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CA PRANAV CHANDAK
 CHAPTER 7. PAYMENT OF GRATUITY ACT, 1972
1.1 INTRODUCTION & APPLICABILITY OF THE ACT
The term ‘gratuity’ is derived from Latin word ‘gratuitous’.
The Act came into effect from 16.09.1972.
The Act applies to whole of India including J&K except plantations & Ports in J&K.
‘Gratuity’ means payment made by the employer to the employee at the time of termination of
his service either by retirement/superannuation/resignation/death of employee.
Gratuity is fully paid by the employer. No part of the gratuity comes from an employee’s salary.
This Act applies to the employees engaged in -
- Factories, Oilfields, Railway, Mines, Plantations, Ports,
- Shops or establishments where 10 or more employees are/were employed.
- Any other establishment notified by CG [Subject to prior notice of 2 Months].
PC Note: Act shall continue to apply even if the no. of employees fall below 10.

1.2 IMPORTANT DEFINITIONS

Employee [Section 2(e)]
Any person (other than apprentice) who is employed for wages
in any kind of work (whether manual or otherwise)
in or in connection with the work of a
- Factories, Oilfields, Railway, Mines, Plantations, Ports, shop or other establishment
but does not include any such person who holds a post under CG/SG & is governed by any other
Act or rules providing for payment of gratuity.
PC Note: Teachers are included in the definition of employees [Amendment Act - 2009].

Employer [Section 2(f)]

Establishment belonging to or under control of CG/SG →
- Person or authority appointed by AG for supervision or control of employees;
- Where no person has been so appointed → Head of the Ministry or Department concerned;
Establishment belonging to or under control of any Local Authority →
- Person appointed by such authority for supervision & control of employees;
- Where no person has been so appointed → CEO of LA.
Any other case → Person who has ultimate control over the establishment etc;
- Where the said affairs are entrusted to any other person (Manager, MD) → Such person.

Family [Section 2(h)]

Male Employee → Himself, his wife, his children (married/unmarried), his dependent parents &
dependent parents of his wife & widow and children of his predeceased son, if any;
Female Employee → Herself, her husband, her children (married/unmarried), her dependent
parents & dependent parents of her husband & widow & children of her predeceased son, if any.
 PC Note: Lawfully adopted Child → deemed to be included in his family.
Child of employee adopted by another person → Such child shall be excluded from employee’s family.

Retirement [Sec 2(q)]: Termination of an employee’s service otherwise than on superannuation.

Superannuation [Section 2(r)]

Attainment of such age as fixed in contract of service on which employee shall vacate employment.

Disablement: Disablement which incapacitates an employee for work which he was capable of
performing before the accident or disease resulting in such disablement.

Wages [Section 2(s)]

All emoluments earned by an employee while on duty or on leave in accordance with T&Cs of his
employment & which are paid/payable to him in cash & includes dearness allowance
but does not include Commission, Overtime wages, Bonus, HRA & Any other allowance.

V. IMP Continuous service [Section 2(A)]

1. Employee shall be said to be in ‘continuous service’ for a period if -
- he has been in uninterrupted service for that period
- including service which may be interrupted on account of:
Sickness;
accident leave;
absence from duty without leave (not being absence treated as absence as break in service)
lay off, strike or a lock out or cessation of work (not due to any fault of the employee).
Deeming 2. Where an employee is not in continuous service (as per clause 1 above) for any period of 1 year
Fiction or 6 months, he shall be deemed to be in continuous service under the employer:
(a) for said period of 1 year if employee has actually worked under employer for -
(during 12 calendar months preceding the date w.r.t. which calculation is to be made)
(i) ≥ 190 days (employed in mine or in establishment which works for < 6 days a week; &
(ii) 240 days (in any other case);
(b) for the period of 6 months if employee has actually worked under employer for -
(during 6 calendar months preceding the date w.r.t. which calculation is to be made)
(i) ≥ 95 days (employed in mine or in establishment which works for < 6 days a week; &
(ii) 120 days (in any other case);
PC Note No. of days on which employee has actually worked shall include days on which:
- he has been laid off under an agreement or as permitted by the standing orders;
- he has been on leave with full wages, earned in the previous year;
- he has been absent due to temporary disablement caused by accident arising out of
and in the course of his employment; &
Female → Maternity leave (Total period of such maternity leave does not exceed 26 weeks).
 1.3 PAYMENT OF GRATUITY [SECTION 4(1)]
- Gratuity shall be payable to an employee on the termination of his employment,
- after he has rendered continuous service for not less than 5 years,
- on his superannuation, retirement, resignation, death or disablement due to accident or disease.

