in the submissions of the appellant-temple that the Court in the
Venkataramana Swamy Temple case had wrongly relied upon the Orissa High Court's verdict in
the Jagannath Temple case

The Bench noted that the judgment of the Orissa High Court turns on its own facts and is based
on the particular State law applicable in Orissa.

"... the same [Orissa High Court Judgment] could not have become a precedent to be simply
followed insofar as the temples in Karnataka are concerned, in view of the specific definition of
the expression establishment and more specifically, commercial establishment under the
provisions of the Act of 1961 are concerned."

As further explained in the judgment,

"What is pertinent to note is under Section 1(3)(b) of the Act of 1972, the establishment
must be one within the meaning of any law for the time being in force in relation to shops and
establishments in a State. Therefore, it is not necessary to consider the relevant State
enactment alone …

The Orissa High Court found that a Temple Trust came within the scope and ambit of the
statute of that State relating to shops and commercial establishments in the said State and
therefore, a Temple came within the ambit of Section 1(3)(b) of the Act of 1972.

But, in the State of Karnataka, the expression ‘Temple’ or ‘Temple Trust’ does not find a place
under Section 2(i) of the Act of 1961 which refers to only a shop or a commercial establishment.
The expression establishment has been given restrictive meaning to mean a commercial
establishment."

Therefore, the Full Bench concluded that the Venkataramana Swamy Temple case was decided
per incuriam and could not be cited as a precedent.

Karnataka Hindu Religious Institutions and Charitable Endowments Act, 1997 alone applicable
to Temple Employees under present regime

The Bench also found that the Karnataka Hindu Religious Institutions and Charitable
Endowments Act, 1997 and corresponding Rules of 2002 form a complete code as far as
temples in Karnataka is concerned. It was observed that this special enactment would prevail
over the general enactment in the Gratuity Act as far as temples in Karnataka are concerned.

On a related note, the legal position may differ if the State or Central government were to
officially notify that the temples in the State would constitute an "establishment". However, the
Court refrained from commenting on this aspect, stating,

"We do not wish to venture into any debate as to what would be the position if a temple is
notified by the Central Government as an establishment under Section 1(3)(c) of the Act of
1972, when the same is juxtaposed with the provisions of the Act of 1997."

Summary of Conclusions

Ultimately, the Court ruled,

 The Division Bench judgment in the Venkataramana Swamy Temple case, wherein
it was held that the Payment of Gratuity Act, 1972 would be applicable to temples
in Karnataka as well, is overruled.
 The Payment of Gratuity Act, 1972 is not presently applicable to temples in
Karnataka, since temples do not fall under the category of "establishment" under
the prevailing laws.
 The provisions of the Karnataka Hindu Religious Institutions and Charitable
Endowments Act, 1997 and the Rules of 2002 made thereunder would apply to
temple employees in Karnataka as per the prevailing law.

In view of these conclusions, the Court partly allowed the appeal but directed the appellant-
temple to pay gratuity to the employee in accordance with the Act of 1997 and the 2002 Rules
within four weeks.

Section 2A. CONTINUOUS SERVICE. -

an employee shall be said to be in continuous service even his/her service in interrupted by way

 sickness,
 accident,
 leave,
 absence from duty without leave,
 leave with full wage,
 temporary disablement,
 laid-off period,
 maternity leave : 26 weeks (THE PAYMENT OF GRATUITY (AMENDMENT) ACT,
2018)

whether such uninterrupted or interrupted service was rendered before or after the
commencement of this Act.

In case of period of one year

Employee will be treated as he in continuous service, if he is employed by employer for the

period of

 190 days employment under the ground in mines, or in establishment which works less
than 6 days in a week.
  240 days in case of other any establishments (factories, companies, etc.)

In case of period of 6 months

Employee will be treated as he in continuous service, if he is employed by employer for the

period of

 95 days employment under the ground in mines, or in establishment which works less
than 6 days in a week.
 120 days in case of other any establishments (factories, companies, etc.)

In case of seasonal establishments

An employee of a seasonal establishment shall be deemed to be in continuous service if he has

actually worked for not less than 75% of the numbers of days on which the establishment was in
operation during the 1 year or 6 months.

Seasonal Establishments in which, although work is carried on throughout the year, the number
of employees is regularly subject to seasonal fluctuations for reasons associated with the
weather, their sales or their location. For example, hotels and restaurants in health spas and
holiday resorts, gravel and sand pits and stone quarries are deemed to be seasonal
establishments.

3. CONTROLLING AUTHORITY. –

The appropriate Government may, by notification, appoint any officer to be a controlling

authority, who shall be responsible for the administration of this Act and different controlling
authorities may be appointed for different areas.

Section- 4. PAYMENT OF GRATUITY.-

(1) Gratuity shall be payable to an employee on the termination of his employment after he has
rendered continuous service for not less than 5years, -

(a) on his sueeperannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease :

Provided that the completion of continuous service of 5 years shall not be necessary where the
termination of the employment of any employee is due to death or disablement:
Provided further that in the case of death of the employee, gratuity payable to him shall be paid
to his nominee or, if no nomination has been made, to his heirs, and where any such nominees
or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who
shall invest the same for the benefit of such minor in such bank or other financial institution, as
may be prescribed, until such minor attains majority.

Calculation of gratuity [Sec 4 (2)]

Gratuity = Monthly salary X 15 X Number of years of service
26

 Monthly salary= last month drawn salary by the employee.

 26 = total number of working days in a month.
 15 = number of days in half of the month.

[Sec 4(3)] The maximum amount of gratuity payable to an employee shall not exceed 3,
50,000/- rupees.
(According to the latest 2010 amendment the maximum gratuity payable amount was
increased to
rupees 10,00,000/-)

Claim for gratuity in excess of ceiling u/s

4(3) not beyond scope of Payment of
Gratuity Act, 1972 - Sec 4 (5): Delhi HC

Read Judgement

The Delhi High Court has held that a claim for gratuity in excess of the ceiling limit prescribed
under Section 4(3) is not at all beyond the scope of the Payment of Gratuity Act, 1972.

Further, just because there is a ceiling placed under the provision, it cannot be said that the
jurisdiction of the Controlling Authority under the Act to examine a dispute under Section 7(4)(b)
is curtailed to the same pecuniary limit.
The judgment was passed by a Single Judge Bench of Justice Rekha Palli in a batch of
petitions assailing identical but separate orders passed by the statutory authorities under the
said Act. The said orders had upheld the claim of the respondent employees to receive gratuity
beyond the ceiling limit prescribed under Section 4(3) of the Act.

One of the respondents, who was the Chief Executive Officer of the petitioner corporation, had
resigned after rendering service of 12 years. As payment towards gratuity, the petitioner
corporation sent out of Rs.10,00,000 as the maximum amount of gratuity payable to him. The
respondent, on the other hand, claimed that he was entitled to a total of Rs.1,83,75,000 as
gratuity for the entire period of his service.

He wrote to the petitioner corporation claiming this sum as gratuity, but to no avail. Aggrieved by
the amount of gratuity paid to him, he filed a claim application before the Controlling Authority
under Section 7 of Act.

Consequently, the Controlling Authority allowed his claim for gratuity and directed the petitioner
corporation to pay him Rs.1,73,75,000 over and above the gratuity amount already paid to him,
along with simple interest at the rate of 10% per annum for delayed payment. The said order
was upheld by the Appellate Authority.

The petitioner corporation then filed a writ petition before the Delhi High Court challenging the
findings of the Controlling Authority and Appellate Authority.

Before the High Court, the petitioner corporation argued that Section 4(3) of the said Act
categorically provided that the maximum gratuity payable to an employee under the Act
was Rs.10,00,000, unless the concerned employee was entitled to receive better terms of
gratuity under any award or agreement or contract.

It thus brought on record the respondent’s terms of appointment to contend that the gratuity
clause therein clearly shows that he would be entitled to gratuity “as per laws”.

It was further argued that since the Act imposed a maximum limit of Rs.10,00,000, the
Controlling Authority, while exercising its powers under Sections 7(4)(a) and 7(4)(b), can only
decide disputes in which the amount claimed is less than or equal to the said ceiling amount.

Rejecting the contentions put forth by the petitioner corporation, the Court observed that while
Section 4(3) generally prescribes a limit on the maximum amount of gratuity, Section 4(5)
carves out an exception for those employees who have better terms of gratuity under an award,
or an agreement or contract with the employer.

“A perusal of Section 4(5) of the Act makes it evident that it begins with a non-obstante clause
that gives the said provision an overriding effect over the remaining provisions of Section 4.”, it
said.
In this light, the Court stated,

“To hold anything to the contrary, would be de hors the spirit of the PG Act and would render
Section 4(5) completely nugatory so as to hamper an employee’s right to enter into
contracts/agreement with better terms of gratuity than those prescribed under the PG Act.”

After perusing the terms of employment of the respondent, the Court concluded that there was
nothing to limit his gratuity to the ceiling limit prescribed under Section 4(3).

Holding that in the absence of a specific clause that caps the maximum amount of gratuity
payable to an employee, the employment conditions cannot be construed to mean that the
ceiling limit under Section 4(3) is applicable, the Court observed.

“The relevant Rule 6(b) of petitioner’s gratuity scheme only stipulates that the amount of gratuity
payable to an employee shall be calculated in accordance with the provisions of the PG Act.
The “provisions of the PG Act” is a broad phrase that not only contemplates the rate statutorily
prescribed under Section 4(2) and the ceiling limit under Section 4(3), but also the exception
carved out under Section 4(5) for employees who have better terms of gratuity under an award,
or agreement/contract with the petitioner.”

Coming to the issue of whether the Controlling Authority has jurisdiction under Section 7(4)(a)
and 7(4)(b) to decide claims in excess of the ceiling limit prescribed under Section 4(3), the
Court held it is “unfathomable how the jurisdiction of the Controlling Authority can be curtailed to
decide only those claims that have a pecuniary value less the said ceiling limit.”

“The PG Act is a complete code in itself with respect to matters relating to the payment of
gratuity and the Controlling Authority appointed under Section 3 is statutorily enjoined under
Section 7(4)(b) to adjudicate any dispute qua the amount of gratuity payable or as to the
admissibility of any claim to gratuity…

…Merely because Section 4(3) places a ceiling on the amount of gratuity payable to an
employee in the absence of better terms of gratuity in accordance with Section 4(5), it cannot be
said that the jurisdiction of the Controlling Authority to examine a dispute under Sections 7(4)(b)
is curtailed to the same pecuniary limit.”

It thus concluded that there was absolutely no reason for it to interfere with the orders under
challenge.

According to the (THE PAYMENT OF GRATUITY

(AMENDMENT) ACT, 2018) The maximum amount of gratuity payable to an
employee shall not exceed 20,00,000/- rupees.
Sec 4 (4) For the purpose of computing the gratuity payable to an employee who is employed,
after his disablement, on reduced wages, his wages for the period preceding his disablement
shall be taken to be the wages received by him during that period, and his wages for the period
subsequent to his disablement shall be taken to be the wages as so reduced.

Sec 4 (5) Nothing in this section shall affect the right of an employee to receive better terms of
gratuity under any award or agreement or contract with the employer.

Download gratuity withdrawal Form I

Different types of forms of gratuity
Form Name Use of Form

Gratuity Form I Application for the payment of gratuity

Gratuity Form J Used by the nominee to make application for

payment of gratuity

Gratuity Form K Used by legal heir to make application for the

payment of gratuity

Gratuity Form F To make nomination

Gratuity Form G To make fresh nomination

Gratuity Form H Modification of nomination

Gratuity Form L Issued by the employer to employee stating

amount and date of payment

Gratuity Form M Issued by the employer stating the reason for

the rejection of gratuity

Gratuity Form N Application made to the labour commissioner by

an employee

Gratuity Form 0 Issued by the authority to appear for case

hearing

Gratuity Form P Summons issued by the authority to be present

 for hearing

Gratuity Form R Issued by the authority directing to make

gratuity payment

Deduction of gratuity
[Sec 4(6) (a)]

Whose services have been terminated for any act, willful omission or negligence causing any
damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the
extent of the damage or loss so caused.

Gratuity of employee wholly or partially lose in case of

[Sec 4(6) (b)]

 If the services of such employee have been terminated for his riotous or disorderly
conduct or any other act of violence on his part, or
 if the services of such employee have been terminated for any act which constitutes an
offence involving moral turpitude, provided that such offence is committed by him in the
course of his employment.

Payment of gratuity is not applicable to employee who has been dismissed from the service for
the reason of indiscipline or misconduct.

In the case of Babu Ram V. Phoenix Mills (1999 (1) labour law Journal 2 58), the court held
that there was a service of petitioner has been terminated by dismissal, it cannot be said that
he was in continuous service from the date of employment will the date of superannuation.

