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Employees Provident Fund Pension: Retired employees tired of delay in justice

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Employees Provident Fund pension is a social security legislation by the Government of India. The legislation Employees Provident funds and miscellaneous Provisions Act was passed in the year 1952. The act provides the benefit of provident funds, pension, and deposit-linked insurance in respect of employees working in factories and other establishments where 20 or more employees are engaged.

There is a common feeling, that the EPFO has not met its objectives. It has not adapted to the changing economy and aspirations of members. EPFO is India’s largest Non-Banking Financial Company, with total assets over Rs 16.6 trillion as of end-March 2019. But EPFO authorities and Central Government has forgotten the objectives of the legislation. Despite these huge assets, EPFO continues to harass the pensioners with paltry pensions and litigation.

Coverage and Management

As per the reports of the Labour Ministry, Govt India published during the year 2019, there are 4.5 Crores active EPF  members, and out of 66 Lakhs are pensioners. The Companies covered under EPF are classified into two categories Exempted and Unexempted establishments. The exempted establishments have formed their trusts after obtaining an exemption from the PF Authorities. The un-exempted establishments are directly under the control of EPF Authorities. There are more than 1300  companies that obtained exemption and formed their trusts. These Companies include the majority of the Public Sector undertakings like BHEL, ONGC, HAL, ITI, BEML, IOC, NTPC, SAIL, and so on, and large private Companies like TCS, Infosys, WIPRO, Hindustan liver, and many others. These trusts are managed by the respective companies as per the provisions of the EPF Act and periodically monitored and inspected by the PF Authorities.

EPF and Pension contribution

As per the provisions of the EPF Act, the Company is required to recover 12% of the Wages [Basic + Dearness Allowance]  of the employee and pay a matching contribution limiting the wages as Rs.15000/- pm. However, Employee and employer can contribute beyond the ceiling subject to a permission form EPF as per Section 26(6) of the Scheme. The employee’s contribution will be deposited in the member account and 8,33% of the employer contribution will be remitted to the pension account. In other words, as per the current wage ceiling, an amount of Rs.1250/- per month will go to the pension fund.

EPF Pension Calculation

The minimum service required for an employee to become eligible for pension under the EPF pension Scheme is 10 years and should attain the age of 50 years. The EPF pension is calculated based on formulae i.e Rs.15000/- multiplied by actual service and divided by 70. Here the actual service means, service from 15/11/1995 till the separation from the Company. Employees who have joined the Company before 15/11/1995 and members of the erstwhile Family pension scheme will get a nominal benefit for their past service.

 Meagre EPF Family pension.

The Compulsory EPF pension Scheme was implemented with effect from 16/11/1995 by the Union Government. At the time of introduction of the pension Scheme the wage ceiling of  Rs.5000/- was enhanced to Rs.6500/- in the year 2001. Because of the wage ceiling employees were receiving very less  pension ranging from the Rs.1000/- to 1500/-.  After almost a gap of 14 years, the wage ceiling was enhanced to Rs.15000/-. However, when compared to the present cost of living current pension of around  Rs.3000/- PM  is very meagre.

“The amount of pension paid under EPS 95 is very low, and not sufficient to take care of the basic need of the retired employees at the fag end of their life. More than 23000 retired employees are already enjoying the benefit of higher pension and others are denied. There is discrimination in pensions across the country including in the same organization,” reveals BN Mohandas Shetty, former DGM-HR of ITI Ltd.

Option for a Higher pension.

The EPF pension Scheme had an option to be exercised by the Employee and the employer for contributing 8.33% of the actual Salary i.e over and above the ceiling prescribed under the EPF Act and get a higher pension of the actual salary. However, this provision was deleted through an amendment to the Act during the year 2014.

Justice delayed is justice denied

The amendment was challenged by some employees before the Hon’ble High Court of Kerala and HC passed a favorable order. The EPF Authorities challenged the order of Hon’ble HC Kerala and the same was dismissed by the Apex Court. As a result, the decision of higher pensions was implemented in  Kerala Co-operative Milk Federation, ITI Palakkad Unit, and few other Companies. Similarly citing this as precedence the higher pension was implemented in many companies all over India benefitting lakhs of employees. According to the orders from the High Courts,   EPFO had issued an order in May 2017  allowing the higher pensionary benefit only to un-exempted establishments. Further,  EPFO had also challenged the orders of High Courts before the Supreme Court and the same was dismissed by the Apex Court in its order dated 01/04/2018.

Higher pension in the “Atrium” of Supreme Court

Aggrieved by the notification of EPFO allowing pension only to unexempted establishments, employees of exempted establishments filed  Special leave petitions before the Supreme Court during the year 2019. Similarly, EPFO also preferred an appeal for review of the Supreme Court dated 01/04/2018.

Though the case listed on many occasions,  finally came up for hearing on 29th January this year before a bench consisting of Justices Uday Umesh Lalith, Hemant Gupta, S. Ravindra Bhat. Lakhs of retired employees hoping for favorable orders were disappointed with the apex Court admitting the review petition and withdrawing its earlier order dated 01/04/2018 which allowed the higher pension.

Fixed pension, No revision.

Despite huge assets in the hands of EPFO, due to lack of proper Managements of funds by the authorities, the members are deprived of the benefit. Retired employees are struggling with a meager pension fixed at the time of their separation without further revision. The pension on actual salary will help lakhs of employees and their families. Whereas the managers of the fund the EPFO Officials are eligible to get handsome pension with periodical revision.

“EPS 95, at the time of its introduction, was acclaimed as one of the largest social benefits schemes in the world. The scheme has been completed for 25 years and has not been reviewed at any point in time. The pension does not commensurate with the contribution made by the employees. The returns on his accumulated pension just work out to 3.48%  which is less than even SB interest,” voices  R Sridhar, President, ITI Retired Officers Association.

Employees provident Scheme being a Social Security legislation, the EPFO authorities, and the Central Govt, instead of fighting the litigation against the poor employees should introspect its objectives and work towards larger interest of the people in the society. We hope better sense will prevail upon the decision-makers which will support the livelihood of lakhs of retired employees who are facing hardship due to a meager pension.

The case in the Supreme Court is listed for further hearing on 25/02/2021. The pensioners and their families are eagerly waiting for a positive order from the Apex Court.

Image Courtesy Brianajackson and Pixabay

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Talekana Krishnadas Rai

The author holds a degree in MSW, LLB, is a practicing advocate & HR consultant with over 33 years of experience in the field of Human Resource Management

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