PC Note If termination is due to death/disablement → Continuous service of 5 years is not necessary.

Death of employee → Gratuity shall be paid to his nominee or to legal heirs (if no nomination).

1.4 CALCULATION OF GRATUITY [Section 4(2)]

Gratuity shall be payable to employee at the rate of 15 days wages based on wages last drawn;
- for every completed years of service or part thereof in excess of 6 months;

Gratuity Payable = Last wage drawn x 15/26 x Completed Years of Service.

PC Note: In calculation of gratuity, one month is taken as 26 days.

Amount of gratuity payable to an employee shall not exceed 20 Months’ wages [Section 4(2)].
Maximum gratuity payable = Rs. 20 lakhs. [Section 4(2)].

PC Note Seasonal Establishment’s Employee → Gratuity shall be paid @ seven days’ wages for each season.
Piece-rated employee: Daily wages = Average of total wages for Last 3 months (Overtime All. - X).

1.5 FORFEITURE OF GRATUITY [Section 4(6)]

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

Gratuity payable to an employee may be wholly/partially forfeited if services is terminated for -

- his riotous or disorderly conduct, other act of violence;
- any act which constitutes an offence involving moral turpitude (committed during employment).

Note Employee shall be given a reasonable opportunity of being heard before forfeiture of gratuity.

PC Note Right to receive gratuity by the employee is the statutory right. It cannot be withheld under any
circumstances but for the exception enumerated in Section 4(6).
 1.6 NOMINATION [SECTION 6] [V. IMP]
Each employee, who has completed 1 year of service, shall make nomination in Form F.

Rule 6(1) Nomination shall be submitted in duplicate either in person or through reg. post.
Employee already in employment for 1 year or more on date of commencement of these rules:
- Within 90 days from date of commencement of these rules.
Employee who completes 1 year of service after the date of commencement of these rules:
- Within 30 days of completion of 1 year of service.
Late Nomination shall be accepted by employer if filed with reasonable grounds for delay.

Rule 6(2) Within 30 days of receipt of nomination,

Employer shall verify service particulars of employee with records of the establishment &
Return to employee duplicate copy of nomination (attested) as token of recording of nomination.
Gratuity may be distributed in more than one nominee;
If employee has a family (at the time of making nomination),
- Nomination shall be made in favor of one or more family members only
- Nomination made in favour of any person other than family member → Void.
If employee has no family (at the time of making a nomination),
- Nomination may be made in favor of any person or persons; but
- if employee subsequently acquires a family, such nomination shall become invalid &
Rule 6(3) Employee shall make fresh nomination in favor of family member(s) within 90 days in Form G.

Modification of Nomination [Form H]

Nomination may (subject to above) be modified by employee at any time, after giving written
notice to his employer in form H.
If nominee dies before (predeceases) the employee, interest of nominee shall revert to employee;

& employee shall make a fresh nomination i.r.o. such interest;

Every nomination, fresh nomination or alteration of nomination shall be sent by the employee to
his employer, who shall keep the same in his safe custody.

Rule 6(6) Nomination shall take effect from the date of receipt by the employeer.
 1.7 DETERMINATION OF AMOUNT OF GRATUITY [SECTION 7]
As soon as gratuity becomes payable, employer shall determine the amount of gratuity (whether
employee has made application or not). [Determination of gratuity payable – Employer’s Duty]
Then, he shall give notice (Form L) to the person to whom gratuity is payable & also to Controlling
Authority (herein referred as C.A), specifying the amount of gratuity so determined.
Employer shall arrange to pay gratuity within 30 days from the date of becoming payable.
If not paid within stipulated period, employer is liable to pay interest @ 10% p.a.
No interest will be payable if delay in payment is due to fault of employee & employer has obtained
permission in writing from C.A for the delayed payment.
If claim for gratuity is not found admissible, notice shall be issued in Form ‘M’ to the employee,
nominee or legal heir specifying reasons why the claim for gratuity is not considered admissible.
Dispute If there is a dispute regarding amount of gratuity, employer shall deposit gratuity with C.A.
- C.A shall (after inquiry & after giving both parties reasonable OOBH) determine gratuity payable
- If any excess amount than deposited is payable, C.A shall direct employer to pay excess amount.
- Then, Controlling Authority shall pay the amount of the deposit to the applicant (employee)
Note: Where applicant is not employee: to the nominee/heir of employee (if C.A is satisfied
that there is no dispute as to right of applicant to receive amount of gratuity).