COMPULSORY INSURANCE. [Sec 4A]

 every employer, other than an employer or an establishment belonging to, or under the
control of, the Central Government or a State Government, should obtain an insurance
in the manner prescribed, for his liability for payment towards the gratuity under this Act,
from the Life Insurance Corporation of India or any other prescribed insurer.
  Employer who had already established an approved gratuity fund in respect of his
employees shall be exempted from above rule.

 Employer who abstained insurance from LIC or other from payment of gratuity shall
within such time as may be prescribed get his establishment registered with the
controlling authority in the prescribed manner. no employer shall be registered under the
provisions of this section unless he has taken an insurance.

 Every employer must pay the premium to the insurance company insurance for his
liability for payment towards the gratuity or contribution to approved gratuity fund. If
employer fails to make any payment he shall be liable to pay the amount of gratuity due
(including interest, if any, for delayed payments)

Forfeiture of Gratuity under Payment of Gratuity

Act not automatic on dismissal from service, SC
SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8251 OF 2018
(Arising out of S.L.P.(Civil) No. 3852/2017)

Download

View

The Supreme Court has held that dismissal from service does not automatically result in
forfeiture of gratuity under the Payment of Gratuity Act, 1972 (Act). The same is subject
to Sections 4(5) and 4(6) of the Act.

The judgment was passed by a Bench of of Justice Kurian Joseph and Justice Sanjay Kishan
Kaul in the case of Union Bank of India v. CG Ajay Babu.

By way of background, the Respondent in the case, Ajay Babu, was employed by the Petitioner-
Bank as a Branch manager. During the course of his service, disciplinary proceedings were
initiated against him on the ground that he failed to take all steps to ensure and protect the
interests of the Bank, failed to discharge his duties with utmost devotion, and conducted himself
in a manner “unbecoming of an officer.”
On the above mentioned charges, the respondent was dismissed from service in June 2004. A
few months before the dismissal order attained finality, the respondent was served a show-
cause notice and was asked to furnish his response on why the gratuity due to him should not
be forfeited on account of Respondent’s “acts involving moral turpitude.”

The Respondent submitted his response to this show-cause notice in February 2004. However,
his response was rejected and vide an order passed in April 2004, the petitioner Bank forfeited
the gratuity due to the respondent citing provisions of the Act and the Bank’s Gratuity Rules.

This forfeiture of gratuity was challenged before the High Court wherein the Single Judge,
without interfering in the dismissal from service, held that since the misconduct did not lead to
financial loss to the Bank, the Respondent was entitled to gratuity.

It was also held that as per the bipartite settlement prevailing in the bank, forfeiture of gratuity is
permissible only in case the misconduct leading to the dismissal has caused financial loss to the
Bank and only to the extent of the loss.

An appeal against this judgement was dismissed by a Division Bench of the High Court leading
to the appeal in Supreme Court.

The Court proceeded to analyse Section 4(5) and Section 4(6) of the Payment of Gratuity Act.

Section 4(5) says that “nothing will affect the right of a person to receive better terms of the
gratuity.”

Section 4(6) lays down that gratuity of an employee who has been terminated on the grounds
that he has wilfully caused damage to the employer, can to the extent of that loss or damage be
forfeited.

Further, it also provides that gratuity payable to an employee may be wholly or partially forfeited
– (i) if the services of such employee have been terminated for his riotous or disorderly conduct
or any other act of violence on his part, or (ii) if the services of such employee have been
terminated for any act which constitutes an offence involving moral turpitude, provided that such
offence is committed by him in the course of his employment.

The Court observed that sub-section (5) of Section 4 of the Act has an overriding effect on all
other sub-sections of Section 4. Additionally, the Court noted that there exists a bipartite
settlement in the appellant-Bank which has a clause relating to gratuity and reads as follows:

“12.2 There will be no forfeiture of gratuity for dismissal on account of misconduct except in
cases where such misconduct causes financial loss to the bank and in that case to that extent
only.”

The Counsel appearing for the Bank submitted that Section 4(5) dealt with only the “better terms
of gratuity”, that is quantum of gratuity, and not with the entitlement of the gratuity under an
award or contract. This argument, the Court said, was not appreciable.

Agreeing with the view taken by the High Court, the Supreme Court noted that the fact that the
bipartite settlement clause exists is not disputed and neither is it contended that the respondent
employee caused any financial loss to the Bank. Therefore, Section 4(6) of the Act which allows
forfeiture of gratuity to the extent of loss caused, cannot be resorted to.

The Court then proceeded to deal with the contention of the appellant-Bank that the conduct of
the respondent which led to the framing of charges in the departmental proceedings involved
moral turpitude.

It is not the conduct of a person involving moral turpitude that is required for forfeiture of gratuity
but the conduct or the act should constitute an offence involving moral turpitude, the Court held.

“To be an offence, the act should be made punishable under law. That is absolutely in the realm
of criminal law. It is not for the Bank to decide whether an offence has been committed. It is for
the court.”

The Court noted that apart from the disciplinary proceedings initiated by the appellant Bank, the
Bank has not set the criminal law in motion either by registering an FIR or by filing a criminal
complaint so as to establish that the misconduct leading to dismissal is an offence involving
moral turpitude.

Under sub-Section (6)(b)(ii) of the Act, forfeiture of gratuity is permissible only if the termination
of an employee is for any misconduct which constitutes an offence involving moral turpitude,
and convicted accordingly by a court of competent jurisdiction.

Hence, the Court turned down the contention of the appellant in this regard.

“Hence, there is no justification for the forfeiture of gratuity on the ground stated in the order
dated 20.04.2004 that the “misconduct proved against you amounts to acts involving moral
turpitude”. At the risk of redundancy, we may state that the requirement of the statute is not the
proof of misconduct of acts involving moral turpitude but the acts should constitute an offence
involving moral turpitude and such offence should be duly established in a court of law.”

It, therefore, summed up that forfeiture of gratuity is not automatic on dismissal from service but
is subject to sub-Sections (5) and (6) of Section 4 of the Payment of Gratuity Act, 1972.

PENALTIES
[Sec 4A (6)]
Whoever employer fails in payment of insurance or contribution towards the approved gratuity
fund shall be punishable with fine which may extend to ten thousand rupees and in the case of a
continuing offence with a further fine which may extend to one thousand rupees for each day
during which the offence continues.

POWER TO EXEMPT. [Sec 5]

The government is having the power to exempt the any establishment, factory, mine, oilfield,
plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not
less favorable than the benefits conferred under this Act.

NOMINATION. [Sec 6]

 Every employer who completed one year of service can choose one or more nominees
for payment of gratuity.
 On the employee choice gratuity payable to him can be distributed amongst the
nominees.
 If employee has family members before making nomination, Nominees should be from
his family members only.
 If employee has no family members before making nomination, Nominees can be any
other person who he likes.
 Nominees as the other persons become in valid if the employee acquires family
members in the future time.
 Employee can make changes in nominees.
 Change of name of nominees should be intimated to employer by employee.

DETERMINATION OF THE AMOUNT OF GRATUITY. [Sec 7]

 Any person who is eligible for payment of gratuity should write an application to his
employer within certain time.

 When gratuity becomes payable and if no application received from employee, employer
should give notice of payment of gratuity to the employer and also to the controlling
authority specifying the amount of gratuity so determined.

 The employer should arrange to pay the amount of gratuity within 30 days from the date
it becomes payable to the person to whom the gratuity is payable.

 If the amount of gratuity payable is not paid by the employer within the 30 days , the
employer shall pay, from the date on which the gratuity becomes payable to the date on
which it is paid, simple interest at such rate, not exceeding the rate notified by the
Central Government.

 Provided that no such interest shall be payable if the delay in the payment is due to the
fault of the employee and the employer has obtained permission in writing from the
controlling authority for the delayed payment on this ground.
  If there is any dispute in payment of the gratuity, employer should deposit the gratuity
payable amount with controlling authority until the dispute is settled by him.

 Once the dispute is settled by the controlling authority, the deposited amount with him
will be paid to employee.

 Any person in dispute is not satisfied with decision order made by the controlling
authority, within 60 day from the date of order by controlling authority, appeal to the
appropriate Government or the appellate authority.

 For admitting the appeal by the employer to the appellate authority, employer should
deposit the amount equal to the amount of gratuity with the appellate authority.

INSPECTORS. [Sec 7A]

 The appropriate Government may, by notification, appoint as many Inspectors, as it

deems fit, for the purposes of this Act.
 The appropriate Government may, by general or special order, define the area to which
the authority of an Inspector so appointed will extend.
 Where two or more Inspectors are appointed for the same area, appropriate
Government also provide, by such order, for the distribution or allocation of work to be
performed by them under this Act.
 Every Inspector shall be deemed to be a public servant within the meaning of section 21
of the Indian Penal Code, 1860.

POWERS OF INSPECTORS. [Sec 7B]

 Inspector has power to order employer to furnish the information needed.

 Inspectors can enter and inspect at all reasonable hours with his assistants who are
government servants, any premises or place in any factory, mine, oilfield, plantation,
port, railway company, shop or other establishment for the purpose of examining any
register, record or notice or other document required to be kept or exhibited in relation to
the payment of gratuity to the employees.

 Inspector can examine the employer or employee concern to the gratuity matters.

 In case any offence is committed by employer under this act, inspector can seize all
register, record, notice or other document as he may consider relevant in respect of that
offence.

 Inspector has the power to search and seize with the warrant under criminal code
procedure.

RECOVERY OF GRATUITY. [Sec 8]

 If the amount of gratuity is not paid to the employee by the employer in prescribed time to the
employee, employee can make application to the controlling authority. On receipt of such
application by the controlling authority issue a certificate fro the amount to the collector fro the
recovery of the amount with compound interest. But the interest amount payable should not
exceed the amount of gratuity payable.

PENALTIES [Sec 9]

 Employer who avoids the payment of the gratuity to the employees, shall be punishable
with imprisonment for a term which may extend to 6 months, or with fine which may
extend to 10,000/- rupees or with both.

 If any person makes false statements or false representations, they shall be punishable
with imprisonment for a term which may extend to 6 months, or with fine which may
extend to 10,000/- rupees or with both.

 Employer who disobeys the rules and regulation of the act, shall be punishable with
imprisonment for a term which shall not be less than 3 months but which may extend to
one year, or with fine which shall not be less than 10,000/- rupees but which may extend
to 20,000/- rupees, or with both :

COGNIZANCE OF OFFENCES. [Sec 11]

Unless the complaint to court is made by the controlling authority under the authorization of the
government regarding the nonpayment of gratuity and recovery of gratuity, court will not any
judicial action against the employer.

Complaint should be made by controlling authority to magistrate (court) within 15 days from the
date of the authorization by government to the controlling authority.

he Payment of Gratuity Act 1972:- Gratuity is a voluntary Payment made by the

employer to the employee in recognition of continuous, meritorious services and sincere
efforts by the employee towards the organization.It is governed under the Payment of
Gratuity Act 1972.It is an Act to provide for a scheme for the payment of
gratuity to employees engaged in factories, mines, Oilfields, plantations, ports,
railway companies, and shops or other establishments.
Applicability:-As per the Gratuity Act, the scheme for the payment of gratuity is
available to:
 Employees engaged in factories, mines, oilfields, plantations, ports, railway companies,
shops or other establishments and for matters connected therewith or incidental with.
 Every shop or establishment within the meaning of any law for the time being in force in
relation to shops and establishments in a State, in which ten or more persons are
employed, or were employed, on any day of the preceding twelve months;
 Such other establishments or class of establishments, in which ten or more employees
are employed, or were employed, on any day of the preceding twelve months, as the
Central Government may, by notification, specify in this behalf.
Employee :-The term “employee” is defined in Section 2(e) of the Act as any person
(other than an apprentice) who is employed for wages, whether the terms of such
employment are express or implied, in any kind of work, manual or otherwise, in or in
connection with the work of a factory, mine, oilfield, plantation, port, railway company,
shop or other establishment to which this Act applies, but does not include any such
person who holds a post under the Central Government or a State Government and is
governed by any other Act or by any rules providing for payment of gratuity;’.
Gratuity Entitlement :-Gratuity is payable to an employee (nominee – in case of death
of employee) who has rendered continuous service of five years or more on his
termination of employment, superannuation, retirement or resignation. Completion of
continuous service of five years is not necessary where the termination of employment
is due to death or disablement due to accident or disease.
Exceptions:-Forfeiture of gratuity amount wholly or partially or to the extent of Damage
/loss in case of an employee whose service has been terminated for:
 Any act, willful omission or negligence causing any damage or loss to, or destruction of,
property belonging to the employer; or
 Act of riotous or disorderly conduct or any other act of violence on part of employee; or
 Any act which constitutes an offence involving moral turpitude, in the course of his
employment.
Nomination:-In case of death, the gratuity is payable to any of the following persons:
 Nominee
 Heirs (in absence of nomination)
 In case nominee/ heir is a minor, such amount will be deposited with the controlling
authority who shall invest the same for the benefit of such minor in such bank or other
financial institution, as may be prescribed, until such minor attains majority.
The Gratuity limit has been raised from 3.5 lakhs to 10 lakhs:-
There has been amendment in the
Payment of Gratuity Act 1972, following proposal of Labor and
Employment Ministry, demands from trade unions and others to
remove the ceiling or increase the maximum payable amount, which was fixed in
1997. It shall come into force on 24 May 2010 as per the Notification in the Official
Gazette.
Maximum Limit :-The Gratuity limit as per Section 4(3) has been raised from 3.5
lakhs to 10 lakhs. This will give advantage to both private and public sector
employees. According to this new amendment, the maximum gratuity exemption as per
IT Act also increases to Rs. 10,00,000.
Determination of Gratuity Amount
 For every completed year of service or part thereof in excess of six months, the
employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on
the rate of wages last drawn by the employee concerned.
 The Gratuity calculation is done as per the last average remuneration drawn and time in
years served by an employee.
 The amount of gratuity payable to an employee shall not exceed Rs. 10,00,000
(increased from Rs. 3,50,000).
 In order to compute the gratuity payable in case of employees employed in seasonal
establishments, daily wages, or piece rated employees. Computation will be as per the
provision of the Act.
 It can be formulated as follows: Basic + DA (Wages Last drawn)* 15days
126 * number of years of continuous service (six months or less to be ignored
and more than six months to be counted as full year)
TIME LIMIT / FORMS FOR APPLICATION TO BE MADE TO EMPLOYER

