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 (Draft Bill), proposing certain amendments to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act). Here is a copy of the Draft Bill for your consideration. The Bill has been issued as part of the Government’s pre-legislative consultative process and comments and inputs from stakeholders and public have been invited.

We have set out below highlights of the Draft Bill for your consideration. If you have any comments/suggestions on the Draft Bill, please share the same with us by September 15, 2019 and we will be happy to collate and submit your suggestions to the Government.

Highlights

1.       New definition of wages: The Draft Bill proposes to replace the currently highly-debated definition of ‘basic wages’ with a new definition of ‘wages’ which is aligned with the definition prescribed under the Code of Wages, 2019. The new definition appears to be an attempt to put an end to the ambiguities concerning inclusion of allowances and certain other components for computation of provident fund contributions and requires allowances that exceed 50% of the total remuneration (or such other prescribed percentage) to be included in computing the contributory wages.

2.       Limitation on proceedings: Presently, the EPF Act and the schemes thereunder, do not contemplate any limitation period for initiation of proceedings under Section 7A to determine applicability of the EPF Act or determine amounts due from the employers. The Draft Bill proposes a limitation period of 5 years from the date on which the PF contributions / deficit amounts have been alleged to be due from an employer.

3.     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 (EPS Scheme) to opt for the ‘National Pension Scheme’ governed under the Pension Fund Regulatory and Development Authority Act, 2013.

4.       Increased penalties: The Draft Bill proposes to increase the quantum of fines stipulated under the EPF Act by 10 times.

5.       Compounding of offences: The Draft Bill contemplates compounding of offences (barring a few offences such as making false statements or misrepresentation of facts).

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 for employers in India, particularly for expatriate employees. Please feel free to reach out to us if you would like us to provide you with a detailed analysis of the Draft Bill.

Date: August 30, 2019