1.8 APPLICATION FOR GRATUITY [RULE 7]

7(1) Employee who is eligible for payment of gratuity (or any person authorized in writing by employee)
shall apply within 30 days from the date on which gratuity became payable in Form ‘I’ to employer.
If date of superannuation or retirement of an employee is known → Employee may apply before
30 days of the date of superannuation or retirement to the employer.
7(2) Nominee eligible for payment of gratuity shall apply within 30 days from date of gratuity became
payable to him in Form ‘J’ to employer.
Application in plain paper with relevant particulars shall also be accepted.
7(3) Legal heir of an employee eligible for payment of gratuity shall apply within 1 year from the date
of gratuity became payable to him, in Form ‘K’ to the employer.
7(4) Where gratuity becomes payable before the commencement of these rules, periods of limitation
specified above shall be deemed to be operative from date of such commencement.
7(5) Belated application for payment of gratuity filed after expiry of the periods specified shall be
entertained by the employer, if applicant has sufficient cause for the delay; &
No claim for gratuity shall be invalid merely because claimant has filed late application.
Any dispute in this regard shall be referred to the controlling authority for his decision.
1.9 NOTICE FOR PAYMENT OF GRATUITY
Within 15 days of receipt of an application for payment of gratuity, employer shall:
- if claim is found admissible on verification: Issue notice in Form L specifying amount of gratuity
payable & fixing date for payment of gratuity (not being later than 30th day after receipt)
- if claim for gratuity is not found admissible: Issue notice in Form ‘M’ specifying the reasons
why claim for gratuity is not considered admissible to applicant employee, nominee, legal heir.
In case payment of gratuity is due to be made in employer’s office, date fixed for the purpose
shall be re-fixed by the employer, if written application in this behalf is made by the payee
explaining why it is not possible for him to be present in person on the date specified.
If claimant for gratuity is a nominee or legal heir, employer may ask for such witness or evidence
as may be deemed relevant for establishing his identity or maintainability of his claim.
In that case, time limit specified for issuance of notices shall be operative w.e.f. the date such
witness or evidence (asked by the employer) is furnished to the employer.

MODE OF PAYMENT (RULE 9)

Gratuity payable shall be paid in cash or in Demand Draft or bank Cheque (if so desired by payee)
If eligible employee, nominee or legal heir desires & amount of gratuity payable < Rs. 1,000,
payment may be made by postal money order after deducting postal money order commission.
Intimation about the details of payment shall also be given by the employer to C.A of the area.
If nominee/heir is a minor: C.A shall invest the amount of gratuity deposited with him for the
benefit of such minor in term deposit with SBI or any of its subsidiaries or any Nationalized Bank.

APPLICATION FOR DIRECTION (RULE 10)

If the employer:
- refuses to accept nomination; or
- to entertain an application for gratuity; or

- rejects the eligibility of gratuity; or

- indicates less amount than eligible amount of gratuity in the notice; or
- fails to issue notice
eligible person to receive the gratuity may file an application in ‘Form-N’ within 90 days from
date of occurrence of the cause, to C.A for the issue of directions to employer.
Additional copies are to be sent along with the application for issuing them to opposite parties.
If such application is filed after 90 days, C.A may admit the application if sufficient cause is there.
Application may be submitted to C.A in person or it may be sent through registered post.
DIRECTIONS ISSUED BY AUTHORITY
On receipt of an application u/r 10, C.A shall [by notice in Form O] call applicant & employer to
appear before him on specified date, time & place together with all documents & witnesses.
Any person desiring to act on behalf of employer or employee/nominee/legal heir shall present to
C.A a letter of authority from the person on whose behalf he seeks to act together with a
written statement explaining his interest in the matter and praying for permission so to act.
C.A shall record an order either giving approval or refusal (specifying the reasons for the refusal).
After completion of hearing on fixed date, C.A shall record his finding as to whether any amount
is payable to the applicant. A copy of the finding shall be given to each of the parties.
If employer fails to appear on date of hearing after due service of notice without sufficient cause,
C.A may proceed to hear and determine the application ex-parte.
If applicant fails to appear on fixed date of hearing without cause, C.A may dismiss application.
Such order may (on good cause being shown within 30 days) be reviewed & application re-heard
after giving 14 days notice to opposite party of date fixed for rehearing of application.
Sittings of C.A shall be held at such times & at such places as he may fix & he shall inform parties.
C.A may authorize a clerk of his office to administer oaths for the purpose of making affidavits.
C.A may at any stage of the proceedings issue summons to any person in Form ‘P’ either to give
evidence or to produce documents or for both purposes on a specified date, time and place.
Notice, summons, order issued by C.A may be served either personally or by registered post.
If parties to any proceeding are members of any trade union or association or are represented
by authorized person, service of notice on secretary/principal officer (if no secretary) of trade
union or association, or on authorized person shall be deemed to be service on such persons.
If finding is recorded that applicant is entitled to payment of gratuity, C.A shall issue a notice
to employer in Form ‘R’ specifying the amount payable & directing payment to the applicant under
intimation to C.A within 30 days from the date of the receipt of the notice by the employer.
Copy of notice shall be endorsed to the applicant employee, nominee or legal heir.