Sr. Particulars Form Timeline Compliance by

1. Nomination F 30 days after Employee

completing 1 year
service

2. Application for
Gratuity

 on gratuity be- I 30 days from the Employee

coming payable date of gratuity
to the employee becoming pay-able

 on gratuity be- J 30 days from the Nominee

coming payable date of gratuity
to the nominee becoming pay-able

 on gratuity be- K 1 year from the date

coming payable of gratuity becoming
to heir pay-able

What are the gratuity payment rules?

There are certain rules that make an employee eligible to receive gratuity
before the age of retirement or superannuation.
By

Preeti Motiani

, ET Online|

5
. Employer's liability for compensation

(1) If personal injury is caused to a workman by accident arising out of and in the course of his
employment his employer shall be liable to pay compensation in accordance with the provisions of this
Chapter :

Provided that the employer shall not be so liable -

(a) in respect of any injury which does not result in the total or partial disablement of the workman for a
period exceeding three days;

(b) in respect of any injury not resulting in death or permanent total disablement caused by an accident
which is directly attributable to -

the workman having been at the time thereof under the influence of drink or drugs or the willful
disobedience of the workman to an order expressly given or to a rule expressly framed for the purpose of
securing the safety of workmen or the willful removal or disregard by the workman of any safety guard or
other device he knew to have been provided for the purpose of securing the safety of workman. (2) If a
workman employed in any employment specified in Part A of Schedule III contracts any disease specified
therein as an occupational disease peculiar to that employment or if a workman whilst in the service of an
employer in whose service he has been employed for a continuous period of not less than six months
(which period shall not include a period of service under any other employer in the same kind of
employment) in any employment specified in Part B of Schedule III contracts any disease specified
therein as an occupational disease peculiar to that employment or if a workman whilst in the service of
one or more employers in any employment specified in Part C of Schedule III for such continuous period
as the Central Government may specify in respect of each such employment contracts any disease
specified therein as an occupational disease peculiar to that employment the contracting of the disease
shall be deemed to be as injury by accident within the meaning of this section and unless the contrary is
proved the accident shall be deemed to have arisen out of and in the course of the employment :

Provided that if it proved -

that a workman whilst in the service of one or more employers in any employment specified in Part C of
Schedule III has contracted a disease specified therein as an occupational disease peculiar to that
employment during a continuous period which is less than the period specified under this sub-section for
that employment; and that the disease has arisen out of and in the course of the employment the
contracting of such disease shall be deemed to be an injury by accident within the meaning of this section
: Provided further that if it is proved that a workman who having served under any employer in any
employment specified in Part B of Schedule III or who having served under one or more employers in any
employment specified in Part C of that Schedule for a continuous period specified under this sub-section
for that employment and he has after the cessation of such service contracted any disease specified in
the said Part B or the said Part C as the case may be as an occupational disease peculiar to the
employment and that such disease arose out of the employment the contracting of the disease shall be
deemed to be injury by accident within the meaning of this section.

(2A) If a workman employed in any employment specified in Part C of Schedule III contracts any
occupational disease peculiar to that employment the contracting whereof is deemed to be an injury by
accident within the meaning of this section and such employment was under more than one employer all
such employers shall be liable for the payment of the compensation in such proportion as the
Commissioner may in the circumstances deem just.

(3) The Central Government or the State Government after giving by notification in the Official Gazette
not less than three months' notice of its intention so to do may by a like notification add any description of
employment to the employments specified in Schedule III and shall specify in the case of employments so
added the diseases which shall be deemed for the purposes of this section to be occupational diseases
peculiar to those employments respectively and thereupon the provisions of sub-section (2) shall apply in
the case of a notification by the Central Government within the territories to which this Act extends or in
case of and notification by the State Government within the State as if such diseases had been declared
by this Act to be occupational diseases peculiar to those employments.

Save as provided by sub-sections (2), (2A) and (3) no compensation shall be payable to a workman in
respect of any disease unless the disease is directly attributable to a specific injury by accident arising out
of and in the course of his employment. Nothing herein contained shall be deemed to confer any right to
compensation on a workman in respect of any injury if he has instituted in a civil court a suit for damages
in respect of the injury against the employer or any other person; and no suit for damages shall be
maintainable by a workman in any court of law in respect of any injury - (a) if he has instituted a claim to
compensation in respect of the injury before a Commissioner; or

(b) if an agreement has been come to between the workman and his employer providing for the payment
of compensation in respect of the injury in accordance with the provisions of this Act.

SC on What is “Continuous
Service” for Claim of Gratuity?
March 27, 2018
0
2686

Advertisement
March 27, 2018

Case name: Netram Sahu v. State of Chhatissgarh

Date of Judgement: March 23, 2018

The question, which arose in the instant case was whether the appellant can be
held to have rendered qualified service, i.e., continuous service as specified
in Section 2(e) read with Section 2A of Payment of Gratuity Act so as to make
him eligible to claim gratuity, as provided under the Act, from the State.

Section 2A of Payment of Gratuity Act defined “continuous service”.

In the case the appellant employee had in all rendered 25 years and 3 months
of service (22 years and 1 month as daily wager and 3 years and 2 months as
regular work charge employee). However, the Appellant was not paid the
gratuity amount by the State after his retirement on the ground that the
appellant could not be held eligible to claim the gratuity amount because out of
the total period of 25 years of his service, he worked 22 years as daily wager
and only 3 years as regular employee.
The Supreme Court in view of the facts and circumstances of the case directed
the State to release the payment of gratuity amount and made the following
observations:

 That the Appellant had actually rendered the service for a period of 25 years. That having
regularized the services, the appellant became entitled to claim its benefit for counting the
period of 22 years regardless of the post and the capacity on which he worked for 22
years.
 That there is no provision in the Act which disentitled the appellant from claiming the
gratuity or prohibits the appellant from taking benefit of his long and continuous period of
22 years of service, which was rendered by him prior to his regularization for calculating
his continuous service of five years.
 That in the circumstances of the case the Appellant is denied relief then the same would
be travesty of justice. The question as to from which date such services were
regularized was of no significance for calculating the total length of service for
claiming gratuity amount once the services were regularized by the State.

Take away- The Supreme Court in the case settles the legal proposition that
while determining “continuous service” under Section 2A of Payment of Gratuity
Act , the question whether the services were regularized or not is of no
significance.

The entire case can be accessed here.

Advertisement

.Nomination.-

(1) Each employee, who has completed one year of service, shall make, within such time, in such form
and in such manner, as may be prescribed, nomination for the purpose of the second proviso to sub-
section (1) of section 4

(2) An employee may, in his nomination, distribute the amount of gratuity payable to him under this Act
amongst more than one nominee.
(3) If an employee has a family at the time of making a nomination, the nomination shall be made in favor
of one or more members of his family, and any nomination made by such employee in favor of a person
who is not a member of his family shall be void.

(4) If at the time of making a nomination the employee has no family, the nomination may be made in
favor of any person or persons but if the employee subsequently acquires a family, such nomination shall
forthwith become invalid and the employee shall make, within such time as may be prescribed, a fresh
nomination in favor of one or more members of his family.

(5) A nomination may, subject to the provisions of sub-section (3) and (4), be modified by an employee at
any time, after giving to his employer a written notice in such form and in such manner as may be
prescribed, of his intention to do so.

(6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who
shall make a fresh nomination, in the prescribed form, in respect of such interest.

(7) Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by
the employee to his employer, who shall keep the same in his safe custody.

Unit5

Definition of Provident Fund

Provident fund is a retirement saving fund of the salaried

employees. It is a mandatory retirement saving which enjoys the
tax benefit. It can’t be attached to a default proceeding.

The EPF or PF is a saving scheme for the employees of Government,

Public or Private sector Organizations. The scheme is governed by
the Employees’ Provident Funds & Miscellaneous Provisions Act,
1952. To manage the operation of EPF a statutory body
the employees provident fund organisation is formed under the
Ministry of Labour and Employment. The EPFO governs three
schemes, the Employee provident fund, Employee pension scheme
and Employee deposit linked insurance scheme. All the organisation
which employ more than 20 people is covered under EPF. It means
the employers of such organisation have to adopt these 3 EPF
schemes.

Employee Provident Fund

Employee provident scheme is a contributory scheme. The

employee deposits a part of his/her salary to this scheme. The
employer also contributes in this scheme on behalf of the employee.
The contribution is deposited every month. The interest rate of EPF
is fixed every year. The interest rate is linked to the 10-year yield of
the government bond. The employee get the total PF balance with
interest at the time of retirement.

The employee can track and check the EPF balance against his EPF
account. Every EPF member is given a UAN number and EPF
member ID with first employment. The UAN does not change with
the change of job. This portable number helps the employee
to transfer the PF balance while changing the job. The PF member
ID changes with every job. It is given by the employer.

One can check the PF balance of its account any time. There are
many ways to check PF balance. The balance into the PF account
belongs to the employee. An employer has no right over it.
Employers act as authenticator and facilitator to the employee.
The employee can also withdraw the EPF balance before retirement
if he/she remains unemployed for more than 2 months. However
the EPF member can’t withdraw 100% of EPF corpus before the
retirement age. The employee who is registered with UAN portal
can withdraw his EPF amount without any approval of the employer.

This scheme gives lump sum payment at the time of retirement.

During the service, one can get loan or partial amount of PF this
facility is given for some peculiar circumstances.

The contribution to the EPF account is done on the basis of a

formula.

The employee has to contribute his/her 12% salary (basic+DA)

towards EPF account. The employer has to match the amount
deposited by the employee. But, from the employer’s contribution,
Some amount goes for Employee Pension scheme.

The contribution by the employee to the EPF is tax deductible

under section 80C of the income tax act. The contribution by the
employer is tax exempt. The maturity amount is also tax exempt.
These tax benefits are subject to the minimum 5 years of the
service. EPF withdrawal before 5 years of continuous service
is subject to TDS.

Contribution Towards EPF (% of salary)

Contribution Accounts Administration Accounts

Total

EPF EPS EDLI EPF EDLI

Employee 12 0 0 0 0 12

Employer 3.67 8.33 0.5 1.10 0.01 13.61

Total 15.67 8.33 0.5 1.10 0.01 25.61

The contributions are statutorily payable up to a prescribed wage ceiling, which is Rs.15,000/-

as on date.

Employee Pension Scheme

The employee Pension scheme runs along the EPF. The contribution
to this scheme is fulfilled by the employer. The contribution is
8.33% of the salary (basic+DA). The maximum contribution to the
EPS in a year is Rs 15,000.

The employee pension scheme gives pension to the employee after

attaining the age of 58. You can take discounted pension after the
age of 50. The pension benefit is reduced by 3% for every year
falling short of 58.

The pension is calculated on the basis of last pay and duration of

service.

In case a person leaves the job before the age of 58, there are
three options before him

If the total service is less than 10 years, he/she can withdraw the
pension benefit.
If the total service is more than 10 years, he/she can get scheme
certificate. The scheme certificate is used once the member gets
another job. Otherwise, it will be used to get the pension at the age
of 58.

