Employees’ Provident Funds & Miscellaneous Provisions (Amendment) Bill, 2019

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The Ministry of Labour and Employment, Government of India has circulated a draft Bill via letter dated August 23, 2019, proposing certain amendments to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’). The draft Bill has been issued as part of the Government’s pre-legislative consultation process, inviting comments and inputs from stakeholders and other members of the public. The highlights of the draft Bill are as follows:

i.      New definition of wages: The draft Bill proposes to replace the highly-debated definition of ‘basic wages’ under the EPF Act with a new definition of ‘wages’ which is aligned with the definition prescribed under the Code of Wages, 2019. This appears to be an attempt to put an end to the ambiguities concerning the inclusion of allowances and certain other wage components for computation of provident fund contributions. The definition specifies that if certain payments made by the employer exceed 50% (or such other percentage as may be prescribed) of the overall remuneration calculated, the amount which is in excess of the prescribed threshold will be deemed to be a part of the remuneration and will accordingly be added to the definition of ‘wages’.

ii.      Limitation on proceedings: Presently, the EPF Act and the schemes thereunder, do not contemplate any limitation period for (i) initiation of proceedings under the EPF Act to determine its applicability to different establishments; or (ii) to determine amounts due from the employers under various provisions of the EPF Act. The draft Bill proposes to introduce a limitation period of five years from the date on which the provident fund contributions / deficit amounts have been alleged to be due from the employer.

iii.    National Pension Scheme: In line with the announcements made in the Union Budget (2015-2016), the draft Bill proposes to allow employees covered under the Employees’ Pension Scheme, 1995 to opt for the National Pension System governed under the Pension Fund Regulatory and Development Authority Act, 2013. This option is subject to an inquiry required to be conducted by the Central Provident Fund Commissioner, upon receipt of such application from employees.

iv.      Increased penalties: The current penalty framework under the EPF Act was last amended in the year 1988. The draft Bill proposes to revise such framework and to increase the quantum of penalty stipulated under the EPF Act by 10 times.

v.       Compounding of offences: The draft Bill contemplates compounding of offences (barring major offences such as making false statements or misrepresentation of facts). This will provide a mutually agreeable disposition of minor offences without the need for conducting a trial.

While the aforesaid amendments are yet to be crystallized, these proposed changes, particularly the revised definition of ‘wages’, are likely to have a significant impact on employers in India, particularly in relation to expatriate employees

Published In:Inter Alia - Quarterly Edition - September 2019 [ English
Date: September 30, 2019