POWERS OF CONTROLLING AUTHORITY (C.A)

For conducting an inquiry, C.A shall have the same powers as vested in a court while trying a suit,
under the Code of Civil Procedure, 1908, w.r.t. the following matters:
enforcing the attendance of any person or examining him on oath;
requiring the discovery and production of documents;
receiving evidence on affidavits;
issuing commission for the examination of witnesses.
APPEAL
Any person aggrieved by an order may within 60 days (from the date of receipt of order) make
an appeal to appropriate Government (AG) or such other authority as may be specified by AG.
AG or appellate authority may on sufficient cause extend the said period by further 60 days.
AG or appellate authority after giving the parties to the appeal a reasonable opportunity of being
heard, confirm, modify or reverse the decision of the controlling authority.

RECOVERY OF GRATUITY [SECTION 8]

If amount of gratuity payable is not paid by employer within specified time to the person entitled,
C.A shall (on application made to it by aggrieved person), issue a certificate for that amount to
Collector, who shall recover it along with compound interest thereon @ 9% p.a. from expiry of the
specified time, as arrears of land revenue & pay the same to the person entitled thereto.

EXEMPTION OF EMPLOYER FROM LIABILITY IN CERTAIN CASES [SECTION 10]

If employer is charged with punishable offence, he shall be entitled (upon complaint duly made by
him & on giving not less than three clear days’ notice in writing to the complainant) to bring any
other person (actual offender) brought before the court at appointed time for hearing charge;
If employer proves to the court that he has used due diligence to enforce execution of this act &
acutal offender committed offence without his knowledge/consent/connivance, actual offender
shall be convicted of the offence & shall be liable to the punishment as if he were the employer
& employer shall be discharged from any liability under this Act in respect of such offence;
Employer may be examined on oath & his evidence & that of any witness whom he calls in his
support shall be subject to cross-examination on behalf of person he charges as actual offender
& by the prosecutor.

If person charged as actual offender by the employer cannot be brought before the court at the
time appointed for hearing the charge:
- court shall adjourn the hearing from time to time for a period not exceeding 3 months &
- if by the end of said period, person charged as the actual offender cannot still be brought
before the court, court shall proceed to hear the charge against the employer &
- shall convict the employer if the offence be proved.
PENALTIES [SECTION 9]
If any person for avoiding any payment knowingly makes or causes to be made any false statement
false representation → Punishable with imprisonment upto 6 months or fine upto Rs. 1,000 or both.
Employer who contravenes or makes default in complying with any provisions or rules or order,
punishable with imprisonment upto 1 year, or with fine upto Rs. 1,000 or both.
If offence relates to non-payment of any gratuity, employer shall be punishable with imprisonment
for a term which shall not be less than 3 months unless court trying the offence is of opinion
(reasons recorded in writing) that lesser imprisonment or only fine would meet the ends of justice.

COGNIZANCE OF OFFENCE [SECTION 11]

No court shall take cognizance of any offence punishable under this Act save on a complaint made
by or under the authority of the appropriate Government.
If gratuity has not been paid/recovered within 6 months from prescribed time, AG shall authorize
C.A to make a complaint against employer; & C.A shall, within 15 days from date of such
authorization, make such complaint to a magistrate having jurisdiction to try offence.
No court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try
any offence punishable under this Act.