This scheme also gives pension to the family member of a deceased

employee.

Employee Deposit Linked Insurance Scheme

This scheme gives lump sum benefit upon the death of a serving
employee. The amount is given to the nominee of the employee.

The insurance cover under EDLI is based on a formula. The cover is

30 times of the last drawn salary. Alon with this a bonus of Rs 1.5
lakh is also given. The salary for this calculation can’t go beyond Rs
15,000/month. Hence maximum cover under this scheme is Rs 6
lakh.

Frequently Asked Questions (FAQ)

Q1. Can I opt out of EPF scheme?

Ans. Yes, you can opt out of EPF scheme if your monthly salary
(basic+DA) is more than 15,000, but you have to decide it before
becoming the member of EPF. Once you become a PF member, you
can’t leave it till you are in the job.

Q2. I am not the member of EPF, can I join later?

Ans. Yes you can join EPF any time before the retirement. There is
no such restriction.

Q3. My company is very small, It is not part of EPF act. Can I

individually become the member of EPF?
Ans. It is not possible without the employer. The contribution
towards employer is the must for EPF.

Q4. Do I need to become the member of PF, whenever I join a new

company?

Ans. No, Every new employee gets the Universal Account Number.
This number is portable and works with any job. You can quote the
existing UAN to the new employer. It will make your PF membership
portable. The PF balance from the previous company also gets
transferred through the UAN.

Q5. Is universal account number necessary for becoming the

member of EPF. How can we get it?

Ans. Today, EPFO asks UAN for every interaction with it. EPF
membership, transfer, withdrawal and even complaint can’t be
lodged without the UAN.

Normally, the EPFO issues UAN for all of the active members. The
employers have to distribute this number to its employees. But, an
employee can also check its UAN status through the UAN portal. It
requires the PF member ID to reveal the UAN.

Besides this one can get UAN even before getting the job. This UAN
can be mentioned at the time of joining a job.

The Employees’ Provident Fund (EPF) Scheme

The EPF scheme’s aim is to build a retirement savings for employees across
India. The Employees’ Provident Fund (EPF) is a corpus built by an
employee and his/her employer together through regular, monthly
contributions.
As the Employee Provident fund Organization (EPFO) services a large
number of subscribers and with this, involved in a large number of associated
transactions, the EPFO ranks among the largest organizations, globally.
EPFO services approximately 5 crore members. Under the EPF Act, the
EPFO operates three schemes as mentioned below.

 Employees’ Provident Fund Scheme

 Employees’ Pension Scheme (EPS)
 Employees’ Deposit Linked Insurance Scheme (EDLI)

Under the EPF Act, the employees are eligible for the provident fund,
pension fund and insurance benefits under the above mentioned schemes.
Features and benefits of the Employee Provident Fund Scheme

 The interest earned from funds held in the EPF account is fully
exempted from tax. Withdrawals at maturity or after completion of 5
years are also completely tax free
 The Contributions made by an employee towards the EPF fund are tax
deductible under 80C
 Amount accumulated provides financial security during retirement
 During emergencies like medical treatment, financial issues, premature
withdrawal of the EPF funds are allowed
 An employee can withdraw the accumulated amount in the EPF
account 2 months after resignation
 The accumulated amount is passed on to the employee’s nominee to
provide financial stability after 2 months when the employee is
declared legally dead
 EPF balances can be withdrawn, if the employee is not in a position to
work any longer
 The employer also contributes towards employee’s pension fund(EPS)
along with provident fund, which can be used by the employee upon
retirement
Eligibility for EPF Membership

 Employees are eligible for EPF membership from the date of joining a
company. This includes them becoming eligible for provident fund,
insurance and pension. It is mandatory that companies with more than
20 employees should provide EPF to their employees.
EPF Contributions
An EPF(employee’s provident fund) account is made up of the following

 Contributions made by the employee and the employer

 On a monthly basis at a fixed rate (percentage of salary = basic + DA)

Currently, the mandatory contributions are made at 12% of Basic + DA, but it
is not mandatory when:

 The number of employees in a company is less than 20

 Sick industries
 Beedi, jute, brick, guar gum and coir industries
Employee’s & Employer’s Contribution
The minimum employee and employer contribution is now 12% of Basic +
DA each
For example, if the Salary (basic+DA) of an employee is Rs.15000 then the
The Employee’s contribution is Rs. 1800 (12% of Rs.15000)
*entire employee contribution is deposited in the provident fund but the
percentage of contributions are different in case of employer’s contribution
The Employer’s contribution is Rs.1800 (12% of Rs.15000)
This is then split to 8.33% to EPS and 3.67% to EPF i.e., Rs. 1249.5 into EPS
& Rs. 550.5 into EPF
Additionally, 0.85% to EPF administration costs, 0.5% to EDLI (Employee
Deposit linked insurance) and 0.01% to EDLI administration costs.
EPF Interest Rate
The latest declared EPF interest rate is 8.8% p.a. EPF account balances earn
interest and the earned interest is entirely tax-free.
Checking EPF Balance Online
If you have the EPF number, the balance can be checked at the webpage. The
input screen would look like the below picture.
EPF Withdrawal or Transfer Claims
The members can simply transfer their account in case of switching
companies. The members can register their transfer and withdrawal claims,
both by visiting the relevant EPFO and filling forms or through EPFO
website. If the members had updated their mobile numbers they will be
receiving updates on their EPF withdrawal claims approval/rejection status.
Alternatively, claim status can be obtained by the applicants by contacting
the respective EPFO through its helpline or customer care numbe

he Employees’ Provident Funds & Miscellaneous Provisions Act,

1952 applies to all states in India except Jammu and Kashmir.
The purpose of a provident fund is to provide financial security
and stability to elderly people on retirement. When one begins
employment, they are expected to contribute on a regularly basis
(typically monthly) to their PF fund. The employer is also expected
to contribute to its employees retirement fund.
In Oct 2014, the Employees Provident Fund Organization (EPFO)
launched a Universal Account Number (UAN) where every employee
was given a unique Provident Fund (PF) account number which is not
associated with the a particular employer. Therefore, an employee can
now change a job without having to transfer funds from one account to
another.

Which Businesses does PF Apply to?

The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952

applies to:
 Any business or establishment within these industries (Industry List) or any activity
notified by Central Government in the Official Gazette
 Employs 20 or more employees (including contract workers)
 Applicable to cinema theaters with over 5 employees
 Once registered, a business will continue be applicable and liable under the Act even if
the employee count falls below 20 persons
  Business that do not meet the criteria above can choose to voluntarily register with the
EPFO under Section 1(4) if the employer and employees are both willing

Which Employees are eligible for PF?

Not applicable to:

PF Contributions

Below is a summary of the required contributions to PF by employee and

employer. The Employees contribution is matched by the Employer till
12%. PF and EPS (Employees’ Pension scheme) are calculated
on basic salary, dearness allowance (DA), cash value of food
concession and retaining allowances if any. Most companies base it of
(Basic + DA).

Contribution Employee Employer

Provident Fund 12% 3.67%

Employee Pension Scheme 0% 8. 33%

– Not tax exempt

Exemptions – Eligible for deduction under -Tax exempt
80C

Admin Fees (as per Jan 2015 revision)

EPF Admin Charges

1. 0.85% of total employee PF wages

2. Minimum of Rs. 75 per month in the case of an non-functional
establishment having no contributory member
3. Minimum of Rs. 500 per month for contributory members

EDLI Admin Charges

1. 0.01% of total EDLI salary

2. Minimum of Rs. 25 per month in the case of an non-functional
establishment having no contributory member
3. Minimum of Rs. 200 per month for contributory members
What Happens to Your Contribution?

All employee PF contributions are pooled into a fund and earn an

interest at a Government set annual rate which is generally higher than
the prevailing market interest rate. Interest is credited to the account on
a monthly basis.

You can check your current EPF balances

here: http://www.epfindia.com/site_en/KYEPFB.php

Or you can also give a missed call to 011-2290-1406 from your

registered phone number.
What is PPF? How is it different from EPF?

Wondering what Public Provident Fund (PPF) is and how it is different

from EPF?

PPF is totally controlled by you without involvement from your employer,

unlike the EPF. Moreover, anyone even in the unorganized sector can

invest in PPF, while EPF is eligible only to salaried employees.

PF Withdrawals

1. If you go 2 months without employment, you are currently eligible

to withdraw 100% of your PF balance
2. If you withdraw the PF balance before completing 5 years of
service and if the PF settlement is equal to or exceeds Rs.30,000,
you will be subject to a TDS of 10% with a PAN card and 34.608%
without a PAN card at the time of settlement

TDS is exempt if:

1. Transfer of PF from one account to another PF account

2. Termination of service due to ill health of member /discontinuation
of Business by employer/completion of project/other cause beyond
the control of member
3. If employee withdraws PF after a service period of five years
4. If the PF balance is less than Rs. 30,000
5. If employee withdraws amount more than or equal to Rs. 30,000,
with service less than 5 years but submits Form 15G/15H along
with their PAN. Form 15H is for senior citizens (60 years & above)
and Form 15G is for individuals having no taxable income
The Government is on the brink of lowering the withdrawal limit to 75%

of PF balance. The EPFO will retain 25% of PF till retirement and you

will continue to earn interest on the remaining balance

Form Nos. 15G and 15H cannot be accepted if amount of withdrawal is

over Rs. 2,50,000/ and Rs. 3,00,000 respectively

Latest Developments in PF

Effective August 2015, here are the latest developments:

PF settlement made quicker

The Employees Provident Fund Organization (EPFO) has

reduced the PF settlement time. Pension and insurance
claims will now be settled within 20 days versus the previous
30 days

EPFO does away with mandatory revenue stamps on PF

withdrawal claims

EPFO has done away with the mandatory requirement of

affixing a one rupee revenue stamp on PF withdrawal claim
forms thereby easing the process for claimholders.

Further improvements to the PF settlement process

 97% of PF settlement will now be made through National Electronic
Fund Transfer (NEFT). Additionally, there is a proposal to remove
employer attestation for when the employee has his KYC information
(Know Your Customer) seeded and has an active UAN.

New Employee? Here’s what you need to do…

The Employees' State Insurance Act, 1948 is one of the most important laws that
provide social security. It contains six kinds of ESI benefits that injured employees can
avail.
...
 Medical benefit. ...
 Sickness benefit. ...
 Maternity benefit. ...
 Dependants benefits. ...
 Disablement benefits. ...
 Other benefits.

Key Features and Benefits of ESI:

There are a number of attractive features and benefits that are offered by the Employee
State Insurance Corporation. Not only does it provide medical benefits but it also comes
with a level of financial security in times of financial hardship like unemployment, etc.
Some of these are listed below:
 Medical Benefits: The Employee State Insurance Corporation takes care of an individual's
medical expenses by providing reasonable medical care. This cover comes into effect from
day one of the individual's employment.
 Disability Benefit: In case an employee is disabled, ESIC ensures that the employee is paid
their monthly wages for the period of the injury in case of a temporary disablement or for the
remainder of the employee's life in case of a permanent disablement.
 Maternity Benefit: ESIC helps an employee welcome their baby to a household which has
been showered with benefits. ESIC provides a total of 100% of the average daily wages for a
period of to 26 weeks from the time of going into labor and 6 weeks in case of a miscarriage.
12 weeks of pay is provided in the case of an adoption.
 Sickness Benefit: ESIC ensures that there is a flow of cash coming into the employee's
household during medical leave. 70% of the average daily wages of an employee is paid
during medical leave for a maximum period of 91 days in two successive benefit periods.
 Unemployment Allowance: ESI provides a monthly cash allowance for a maximum period of
24 months in case of permanent invalidity due to a non-employment injury or due to
involuntary loss of employment.
 Dependent's Benefit: In case the employee meets with an untimely death due to an injury at
the place of employment, ESIC will provide monthly payments apportioned among the
surviving dependents.
Other benefits that are offered with ESI are:
 Confinement Expenses
 Funeral Expenses
 Physical Rehabilitation
 Vocational Training
 Skill Upgradation Training under Rajiv Gandhi Shramik Kalyan Yojana (RGSKY)

When is ESI registration required?

When a company employs 10 or more employees, it is mandatory for that company or
any other entity to with the ESIC. An employee who earns less than Rs.21,000 per
month contributes 1.75% of his/her salary towards the ESI where as the employer pays
4.75% towards the ESI making a total of 6.5%. The company or establishment can
apply for an ESI registration within 15 days from the time the ESI Act becomes
applicable to that company or establishment.

