The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (“EPF Act”), and its associated schemes – Employees Provident Fund Scheme 1952 (“EPF Scheme”) and the Employees’ Pension Scheme, 1995 (“EPS Scheme”) (together collectively referred to as “EPF Law”), is a social beneficial legislation, wherein an employer and an employee are required to contribute 12% from the employee’s salary to government controlled funds (the employee’s contribution is allocated to the provident fund account and the employer’s contribution is split – 8.33% into the employee’s pension account and 3.67% into the employees provident fund account).
Prior to the EPF Amendment 2014, for domestic workers (i.e. employees who do not qualify as “International Worker” as per the EPF Law) the contribution could be capped at 12% of INR 6500/month. The EPF Amendment 2014, introduced few crucial changes to the EPF Law. It increased the maximum salary cap to INR 15,000 per month from INR 6,500 per month, it excluded all new members, earning more than the INR 15,000 from pension. Further, the EPF Amendment 2014 gave an option to the existing members to determine whether they would want to make uncapped pension contributions.
Some of the key provisions of the EPF Amendment 2014 are as listed below:
- The salary limit for making the required contributions was increased from INR 6,500 to INR 15,000 per month.
- New members, joining on or after September 1, 2014, and earning a salary more than INR 15,000 per month were not eligible to contribute under the EPS Scheme.
- The existing members were given an option to determine, within a period of 6 months, whether they would want to make a contribution at a higher salary limit (i.e. exceeding the salary ceiling of INR 15,000 per month).
The validity of the EPF Amendment 2014 was challenged before the Kerala High Court in the case of P. Sasikumar and Ors. v. Union of India, 2018. In this case, the petitioners claimed that the EPF Amendment 2014 created different classes of employees who received pension based upon the date-September 2014. The Kerala High Court agreed with the petitioners and held that such differentiation had no legal basis and it held that limiting the maximum pensionable salary to INR 15,000 will deprive employees of a decent pension in their old age. The Kerala High Court also opined on certain other matters in relation to the EPF Amendment 2014, and the EPF Amendment 2014 was struck down.
The matter was brought before the Supreme Court of India in 2019. On April 1, 2019 the Supreme Court dismissed the petition and upheld the judgment of the Kerala High Court.
Therefore, in light of the above, employees who are covered under the EPF Law would now be eligible for a higher pension, as they would now be able to contribute towards their pension at an uncapped salary.