PROTECTION OF GRATUITY [SECTION 13] [V. IMP]

No gratuity payable under this Act shall be liable to attachment in execution of any decree or
order of any civil, revenue or criminal court.
Section 13A provides that notwithstanding anything contained in any judgment, decree or order
of any court, for the period commencing on & from 3rd day of April 1997 & ending on the day on
which the Payment of Gratuity (Amendment) Act 2009 receives the assent of the president,
gratuity shall be payable to an employee in pursuance of this notification of GoI in the Ministry of
Labor and Employment vide SO 1080 dated 3rd April 1997 & the said notification shall be valid and
shall be deemed always to have been valid as if the payment of gratuity (Amendment) Act 2009
had been in force at all material times and the gratuity shall be payable accordingly.
Nothing contained in this section shall extend to affect any person with any punishment or penalty
whatsoever by reason of the non-employment by him of gratuity during the period specified in
this section which shall become due in pursuance of said notification.
 ACT TO OVERRIDE OTHER ENACTMENTS ETC., [SECTION 14]
Provisions of this Act or any rule made there under shall have effect notwithstanding anything
inconsistent therewith contained in any enactment other than this Act or in any instrument or
contract having effect by virtue of any enactment other than this Act.
PC Note: If service of an employee has been terminated by way of disciplinary action under Working
Journalists & other Newspaper Employees (Conditions of Service) and Misc. Provisions of Act,1955,
he is not entitled to gratuity.

DISPLAY OF ABSTRACT OF THE ACTS AND RULES

Employer shall display an abstract of the Act & the rules made there under as given in Form ‘U’ in
English & in language understood by the majority of the employees at conspicuous place at or near
the main entrance of the establishment.

Not IMP POWER OF CG TO GIVE EXEMPTION TO ANY ESTABLISHMENT [SECTION 5]

This section gives power to appropriate Government to give exemption to any establishment from
this Act, if it is satisfied that the employees in such establishment are in receipt of gratuity or
pensionary benefits not less favorable than the benefits covered under this Act.

Not IMP NOTICE OF OPENINGS, CHANGE & CLOSURE OF THE ESTABLISHMENT [RULE 3]
Notice to be submitted by the employer to the Controlling Authority of the area
Notice in Form A: Within 30 days of the rules becoming applicable to an establishment.
Notice in Form B: within 30 days of any change in name, address, employer or nature of business.
Notice in Form C: 60 days before an employer intends to close down the business.

Not IMP DISPLAY OF NOTICE [RULE 4]

Employer shall display conspicuously a notice at or near the main entrance of the establishment
in bold letters in English & in a language understood by the majority of the employees specifying
the name of officer with designation authorized by the employer to receive notices on his behalf.
CA PRANAV CHANDAK
 EMPLOYEE PROVIDENT FUND & MISCELLANEOUS PROVISIONS ACT 1952
1.1 INTRODUCTION
The Act aims at providing social security & timely monetary assistance to industrial employees
& their families when they are in distress.

Following three schemes have been framed under the Act by CG:
1. The Employees’ Provident Fund Schemes, 1952;
2. The Employees’ Pension Scheme, 1995; &
3. The Employees’ Deposit-Linked Insurance Scheme; 1976.

The Act is now applicable to employees drawing a pay not exceeding Rs. 15,000 per month.
The Act extends to whole of India except Jammu & Kashmir.
Pay = Basic wages + Dearness Allowance + Retaining Allowance + Cash value of food concession.

1.2 APPLICABILITY [SECTION 1(3) - (subject to Section 16)]

This Act applies to:
Every establishment in which 20 or more persons are employed & which is a factory engaged
in any industry specified in Schedule I &
Any other establishment or class of such establishments:
- employing 20 or more persons which CG may by notification in OG specify in this behalf.
CG may apply the provisions of this Act to any establishment employing such number of persons
less than 20 as may be specified in the notification.
PC Note: Notice of not less than 2 months shall be given by CG to such establishments;
Once the Act applies, it shall continue to apply even if number of employees falls below 20.
Where it appears to Central PF Commissioner that employer & majority of employees have
agreed that provisions of this Act should be made applicable to their establishment, he may,
by notification, apply the provisions of this Act to that establishment on & from the date of
such agreement or from any subsequent date specified in such agreement;

Case Laws School rightly covered under PF when principal has affirmed about employment of 20 employees.