Documents Required for ESI Registration:

The following documents are needed when registering a company or establishment with
ESIC:
 Certificate of Registration (in case of a private limited company) of the company or
establishment
 License or a registration certificate which can be obtained under the Shops and
Establishment Act or the Factories Act
 Certificate of Registration for every entity and for the commencement of production of
factories
 Detailed list of employees along with their monthly compensation
 List of partners, shareholders, and directors of the company or establishment
 The company's bank statements along with sufficient evidence about the commencement of
operations
 Address proof and PAN Card of the business establishment or company

Procedure for ESI Registration:

An individual should follow the procedure listed below to initiate the ESI Registration of
a company or establishment:
 The company can apply for ESI registration by duly filling up and submitting the Employer's
Registration Form (Form-1).
 The employee can also access the PDF format of the form that is available on the website.
Dully fill up the form and submit the same to ESIC on the official website.
 Once the application and documents have been verified, a 17 digit registration number will be
provided to the organisation. Once the company or organisation has received their 17 digit
number, they can file their ESI filings.
 Employees who are registered under the ESI scheme will receive an ESI card after they have
submitted a form along with their photographs as well as details about their family members.
 Any new changes like the additions of employees, etc. will have to be intimated to the ESI.
Documents required for ESI Returns are listed below:
 Register for Form 6
 Attendance register
 Inspection book
 Register of wages
 Register of any accidents on the premises
 Returns and monthly challans submitted for ESI

Employees' State Insurance Act, 1948:

The Employees' State Insurance is a social security scheme that is aimed at
delivering medical care and other benefits available to the employees and workers
employed in factories, organisations, and other establishments. The ESI scheme works
as a for a worker/employee and their family members. There are a large number of ESI
hospitals, specialist centers, dispensaries, and clinics that provide the state of the art
medical care to those who come under the ESI Act. Apart from medical benefits, the
employee or worker will be entitled to financial benefits as well.

Employees’ Pension Scheme (EPS):

Eligibility, Calculation & Formula
Home Saving Schemes List: Types, Interest Rates & Tenures Employees’
Pension Scheme (EPS): Eligibility, Calculation & Formula

Get ₹ 1 crore life cover @ ₹ 490/month* and avail tax benefits under 80(C)*Explore
Now

Updated: 21-10-2019 06:07:30 AM

Table of Contents :

1. Eligibility For EPS

 2. Calculate Your EPS
 Pensionable Salary
 Pensionable Service
3. Benefits of EPS
4. Types of EPS
5. EPS Forms
6. Check Your EPS Amount
7. FAQs EPS

EPF Pension which is technically known as Employees’ Pension Scheme (EPS), is

a social security scheme provided by the Employees’ Provident Fund
Organisation (EPFO). The scheme makes provisions for employees working in
the organized sector for a pension after their retirement at the age of 58 years.
However, the benefits of the scheme can be availed only if the employee has
provided a service for at least 10 years (this does not have to be
continuous service). EPS was launched in 1995 and allowed existing and new
EPF members to join the scheme.

Eligibility Criteria
In order to be eligible for availing benefits under the Employees’ Pension
Scheme (EPS), an individual has to fulfil the following criteria:

 He should be a member of EPFO

 He should have completed 10 years of service
 He has reached the age of 58
 He can also withdraw his EPS at a reduced rate from the age of 50 years
 He can also defer his pension for two years (up to 60 years of age) after
which he will get a pension at an additional rate of 4% for each year
How to Calculate Your Pension Under EPS
The pension amount in PF depends on the pensionable salary of the member
and the pensionable service. The member’s monthly pension amount is
calculated as per the following formula:

Member’s Monthly Salary = Pensionable salary X Pensionable service / 70

a) Pensionable Salary
Pensionable salary is the average monthly salary in the last 12 months before
the member exits the Employees’ Pension Scheme.

If there are non-contributory periods in the last 12 months of the employment,

the non-contributory days in the month will not be considered and the benefit of
those days would be given to the employee. Let us assume that the person
takes up the job on 3rd of the month then his salary of 28 days will be divided
as per each day’s pay and then multiplied with 30 to calculate the total monthly
wage for the month.

If the salary of the person is ₹ 15,000, the salary for the person would be ₹
14,000 for 28 days ( ₹ 500 per day less for two days). However, the monthly
salary considered for EPS would be for 30 days, i.e. ₹ 15,000

The maximum pensionable salary is limited to ₹ 15,000 every month.

Since the employer contributes 8.33% of this salary in the employee’s EPS
account, the amount deposited in the EPS account of the employee every month
is

₹ 15000 x 8.33/100 = ₹ 1250

b) Pensionable Service
The actual service period of the member is considered as the pensionable
service. Service periods under different employers are added at the time of
calculating the pensionable service period. The employee has to get the EPS
Scheme Certificate issued and submit it to the new employer every time he
switches a job.

It is worth mentioning that the employee gets a bonus of 2 years after

completing 20 years of service.
If the member withdraws the EPS corpus before completing the service period
of 10 years and joins another company, he will have to start afresh for
contributing to the EPS account and the service period will also be set as zero at
the start.

The pensionable service period is considered on a 6 months basis. The minimum

pensionable service period is 6 months. If the service period is 8 years 2
months, the pensionable service period considered is 8 years. However, if the
service duration is 8 years and 10 months, the pensionable service period is
taken as 9 years.
Pension Benefits under Employees’ Pension
Scheme (EPS)
All eligible members of EPFO can avail pension benefits as per their age from
when they start withdrawing the pension. The pension amount is different in
different cases.

1) Pension on Retirement at the Age of 58 years

A member becomes eligible for pension benefits once he retires at the age of 58
years. However, it is mandatory for him to provide service for a period of at
least 10 years when he turns 58 for availing pension benefits. An EPS Scheme
Certificate is generated which can be used to fill Form 10D for withdrawing the
monthly pension.

2) Pension on leaving service before becoming eligible for Monthly Pension

In case a member is not able to remain in service for 10 years before attaining
the age of 58 years, he can withdraw the complete sum at the age of 58 years
by filling Form 10C. It is worth mentioning here that he will not get the monthly
pension benefits after retirement.

3) Pension on Total Disablement during the Service

A member of the EPFO, who becomes disabled totally and permanently, is

entitled to a monthly pension irrespective of the fact that he has not served the
pensionable service period. His employer has to deposit funds in his EPS
account for at least one month to be eligible for the pension.

The member becomes eligible for the monthly pension from the date of
permanent disablement and is payable for his lifetime. However, the member
may have to undergo a medical examination to check whether he is unfit for the
job that he was doing before becoming disabled.

4) Pension for the Family on the Death of the Member

A member’s family becomes eligible for the pension benefits in the following
cases:

 In case of death of the member while in service and the employer has
deposited funds in his EPS account for at least one month
 In case the member has completed 10 years of service and dies before
attaining 58 years of age
  In case of death of the member after the commencement of the monthly
pension

Types of Pensions under Employees’ Pension

Scheme
There are different types of pensions under EPS such as pensions for widows,
children and orphans. These pensions provide an income to the family member
of the EPF subscriber.

1) Widow Pension
Widow pension or vridha pension is applicable to the widow of the member
eligible for a pension. The pension amount will be payable until the death of the
widow or her remarriage. In case of more than one widow, the pension amount
will be payable to the eldest widow.

The monthly vridha pension amount depends on Table-C of the EPS, 1995. The
minimum pension amount has been increased to ₹ 1000 as of now. As per the
pensionable salary of ₹ 6,500 for member pensioners, the widow pension
amount is calculated according to the table illustrated below. Note that the
monthly pensionable salary has been increased to Rs 15,000 and hence a higher
pension may be available :

Monthly Pensionable Salary for Widow Pension ( ₹ ) Monthly Widow Pension (

6200 2021

6250 2026

6300 2031

6350 2036

6400 2041

6450 2046

6500 2051
2) Child Pension
In case of death of the member, monthly children pension is applicable for the
surviving children in the family in addition to the monthly widow pension. The
monthly pension will be paid till the child attains the age of 25 years. The
amount payable is 25% of the widow pension and can be paid to a maximum of
two children.

3) Orphan Pension
In case the member dies and has no surviving widow, his children will be
entitled to get the monthly orphan pension of 75% of the value of monthly
widow pension. The benefit will be applicable for two surviving children from
oldest to youngest.

4) Reduced Pension
A member of the EPFO can withdraw an early pension if he has completed 10
years of service and has reached the age of 50 years but is less than 58 years.
In this case, the pension amount is slashed at a rate of 4% for every year the
age is less than 58 years.

In case the member decides to withdraw the monthly reduced pension at the
age of 56 years, he will get the pension at a rate of 92% (100% – 2 x4) of the
original pension amount.

5) Pension Forms
A member or the survivors of the EPFO member have to fill the following forms
to avail Employees’ Pension Scheme (EPS) benefits :

EPS Form Applicant Purpose of the Form

 Withdrawal before 10 years of service

Form 10C Member
 EPS Scheme Certificate

 Monthly pension withdrawal after 50 years of age

Form 10D Member  Monthly widow pension, child pension, etc.

 The pensioner signs a form certifying that he/she is alive.

Life Certificate Pensioner/Guardian  To be submitted every year in November to the bank manager whe
pension account is active
Non-Remarriage  To declare that the widow/widower has not remarried
Widow/widower
Certificate  It has to be submitted every year in November

How to Check Your EPS Amount

A member can check the amount accumulated in his Employees’ Pension
Scheme (EPS) account in his EPF Passbook. The last column in the passbook
shows the EPS contribution deposited by the employer every month in the
account of the member. The passbook can be downloaded from the EPF
Passbook portal after logging into the account using UAN and password.

Important Points to remember about EPF Pension

  All contributions made in the Employees’ Pension Scheme (EPS) account
are to be done by the employer
 The employer makes a contribution of 8.33% of the employee’s pay for
EPS
 The employee’s pay consists of basic wages with dearness allowance,
retaining allowance and admissible cash value of food concessions
 The employer has to make the contribution within 15 days of close of
every month
 All applicable contribution cost has to be borne by the employer
 The principal employer has to make the contributions for all employees
working for him directly or under a contractor
 The minimum service period is 10 years to be eligible for availing pension
benefits
 If you have completed less than 10 years service. but more than 6
months’ service, you can withdraw the EPS amount on being unemployed
for more than two months.
 As per the scheme, the retirement age of the person is fixed at 58 years
of age
 An employee ceases to be a member of the Pension Fund after reaching
the age of 58 or from the time he starts availing reduced pension (at the
age 50).

2016 5 questionInformation-Benefits
The section 46 of the Act envisages following six social security benefits :-

(a) Medical Benefit : Full medical care is provided to an Insured person and his family members from
the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an
Insured Person or his family member. Medical care is also provided to retired and permanently
disabled insured persons and their spouses on payment of a token annual premium of Rs.120/- .

1. 1. System of Treatment
2. 2. Scale of Medical Benefit
3. 3. Benefits to Retired IPs
4. 4. Administration of Medical Benefit in a State
5. 5. Domiciliary treatment
6. 6. Specialist consultation
7. 7. In-Patient treatment
8. 8. Imaging Services
9. 9. Artificial Limbs & Aids
10. 10. Special Provisions
11. 11. Reimbursement

(b) Sickness Benefit(SB) : Sickness Benefit in the form of cash compensation at the rate of 70 per
cent of wages is payable to insured workers during the periods of certified sickness for a maximum
of 91 days in a year. In order to qualify for sickness benefit the insured worker is required to
contribute for 78 days in a contribution period of 6 months.
1. 1. Extended Sickness Benefit(ESB) : SB extendable upto two years in the case of 34 malignant and
long-term diseases at an enhanced rate of 80 per cent of wages.

2. 2. Enhanced Sickness Benefit : Enhanced Sickness Benefit equal to full wage is payable to insured
persons undergoing sterilization for 7 days/14 days for male and female workers respectively.

(c) Maternity Benefit (MB) : Maternity Benefit for confinement/pregnancy is payable for Twenty Six
(26) weeks, which is extendable by further one month on medical advice at the rate of full wage
subject to contribution for 70 days in the preceding Two Contribution Periods.

(d) Disablement Benefit

1. 1. Temporary disablement benefit (TDB) : From day one of entering insurable employment &
irrespective of having paid any contribution in case of employment injury. Temporary Disablement
Benefit at the rate of 90% of wage is payable so long as disability continues.

2. 2. Permanent disablement benefit (PDB) : The benefit is paid at the rate of 90% of wage in the form
of monthly payment depending upon the extent of loss of earning capacity as certified by a Medical
Board

(e) Dependants Benefit(DB) : DB paid at the rate of 90% of wage in the form of monthly payment to
the dependants of a deceased Insured person in cases where death occurs due to employment
injury or occupational hazards.

(f) Other Benefits :

Funeral Expenses : An amount of Rs.15,000/- is payable to the dependents or to the person who
performs last rites from day one of entering insurable employment.
Confinement Expenses : An Insured Women or an I.P.in respect of his wife in case confinement
occurs at a place where necessary medical facilities under ESI Scheme are not available.

In addition, the scheme also provides some other need based benefits to insured workers.

Vocational Rehabilitation :To permanently disabled Insured Person for undergoing VR Training at
VRS.
Physical Rehabilitation : In case of physical disablement due to employment injury.
Old Age Medical Care :For Insured Person retiring on attaining the age of superannuation or under
VRS/ERS and person having to leave service due to permanent disability insured person & spouse
on payment of Rs. 120/- per annum.

Rajiv Gandhi Shramik Kalyan Yojana : This scheme of Unemployment allowance was introduced
w.e.f. 01-04-2005. An Insured Person who become unemployed after being insured three or more
years, due to closure of factory/establishment, retrenchment or permanent invalidity are entitled to :-

 Unemployment Allowance equal to 50% of wage for a maximum period of upto Two Years.
 Medical care for self and family from ESI Hospitals/Dispensaries during the period IP receives
unemployment allowance.
 Vocational Training provided for upgrading skills - Expenditure on fee/travelling allowance borne by
ESIC.
 Atal Beemit Vyakti Kalyan Yojana : This scheme is a welfare measure for employees covered
under Section 2(9) of ESI Act, 1948, in the form of cash compensation upto 90 days, once in a
lifetime, to be claimed after three months in one or more spells for being rendered unemployed,
provided the employee should have completed two years of insurable employment and has
contributed not less than seventy eight (78) days in each of the four consecutive contribution periods
immediately preceding to the claim of the relief. The relief shall not exceed twenty five percent (25%)
of the average earning per day.
The Scheme was introduced w.e.f. 01-07-2018. The scheme is implemented on pilot basis for a
period of two years initially.

Incentive to employers in the Private Sector for providing regular employment to the persons
with disability :

 Minimum wage limit for Physically Disabled Persons for availing ESIC Benefits is 25,000/-.
 Employerss' contribution is paid by the Central Government for 3 years.

Benefits & Contributory Conditions :

An interesting feature of the ESI Scheme is that the contributions are related to the paying capacity
as a fixed percentage of the workers wages, whereas, they are provided social security benefits
according to individual needs without distinction.
Cash Benefits are disbursed by the Corporation through its Branch Offices (BOs) / Pay Offices
(POs), subject to certain contributory conditions.

Internal paper
1
aternity Benefits Act 1961, Act Under
The Maternity Benefits Act,1961
The Maternity Benefit Act, aims to regulate of employment of
women employees in certain establishments for certain periods
before and after child birth and provides for maternity and certain
other benefits.

The Act extends to the whole of India and is applicable to:

1. Every factory, mine or plantation (including those belonging to

Government) and
2. An establishment engaged in the exhibition of equestrian, acrobatic
and other performances, irrespective of the number of employees,
and
3. To every shop or establishment wherein 10 or more persons are
employed or were employed on any day of the preceding 12
months.

The State Government may extend the Act to any other

establishment or class or establishments; industrial, commercial,
agricultural or otherwise.

However, the Act does not apply to any such factory/other

establishment to which the provisions of the Employees’ State
Insurance Act are applicable for the time being.

But, where the factory/establishment is governed under the

Employees’ State Insurance Act, and the woman employee is not
qualified to claim maternity benefit under section 50 of that Act,
because her wages exceed Rs. 3,000 p.m. (or the amount so
specified u/s 2(9) of the ESI Act), or for any other reason, then
such woman employee is entitled to claim maternity benefit under
this Act till she becomes qualified to claim maternity benefit under
the E.S.I. Act.

WHAT IS MATERNITY BENEFIT?

Every woman shall be entitled to, and her employer shall be liable
for, the payment of maternity benefit, which is the amount payable
to her at the rate of the average daily wage for the period of her
actual absence.
Period For Which Benefit Allowed
The maximum period for which any woman shall be entitled to
maternity benefit shall be 12 weeks in all whether taken before or
after childbirth. However she cannot take more than six weeks
before her expected delivery.

Prior to the amendment of 1989, a woman employee could not avail

of the six weeks’ leave preceding the date of her delivery; she was
entitled to only six weeks leave following the day of her delivery.
 However, by the above amendment, the position has changed. Now,
in case a woman employee does not avail of six weeks’ leave
preceding the date of her delivery, she can avail of that leave
following her delivery, provided the total leave period, i.e. preceding
and following the day of her delivery does not exceed 12 weeks.
Who is Entitled to Maternity Benefit

1. Every woman employee, whether employed directly or through a

contractor, who has actually worked in the establishment for a
period of at least 80 days during the 12 months immediately
preceding the date of her expected delivery, is entitled to receive
maternity benefit.
2. The qualifying period of 80 days shall not apply to a woman who
has immigrated into the State of Assam and was pregnant at the
time of immigration.
3. For calculating the number of days on which a woman has actually
worked during the preceding 12 months, the days on which she has
been laid off or was on holidays with wages shall also be counted.
4. There is neither a wage ceiling for coverage under the Act nor there
is any restriction as regards the type of work a woman is engaged
in.

Notice For Maternity Benefit

A woman employee entitled to maternity benefit may give a notice
in writing (in the prescribed form) to her employer, stating as
follows:

1. that her maternity benefit may be paid to her or to her nominee (to
be specified in the notice);
2. that she will not work in any establishment during the period for
which she receives maternity benefit; and
3. that she will be absent from work from such date (to be specified by
her), which shall not be earlier than 6 weeks before the date of her
expected delivery.

The notice may be given during the pregnancy or as soon as

possible, after the delivery.
 On receipt of the notice, the employer shall permit such woman to
absent herself from work after the day of her delivery. The failure to
give notice, however, does not disentitle the woman to the benefit
of the Act.
Restriction on Employment of Pregnant Women

1. No employer should knowingly employ a woman during the period

of 6 weeks immediately following the day of her delivery or
miscarriage or medical termination of pregnancy. Besides, no
woman should work in any establishment during the said period of 6
weeks.
2. Further, the employer should not require a pregnant woman
employee to do an arduous work involving long hours of standing or
any work which is likely to interfere with her pregnancy or cause
miscarriage or adversely affect her health, during the period of 1
month preceding the period of 6 weeks before the date of her
expected delivery, and any period during the said period of 6 weeks
for which she does not avail of the leave.

Discharge or Dismissal to be Void

When a pregnant woman absents herself from work in accordance
with the provisions of this Act, it shall be unlawful for her employer
to discharge or dismiss her during, or on account of, such absence,
or give notice of discharge or dismissal in such a day that the notice
will expire during such absence or to vary to her disadvantage any
of the conditions of her services.

Dismissal or discharge of a pregnant woman shall not disentitle her

to the maternity benefit or medical bonus allowable under the Act
except if it was on some other ground.
Other Benefits
LEAVE FOR MISCARRIAGE AND ILLNESS

In case of miscarriage or medical termination of pregnancy, a

woman shall, on production of the prescribed proof, be entitled to
leave with wages at the rate of maternity benefit, for a period of 6
weeks immediately following the day of her miscarriage or medical
termination of pregnancy.
 LEAVE FOR TUBECTOMY OPERATION

In case of tubectomy operation, a woman shall, on production of

prescribed proof, be entitled to leave with wages at the rate of
maternity benefit for a period of two weeks immediately following
the day of operation.

LEAVE FOR ILLNESS

Leave for a maximum period of one month with wages at the rate of
maternity benefit are allowable in case of illness arising out of
pregnancy, delivery, premature birth of child, miscarriage or
medical termination of pregnancy or tubectomy operation.

MEDICAL BONUS

Every woman entitled to maternity benefit shall also be allowed a

medical bonus of Rs. 250, if no pre-natal confinement and post-
natal care is provided for by the employer free of charge.
Duties of Employers
Important obligations of employers under the Act are:

1. To pay maternity benefit and/or medical bonus and allow maternity

leave and nursing breaks to the woman employees, in accordance
with the provisions of the Act.
2. Not to engage pregnant women in contravention of section 4 and
not to dismiss or discharge a pregnant woman employee during the
period of maternity leave.

Right of Employees
Important rights of an employee are:

1. To make a complaint to the Inspector and claim the amount of

maternity benefit improperly with held by the employer.
2. To appeal against an order of the employer depriving her of the
maternity benefit or medical bonus or dismissing or discharging her
from service, to the competent authority, within 60 days of the
service of such order.
 Penalties For Contravention of Act by Employer
For failure to pay maternity benefit as as provided for under the Act,
the penalty is imprisonment upto one year and fine upto Rs. 5000.
The minimum being 3 months and Rs. 2000 respectively.

For dismissal or discharge of a woman as provided for under the

Act, the penalty is imprisonment upto one year and fine upto Rs.
5000. The minimum being 3 months and Rs.2000 respectively.

disentitle the woman to the benefit of the Act.

2

nformation-Benefits
The section 46 of the Act envisages following six social security benefits :-

(a) Medical Benefit : Full medical care is provided to an Insured person and his family members from
the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an
Insured Person or his family member. Medical care is also provided to retired and permanently
disabled insured persons and their spouses on payment of a token annual premium of Rs.120/- .

1. 1. System of Treatment
2. 2. Scale of Medical Benefit
3. 3. Benefits to Retired IPs
4. 4. Administration of Medical Benefit in a State
5. 5. Domiciliary treatment
6. 6. Specialist consultation
7. 7. In-Patient treatment
8. 8. Imaging Services
9. 9. Artificial Limbs & Aids
10. 10. Special Provisions
11. 11. Reimbursement

(b) Sickness Benefit(SB) : Sickness Benefit in the form of cash compensation at the rate of 70 per
cent of wages is payable to insured workers during the periods of certified sickness for a maximum
of 91 days in a year. In order to qualify for sickness benefit the insured worker is required to
contribute for 78 days in a contribution period of 6 months.

1. 1. Extended Sickness Benefit(ESB) : SB extendable upto two years in the case of 34 malignant and
long-term diseases at an enhanced rate of 80 per cent of wages.

2. 2. Enhanced Sickness Benefit : Enhanced Sickness Benefit equal to full wage is payable to insured
persons undergoing sterilization for 7 days/14 days for male and female workers respectively.
 (c) Maternity Benefit (MB) : Maternity Benefit for confinement/pregnancy is payable for Twenty Six
(26) weeks, which is extendable by further one month on medical advice at the rate of full wage
subject to contribution for 70 days in the preceding Two Contribution Periods.

(d) Disablement Benefit

1. 1. Temporary disablement benefit (TDB) : From day one of entering insurable employment &
irrespective of having paid any contribution in case of employment injury. Temporary Disablement
Benefit at the rate of 90% of wage is payable so long as disability continues.

2. 2. Permanent disablement benefit (PDB) : The benefit is paid at the rate of 90% of wage in the form
of monthly payment depending upon the extent of loss of earning capacity as certified by a Medical
Board

(e) Dependants Benefit(DB) : DB paid at the rate of 90% of wage in the form of monthly payment to
the dependants of a deceased Insured person in cases where death occurs due to employment
injury or occupational hazards.

(f) Other Benefits :

Funeral Expenses : An amount of Rs.15,000/- is payable to the dependents or to the person who
performs last rites from day one of entering insurable employment.
Confinement Expenses : An Insured Women or an I.P.in respect of his wife in case confinement
occurs at a place where necessary medical facilities under ESI Scheme are not available.

In addition, the scheme also provides some other need based benefits to insured workers.

Vocational Rehabilitation :To permanently disabled Insured Person for undergoing VR Training at
VRS.
Physical Rehabilitation : In case of physical disablement due to employment injury.
Old Age Medical Care :For Insured Person retiring on attaining the age of superannuation or under
VRS/ERS and person having to leave service due to permanent disability insured person & spouse
on payment of Rs. 120/- per annum.

Rajiv Gandhi Shramik Kalyan Yojana : This scheme of Unemployment allowance was introduced
w.e.f. 01-04-2005. An Insured Person who become unemployed after being insured three or more
years, due to closure of factory/establishment, retrenchment or permanent invalidity are entitled to :-

 Unemployment Allowance equal to 50% of wage for a maximum period of upto Two Years.
 Medical care for self and family from ESI Hospitals/Dispensaries during the period IP receives
unemployment allowance.
 Vocational Training provided for upgrading skills - Expenditure on fee/travelling allowance borne by
ESIC.

Atal Beemit Vyakti Kalyan Yojana : This scheme is a welfare measure for employees covered
under Section 2(9) of ESI Act, 1948, in the form of cash compensation upto 90 days, once in a
lifetime, to be claimed after three months in one or more spells for being rendered unemployed,
provided the employee should have completed two years of insurable employment and has
contributed not less than seventy eight (78) days in each of the four consecutive contribution periods
immediately preceding to the claim of the relief. The relief shall not exceed twenty five percent (25%)
of the average earning per day.
 The Scheme was introduced w.e.f. 01-07-2018. The scheme is implemented on pilot basis for a
period of two years initially.