1.3 NON-APPLICABILITY OF THE ACT [Section 16(1)]

1. A Co-operative Society employing < 50 Persons & working without the aid of the power; or
2. A Newly set up establishments for an initial period of 5 years.
3. Other establishment belonging to/under control of CG/SG & whose employees are entitled to
benefit of contributory PF/old age pension in accordance with any scheme framed by CG/SG;
4. Any other establishment set up under Central, Provincial or State Act & whose employees are
entitled to benefit of contributory PF/old age pension in accordance with any scheme framed;
1.4 IMPORTANT DEFINITIONS
Appropriate Government [Section 2(a)]
in relation to an establishment belonging to/under control of CG - Appropriate Government
in relation to an establishment connected with - is ‘CG’
- a railway company;
- a major port;
- a mine or an oil field; or
- a controlled industry; or
- establishment having departments/branches in more than 1 state

in relation to any other establishment - AG = State Government.

Authorized Officer [Section 2(aa)]

- Central PF Commissioner;
- Additional Central PF Commissioner;
- Deputy PF Commissioner;
- Regional PF Commissioner; or
- Such other officer as may be authorized by CG, by Notification in Official Gazette

Employer [Section 2(e)]

For Factory → Owner or occupier of the factory, including their agent, legal representative of
deceased owner or occupier & if there is a manager appointed, such manager.
For any other establishment → Person who has ultimate control over affairs of establishment.
If said affairs are entrusted to a manager/MD → Such manager/MD.

Employee [Section 2(f)]

Any person who is employed for wages in any kind of work (manual or otherwise) in or in connection
with the work of establishment & who gets his wages (directly/indirectly) from the employer &
includes any person -
employed by or through a contractor in or in connection with the work of the establishment;
engaged as an apprentice (not being an apprentice engaged under the Apprentices Act, 1961
or under the Standing orders of the establishment).
Factory [Section 2(g)]
Any premises (including precincts) in any part of which a manufacturing process is being carried
(Whether with or without the aid or power).

Occupier of a factory [Section 2(k)]

Person who has ultimate control over the affairs of a factory, and, where the said affairs are
entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory.
 VARIOUS SCHEMES UNDER THIS ACT
The Act provides 3 types of schemes for the benefit of the employees as detailed below-
1. Section 5: Employees’ Provident Fund Schemes;
2. Section 6A: Employees’ Pension Scheme;
3. Section 6C: Employees’ Deposit Linked Insurance Scheme.
PC Note: Section 7 gives powers to CG to amend or vary schemes (prospectively/retrospectively)

SCHEME 1 EMPLOYEES’ PROVIDENT FUND SCHEMES [Section 5]

CG framed ‘Employees’ PF Fund Scheme, 1952 which came into effect from 2nd September, 1952.
Fund shall vest in & be administered by Central Board constituted under Section 5A of the Act.
Scheme framed may provide for all or any of the matters specified in Schedule II.

Central Board [Section 5A]

CG shall establish a Central Board.
Board consists of a chairman & a Vice Chairman to be appointed by the CG.
Central PF Commissioner is ex officio.
Members of this Board are being appointed by CG as per the provisions contained in Sec. 5A.
Section 5AA provides for the appointment of Executive Committee by CG to assist Central Board
in the performance of its functions. Members of Executive Committee are appointed by CG.

Applicability of the scheme

This scheme shall apply to all factories and other establishments to which the Act applies.
Note: This scheme shall not applicable to the tea factories in the State of Assam.

Eligible Employees to join PF

Employee whose pay is not more than Rs. 15,000 is eligible to join PF.
Contribution is paid upto a maximum of Rs. 15,000 by employer & employee.
However, employee drawing salary > Rs. 15,000 can become member of PF with permission of
Assistant PF Commisioner & his employer. In such case, PF contribution will be as per Rs. 6,500.
Note: Employee ceases to be a member of PF on attaining age of 60 years.
For international worker, ceiling of Rs. 15,000 is not applicable.