Incentive to employers in the Private Sector for providing regular employment to the persons
with disability :

 Minimum wage limit for Physically Disabled Persons for availing ESIC Benefits is 25,000/-.
 Employerss' contribution is paid by the Central Government for 3 years.

Benefits & Contributory Conditions :

An interesting feature of the ESI Scheme is that the contributions are related to the paying capacity
as a fixed percentage of the workers wages, whereas, they are provided social security benefits
according to individual needs without distinction.
Cash Benefits are disbursed by the Corporation through its Branch Offices (BOs) / Pay Offices
(POs), subject to certain contributory conditions.

3
Factories Act, 1948

79. Annual leave with wages

(1) Every worker who has worked for a period of 240 days or more in a factory during a calendar year
shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated
at the rate of-

(i) if an adult, one day for every twenty days of work performed by him during the previous
calendar year;

(ii) if a child, one day for every fifteen days of work performed by him during the previous calendar
year.

Explanation 1 : For the purpose of this sub-section-

(a) any days of lay-off, by agreement or contract or as permissible under the standing orders;

(b) in the case of a female worker, maternity leave for any number of days not exceeding twelve weeks;
and

(c) the leave earned in the year prior to that in which the leave is enjoyed;

shall be deemed to be days on which the worker has worked in a factory for the purpose of computation
of the period of 240 days or more, but shall not earn leave for these days.
Explanation 2: The leave admissible under this sub-section shall be exclusive of all holidays whether
occurring during or at either end of the period of leave.

(2) A worker whose service commences otherwise than on the first day of January shall be entitled to
leave with wages at the rate laid down in clause (i) or, as the case may be, clause (ii) of sub-section (1) if
he has worked for two-thirds of the total number of days in the remainder of the calendar year.

90[(3)If a worker is discharged or dismissed from service or quits his employment or is superannuated or
dies while in service, during the course of the calendar year, he or his heir or nominee, as the case may
be, shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before
his discharge, dismissal, quitting of employment, superannuation or death calculated at the rates
specified in sub-section (1), even if he had not worked for the entire period specified in sub-section (1) or
sub-section (2) making him eligible to avail of such leave, and such payment shall be made-

(i) where the worker is discharged or dismissed or quits employment, before the expiry of the
second working day from the date of such discharge, dismissal, or quitting; and

(ii) where the worker is superannuated or dies while in service, before the expiry of two months
from the date of such superannuation or death.]

(4) In calculating leave under this section, fraction of leave of half a day or more shall be treated as one
full day's leave, and fraction of less than half a day shall be omitted.

(5) If a worker does not in any one calendar year take the whole of the leave allowed to him under sub-
section (1) or sub-section (2), as the case may be, any leave not taken by him shall be added to the leave
to be allowed to him in the succeeding calendar year:

PROVIDED that the total number of days of leave that may be carried forward to a succeeding year shall
not exceed thirty in the case of an adult or forty in the case of a child:

PROVIDED FURTHER that a worker, who has applied for leave with wages but has not been given such
leave in accordance with any scheme laid down in sub-section (8) and (9) 92[or in contravention of sub-
section (10)] shall be entitled to carry forward the 93[leave refused] without any limit.

(6) A worker may at any time apply in writing to the manager of a factory not less than fifteen days before
the date on which he wishes his leave to begin, to take all the leave or any portion thereof allowable to
him during the calendar year:

PROVIDED that the application shall be made not less than thirty days before the date on which the
worker wishes his leave to begin, if he is employed in a public utility service as defined in clause (n) of
section 2 of the Industrial Disputes Act, 1947 (14 of 1947):

PROVIDED FURTHER that the number of times in which leave may be taken during any year shall not
exceed three.

(7) If a worker wants to avail himself of the leave with wages due to him to cover a period of illness, he
shall be granted such leave even if the application for leave is not made within the time specified in sub-
section (6); and in such a case wages as admissible under section 81 shall be paid not later than fifteen
days, or in the case of a public utility service not later than thirty days from the date of the application for
leave.

(8) For the purpose of ensuring the continuity of work, the occupier or manager of the factory, in
agreement with the Works Committee of the factory constituted under section 3 of the Industrial Disputes
Act, 1947 (14 of 1947), or a similar Committee constituted under any other Act or if there is no such
Works Committee or a similar Committee in the factory, in agreement with the representatives of the
workers therein chosen in the prescribed manner, may lodge with the Chief Inspector a scheme in writing
whereby the grant of leave allowable under this section may be regulated.

(9) A scheme lodged under sub-section (8) shall be displayed at some conspicuous and convenient
places in the factory and shall be in force for a period of twelve months from the date on which it comes
into force, and may thereafter be renewed with or without modifications for a further period of twelve
months at a time, by the manager in agreement with the Works Committee or a similar Committee, or as
the case may be, in agreement with the representatives of the workers as specified in sub-section (8),
and a notice of renewal shall be sent to the Chief Inspector before it is renewed.

(10) An application for leave which does not contravene the provisions of sub-section (6) shall not be
refused, unless refusal is in accordance with the scheme for the time being in operation under sub-
sections (8) and (9).

(11) If the employment of a worker who is entitled to leave under sub-section (1) or sub-section (2), as the
case may be, is terminated by the occupier before he has taken the entire leave to which he is entitled, or
if having applied for and having not been granted such leave, the worker quits his employment before he
has taken the leave, the occupier of the factory shall pay him the amount payable under section 80 in
respect of the leave not taken, and such payment shall be made, where the employment of the worker is
terminated by the occupier, before the expiry of the second working day after such termination, and
where a worker who quits his employment, on or before the next pay day.

(12) The unveiled leave of a worker shall not be taken into consideration in computing the period of any
notice required to be given before discharge or dismissal.

4
What is EPF
The Employees’ Provident Fund (EPF) is a savings scheme introduced under
Employees’ Provident Fund and Miscellaneous Act, 1952. It is administered and
managed by the Central Board of Trustees that consists of representatives from
three parties, namely, the government, the employers and the employees. The
Employees’ Provident Fund Organization (EPFO) assists this board in its
activities. EPFO works under the direct jurisdiction of the government and is
managed through the Ministry of Labour and Employment.
The EPF scheme basically aims at promoting savings to be used post-retirement
by various employees all over the country. Employees’ Provident Fund or EPF is
a collection of funds contributed by the employer and his employee regularly on
a monthly basis. The employer and employee contribute 12% each of the
employee’s salary (basic + dearness allowance) to the EPF. These contributions
earn a fixed level of interest set by the EPFO. The amount of interest to be
received on the deposit along with the total accumulated amount is totally tax-
free, i.e. the employee may withdraw the entire fund without worrying about
paying any kind of tax on it.

The accrued amount may also be withdrawn by the nominee or the legal heir of
the employee post his death or can be withdrawn by the employee himself post-
resignation.

Read More: Saving Schemes List: Types, Interest Rates & Tenures

Employees’ Provident Fund (EPF) Schemes

The scheme caters to the needs of more than 5 crore members and is governed
by three Acts.

Employees’ Provident Fund Scheme, 1952

Employees’ Pension Scheme, 1995

Employees’ Deposit Linked Insurance Scheme, 1976

Eligibility Criteria
 Employees need to become an active member of the scheme in order to
avail benefits under this scheme

 Employees of an organization are directly eligible for availing Provident

Fund, insurance benefits as well as pension benefits since the day they
join the organization.

 Any organization employing a minimum of 20 workers is liable to give EPF

benefits to the workers.
 This scheme does not cater to the needs of people residing in Jammu and
Kashmir.
How to Register for EPF?
 Visit the government website Employee Provident Fund Organisation
(EPFO)
 Go to the section of ‘Establishment Registration’ that opens up a new
page with ‘Instruction Manual’. It will explain the process of Employer
Registration, followed by registration of DSC [Digital Signature
Certificate] of the Employer which is a prerequisite for fresh application
submission
 Accept ‘I have read the instruction manual’ tickbox to proceed and fill in
the details to register
 An email e-link is sent which is to be activated and mobile PIN is also
sent. You need to upload certain documents to register
 Those who are already registered can log in using their Universal Account
Number (UAN)

How to Login to EPF?

You need to visit the member website of EPF i.e. EPF e-SEWA/EPF Members
Portal and on the right side you have the option to login using UAN. However,
UAN must have been activated earlier.

EPF KYC Update

 Visit EPF Members Portal and login using UAN & Password
 As the new page opens up, under the section of ‘Manage’, click on KYC
from the dropdown menu
 Update the details like name and number of PAN, Aadhar, Bank
documents, etc.
 Save it and it will show as Pending KYC as long as it is verified from the
other end

EPF UAN Activation

 You need to visit the member website of EPF i.e. EPF e-SEWA/EPF
Members Portal
 On the right corner below, you will find the option of ‘Activate UAN’ and
click on it
 As the new dashboard opens up, enter either UAN, PAN or Aadhar and
other details as Name, Birth date, etc according to EPFO records
 Enter the ‘captcha’ code and get authorization PIN on your registered
mobile with EPFO
 Use the One Time Password (OTP) to validate and activate the UAN online
  Another message will be sent to confirm activation of UAN
 Once UAN is activated, you can login using it to check the status of
Provident Fund

EPF Contribution
The Employees’ Provident Fund is a fund where both the employer as well as
the employee contributes a part of the salary. These contributions are made
regularly on a monthly basis. The interest rate fixed depends upon the
employee’s basic pay along with the dearness allowance in his salary. Here is a
breakup of the EPF Contributions:

Contribution By Monthly Percentage Contributed (%)

Employee 12/10*

Employer 12**

Total 24%

*10% EPF share is valid for the organisations– where there are 20 or less than
20 employees /organisations with losses incurred more than or equal to the net
worth (at the end of financial year) /organisations declared sick by the Board for
Industrial and Financial Reconstruction

**12% Employer’s contribution includes 3.67% EPF and 8.33% EPS

For Example:

If the monthly salary of a person is Rs.30,000. The contributions calculated are

as follows-

 12% of Rs.30,000 (Employee share)= Rs.3,600

 3.67% (in EPF) of Rs.30,000 (Employer’s share)= Rs.1,101
 8.33% (in EPS) of Rs.30,000 (Employer’s share)= Rs.2,499
 Total= Rs.7200/-

A) Employee’s Contribution towards EPF

In general, the contribution rate for the employee is fixed at 12%. However, the
rate is fixed at 10% for the below-mentioned organizations:
  Organizations or firms employing a maximum of 19 workers.
 Industries declared as sick industries by the BIFR
 Organizations suffering annual loss much more as compared to their net
value.
 Coir, guar gum, beedi, brick and jute industries.
 Organizations operating under wage limit of ₹ 6,500.

B) Employer’s Contribution towards EPF

The minimum amount of contribution to be made by the employer is set at a
rate of 12% of ₹ 15,000 (although they can voluntarily contribute more). This
amount equals to ₹ 1800 per month. It means that both the employer as well
as the employee has to contribute ₹ 1800 each per month towards this
scheme. Initially, this amount was set at 12% of ₹ 6,500 which would equal to
₹ 780 to be contributed both by the employer and the employee.

 The contribution from both the parties is deposited into the EPFO
(Employees Provident Fund Organisation)
 This is a long-term investment fund for the contributors which helps them
continue an independent life after retirement
 EPF also provides its contributors the loan facility in need

Important Points Related to EPF Contributions

 The contribution made by the employee goes totally towards the provident fund of the
employee.

 The contribution made by the employer is divided into different parts.

 Total contribution made by the employer is distributed as 8.33% towards Employees’ P

Scheme and 3.67% towards Employees’ Provident Fund.

 Apart from the above-made contributions, an additional 0.5% towards EDLI has to be p
the employer.

 Certain administration costs towards EDLI and EPF standing at the rate of 1.1% and 0.
respectively also have to be incurred by the employer.

 This means that the employer has to contribute a total of 13.61% of the salary towards
scheme.
Interest Rate on EPF
The interest rate for the financial year 2018 – 2019 is 8.65%. The interest rate
for the following financial year i.e. 2018-19 is scheduled to be declared in the
month of January 2019. The accumulated fund in the PF account attracts certain
interest which is 100% tax exempted.

The interest earned is directly transferred to the Employees’ Provident Fund

account and is calculated depending upon the rate which is pre-decided by the
GOI along with the Central Board of Trustees (CBT). The CBT administers the
Act.