Amount of Contribution [Section 6]

Contribution = 12% of basic wages + DA + RA which shall be paid by the employer & employee.
Employees can (if they want) make contribution above 12%.
but employer shall not be under any obligation to contribute over and above 12%.
Note Dearness allowance shall include the cash value of any food concession allowed to an employee.
Retaining allowance → Allowance payable to employee for retaining his services, when the
establishment is not working.
 Withdrawal from the fund
Withdrawal from the fund is allowed for the following purposes -
- For purchase of a house/flat or for construction of house including acquisition of a suitable site;
- For repayment of loans in special cases;
- Withdrawal within one year before the retirement;
- Withdrawal upto 75% of the balance, if not employed from one month or more, subject to
approval of P.F. Commissioner or any officer authorised by him.
PC Note: Such withdrawals are not required to be repaid.

Advances from the fund

Advances from the fund are paid for the following purposes -
- For illness in certain cases;
- For marriages or post matriculation education of children;
- In abnormal conditions (Ex: Calamity, flood, earthquakes or riots) [Non-refundable]
- Granted to members affected by cut in the supply of electricity [Non-refundable]
- Grant of advance to members who are physically handicapped [Non-refundable]

SCHEME 2 EMPLOYEES’ PENSION SCHEME [SECTION 6A]

CG framed Employees’ Pension Scheme for the purpose of providing for -
- Superannuation pension;
- Retiring pension or permanent total disablement pension to the employees of any establishment
or class of establishments to which this Act applies; and
- Widow or widower’s pension;
- Children pension or orphan pension payable to the beneficiaries of such employees.

Contribution
Employer is to contribute 8.33% of the basic wages, dearness allowance & retaining allowance,
if any of the concerned employees as may be specified in the pension scheme.
There is no contribution from the employee.
Contribution is not payable by the employer when employee crosses 58 years of age since the
scheme ceases on completion of 58 years.

Pension Fund
A pension fund has been created for the purpose of this scheme.
Pension Fund shall vest in and administered by the Central Board.
Pension scheme may provide for all or any of the matters in Schedule II, as detailed below -
- Employees or class of employees to whom the Pension scheme shall apply;
- Portion of employers’ contribution to PF which shall be entitled to Pension Fund & its manner;
- Minimum qualifying service for being eligible for pension & manner in which the employees
may be granted the benefits of their past service;
 - Regulation of the manner in which & period of service, for which no contribution is received;
- Manner in which the employees’ interest will be protected against default in payment of
contribution by the employer;
- Manner in which accounts of Pension fund shall be kept and investment of moneys belonging
to Pension Fund to be made subject to such pattern of investment as determined by CG;
- Form in which an employee shall furnish particulars about himself & members of his family
- Forms, registers & records to be maintained i.r.o. employees, required for administration;
- Scale of pension & pensionary benefits & conditions relating to the grant of such benefits;
- Manner in which the exempted establishments have to pay contribution towards the pension
scheme and the submission of returns relating thereto;
- Mode of disbursement of pension and arrangements to be entered into with such disbursing
agencies as may be specified for the purpose;
- Manner in which expenses for administering the Pension Scheme will be met from income
income of the Pension Fund;
- Any other matter which is to be provided for in the Pension Scheme or which may be
necessary for the purpose of implementation of the Pension Scheme.

3 EMPLOYEES’ DEPOSIT LINKED INSURANCE SCHEME [SECTION 6C]

CG made Employees Deposit Linked Insurance Scheme, 1976 which came into effect from 1.9.1976.
It applies to all factories & establishments to which Act applies except tea factories in Assam.
Wage ceiling limit under Employees Deposit linked Insurance Scheme = Rs. 15,000.
The insurance benefit under the scheme shall be an amount between Rs. 2.5 lacs & 6 lacs.

Contribution
Deposit Linked Insurance Fund has been created for this purpose.
Employer shall pay amount not being more than 1% of basic wages + DA + Retaining allowance.
Employer shall pay such further amount not exceeding 1/4th of contribution which is required to
made as determined by CG to meet all expenses in connection with administration of the scheme
other than the expenses towards the cost of any benefits provided by or under that scheme.
PC Note: If monthly pay > Rs. 15,000, contribution payable is restricted Rs. 15,000.

Determination of moneys due from employers [Section 7A]

In case where dispute arises regarding applicability of this Act, authority may conduct such
enquiry & determine the amount due from any employer under the provision of this Act.
Before passing such order, employer concerned shall be given a reasonable OOBH.
For conducting inquiry, Authority shall have same powers as are vested in a court under CPC
for trying a suit in respect of the following matters -
- enforcing the attendance of any person or examining him on oath;
- requiring the discovery and production of documents;