The year in which the new interest rates are announced stays valid for the next
financial year i.e. from the year starting on 1st April of one year to the year
ending on 31st March of the next year. Let’s understand this with the help of an
example:

 The rate of interest i.e. 8.65% is valid and will be applicable only on EPF
deposits made between the financial years of April 2018 to March 2019.
 The interest even though calculated on a monthly basis, is transferred to
the Employees’ Provident Fund account only on a yearly basis on 31st
March of the applicable financial year.
 The transferred interest is summed up with the next month i.e. April’s
balance and is then again used for calculation of the interest.
 If the contribution is not made into an EPF account for thirty-six months
continuously, the account becomes dormant or inoperative.
 Interest is offered on inoperative accounts of employees who have not
attained the retirement age.
 Interest is not provided on the amount deposited in inoperative accounts
of retired employees.
 The interest earned on inoperative accounts is taxable as per the
member’s slab rate.
 For contributions made towards the Employees’ Pension Scheme by the
employer, the employee shall not receive any interest. However, a
pension is paid out of this amount after the age of 58.

Know More About EPF Interest Rate 2019-20

Calculation of Interest Rate on EPF

The interest rate is announced on a yearly basis, whereas, the interest is
calculated on a monthly basis. The interest rate is calculated by dividing the per
annum rate by 12. This is done in order to arrive at the amount of interest to be
given to the employee for a particular month.
For example :

 If the interest rate per annum is set at 12% then the rate of interest for
any particular month in the given year will be calculated as 12/12= 1%
per month.

Let’s suppose that an employee started his contributions from the month of
November 2018.

 The applicable rate of interest for him will stand at 8.65%.

 In this case, the rate of interest per month will be 8.65/12=0.7208%.
 The employee directs 12% of ₹ 15,000 which is equivalent to ₹
1,800 per month towards his EPF account.
 This amount is transferred to the employee’s EPF account at the end of
every working month and is reflected as a component of the total salary.

The employer makes a contribution of ₹ 1,800 which is equivalent to the

contribution made by the employee.

 3.67% of the employer’s contribution is made towards EPF account and

 8.33% of the contribution is made towards the employee’s EPS account

 The employer’s contribution to the employee’s account stands at 3.67%

of ₹ 15,000 which is equal to ₹ 550.
 The monthly contributions made by the employer and the employee
towards this account amounts to ₹ 1800+ ₹ 550, which is equal to ₹
2350.

1. The balance calculation for the next month (December) will be done in
the given manner:

 Balance carried forward from November 2018= ₹ 2,350.

 Interest earned for the month of December 2018 = ₹ 16.75
 Balance at the end of December 2018 = ₹ 2,350 + ₹ 2,350 = ₹ 4,700

Note: Although interest has been earned in December 2018, it is only credited
at the end of the financial year on 31st March.

Read More: 10 Things You Need to Know About EPF

EPF Forms
An EPF form is mandatory for all activities that employees wish to undertake in
their accounts; the activities include registration, withdrawal, transfer of PF,
availing loans from an existing EPF account or for any other reason.
Mentioned below are the various types of forms available :

Forms for EPF Claims

EPF Form Use of the EPF Form Dow

Form 31 EPF Withdrawal

Form 14 Buying LIC Policy

Form 10D For claiming monthly pension

Form 10C For claiming withdrawal benefits/scheme certificate of EPS

Form 11 EPF Account Transfer

Form 19 Final Employees’ Provident Fund Settlement

Form 20 EPF Final settlement in case of death of the employee

Form 2 Declaration and nomination form for EPF & EPS

Form 5 IF Claim as per EDLI scheme

Form 15G To save TDS on the interest income on EPF

Form 5 New employees registering for EPF and EPS

Form 11 Auto transfer of EPF

Know More About EPF Forms

EPF Payment
Given below are the steps to be followed to process the payments:

1. Login to EPFO Portal using the Electronic Challan cum Returns (ECR)
credentials
 2. Click on ‘Payments’ and go to ‘ECR upload’
3. Select Wage Month, Salary Disbursal Date, Rate of Contribution
4. Proceed to upload ECR text File. You will see a pop-up saying ‘File
Validation Successful’ in case the uploaded file is validated for predefined
conditions. However, if the file is not validated, ‘Error’ appears on the
screen
5. The TRRN will be displayed on the screen, Click on ‘Verify’
6. Click on ‘Prepare Challan’ to obtain summary sheet for ECR
7. Go to Admin/Inspection Charges and select ‘Generate Challan’
8. Click on ‘Finalize’ and proceed to pay
9. Choose ‘Online’ as the payment mode and choose any bank account
10. Once you select your respective bank account, you will be
redirected to the online banking website of the same bank
11. Make payment using Net Banking

Once the payment is successfully made, a confirmation will be generated with

Transaction-id and e-Receipt. The transaction will further be uploaded on the
EPFO Portal and confirmation via TRRN number provided accordingly.

Also Read: EPF Payment: Online Procedure, Receipt Download & Late Payment
Penalty

EPF Passbook
All contributions made by a member and his employer are mentioned in the EPF
passbook. The passbook also contains other important details such as
establishment ID and name, member ID and name, office name, employee’s
share, employer’s share, EPS contribution, etc.

The member can download the EPF passbook online by visiting the EPF website.

Checking EPF Balance

A member can check the EPF balance accumulated in the account online by
following these simple steps:

 Visit EPF’s website at www.epfindia.gov.in

 Go to “For Members” in the “Our Services” section
 Click on the “Member Passbook” option
 Now enter your “UAN”, password and captcha code and login to your EPF
account
 Select the “Member ID” to view your passbook
 Your passbook will be displayed with complete details in the document.
The member can also check his EPF balance by sending
an SMS to 7738299899 in the format EPFOHO <UAN> ENG.

EPF balance can also be checked through a missed call on the number- 011-
22901406.

Read More: How to Check EPF Balance

How to Transfer EPF Online?

 Log in to the EPFO members’ portal using your UAN and password
 Go to the ‘Online Services’ tab on the main menu of the home page and
select ‘Transfer Request’ to generate an online transfer request
 A new dashboard displaying all your personal details will be shown. Verify
all of that like DOB, EPF and date of joining, etc. soa s to claim the
process
 Once you verify, go to Step 1, select the option of previous or present
employer and then provide the details of the previous employer through
which you want to claim
 Submit the details, an OTP will be sent to your registered mobile number.
You need to authenticate your identity by entering the OTP, then only the
request will be submitted and an online filled-in form will be generated.
You need to sign the form and send it to your present or previous
employer
 The employer will also get an online notification about the EPF transfer
request. EPFO Office will process the claim only after employer digitally
forwards the claim to the EPFO after verifying your employment details
 Post submission of the request, you can check the status of your EPF
transfer claim under the ‘Track Claim Status’ menu, which is under the
‘Online Services’ menu

How to Activate Inoperative Accounts?

Inoperative or dormant accounts are those which have not seen a contribution
in over 36 months. Generally, it happens when a member has not transferred
the old account to his new employer and tends to forget about the previous
contributions. One can either transfer them to the current EPF account as per
the above mentioned steps or withdraw them using UAN number.

Lodging EPF Grievances

ickness Benefits
Sickness Benefits

Sickness Benefit represents periodical cash payments made to an IP during the period of certified
sickness occurring in a benefit period when IP requires medical treatment and attendance with
abstention from work on medical grounds. Prescribed certificates are; Forms 8,9,10,11 & ESIC-
Med.13. Sickness benefit is 70% of the average daily wages and is payable for 91 days during 2
consecutive benefit periods.

Qualifying Conditions
(i) To become eligible to Sickness Benefit, an IP should have paid contribution for not less than 78
days during the corresponding contribution period.

(ii) A person who has entered into insurable employment for the first time has to wait for nearly 9
months before becoming eligible to sickness benefit, because his corresponding benefit period starts
only after that interval.

(iii) Sickness Benefit is not payable for the first two days of a spell of sickness except in case of a
spell commencing within 15 days of closure of earlier spell for which sickness benefit was last paid.
This period of 2 days is called "waiting period". This provision should be clearly understood by
IMOs/IMPs as actual experience shows that such of IPs who want to avail medical leave on flimsy
grounds generally come for First Certificate/First & Final Certificate within 15 days of earlier spell,
usually on unpaid holidays and/or on each weekly off etc, to avoid loss of benefit for 2 days due to
fresh waiting period.

Forfeiture of Gratuity – When and How an

Employer can Forfeit Gratuity payable to an
Employee
Posted by: The ADP Team on 12 September 2019 in Compliance
 Share this

(Coffee Break Compliance Guide – Volume 55, by Subramaniam Anandan)

Payment of Gratuity under the Payment of Gratuity Act, 1972 for eligible employees is
mandatory and to be disbursed within 30 days of separation of such employees. It is a piece of
social security legislation which cannot be denied for eligible employees and it shall be
automatic upon any such separation. Forfeiture clause shall always be used cautiously by any
employer.

Provisions under the Act to forfeit Gratuity:

As per the section 4(6) of The Payment of Gratuity Act the forfeiture of gratuity is possible fully
or to the extent of amount as misappropriated.

Section 4 (6) – Notwithstanding anything contained in sub-section (i),

a. the gratuity of an employee, whose services have been terminated for any act, wilful omission or
negligence causing any damage or loss to, or destruction of, property belonging to
the employer, shall be forfeited to the extent of the damage or loss so caused.
b. the gratuity payable to an employee may be wholly or partially forfeited
i. if the services of such employee have been terminated for his riotous or disorderly conduct or
any other act of violence on his part; or
ii. if the services of such employee have been terminated for any act which constitutes an offence
involving moral turpitude, provided that such offence is committed by him in the course of his
employment.

Adding to the above, another provision in the Act specifically protects payment of Gratuity.

Section 13 of the Act – Protection of gratuity – No gratuity payable under this Act [and no
gratuity payable to an employee employed in any establishment, factory, mine, oilfield,
plantation, port, railway company or shop exempted under section 5] shall be liable to
attachment in execution of any decree or order of any civil, revenue or criminal court.

From the above, it is understood that the Gratuity is protected against attachment or forfeiture
except only under certain circumstances like dismissal of an employee for moral turpitude,
misappropriation, theft, violence or misbehavior and not otherwise.

Right to forfeit gratuity of employee by the employer not absolute but only when the employee
has been dismissed for the misconduct as specified in section 4(6) of the payment of Gratuity
 Act. Even such forfeiture can be taken-up only after giving an opportunity to the concerned
employee, issuing a show-cause notice.

Subsequent to the reply to such notice, a specific order is to be issued in respect of forfeiture of
amount of gratuity.

Further, the forfeiture of gratuity of an employee for misappropriation can be to the extent of
amount as misappropriated.

Besides, Gratuity payable to an separated employee, cannot be adjusted with any

 Loan taken was pending with some instalments

 Advance taken and still to be closed
 Notice pay
 Loss of pay in the previous months to which wages were paid due to pre-attendance closure
 Charges towards any facility / amenity provided by the employer
 Or, any others

Following excerpts from the Hon’ble Apex court of India, shows that the Gratuity under the
Payment of Gratuity Act is one of the safeguarded social security benefit available to any
eligible employee.

1. The Hon’ble the Supreme Court of India in the case of Ahmedabad Pvt. Primary Teachers’
Association vs. Administrative Officer reported in AIR 2004 SC 1426. Para: 6 of the said
decision read as under,

“The Act (Payment of Gratuity Act, 1972) is a piece of social welfare legislation and deals with
the payment of gratuity which is a kind of retiral benefit like pension, provident fund etc. As has
been explained in the concurring opinion of one of the learned Judges of the High Court
“gratuity in its etymological sense is a gift, especially for services rendered, or returns for
favours received”. It has now been universally recognized that all persons in society need
protection against loss of income due to unemployment arising out of incapacity to work due to
invalidity, old age etc. For the wage-earning population, security of income, when the worker
becomes old or infirm, is of consequential importance. The provisions contained in the Act are in
the nature of social-security measures like employment, insurance, provident fund and pension.
The Act accepts, in principle, compulsory payment of gratuity as a social-security measure to
wage-earning population in industries, factories and establishments.”

2. It has been held by Hon’ble Supreme Court of India, in Balbir Kaur vs.Steel Authority of India
Ltd., Appeal (civil) 11881 of 1996 and Appeal (civil) 11882 of 1996, by Supreme Court Bench
comprising of Hon’ble Justice Mr.U.C.Banerjee and Hon’ble Justice Mr.S.B.Majumdar, as under
(Paragraph 3) :
“As regards the provisions of the Payment of Gratuity Act, 1972 (as amended from time to time)
it is no longer in the realm of charity but a statutory right provided in favour of the employee”.

Hence, it suggested that any gratuity which is due to an employee as per the provisions of the
Act, needs to be disbursed within the due date, which is a right of an employee. Forfeiture
which does not have any backing documentation or record may lead to unnecessary legal tria