Popular Misconception On Contributions Under The Employees' Provident Fund Law

The object of the EPF Act must be remembered before making any change to the contributions payable to the Provident Fund. The EPF Act was never intended to cause hardship to an employee in the present

The name of the enactment in using the term ‘provident’ suggests the purpose of this legislation. The Employees Provident Fund Act 1952 (“EPF Act”) is a legislation facilitating compulsory saving for employees and is designed to induce thrift so that the employee may save from his present earnings a portion for a rainy day or old age.1 The EPF Act and the Employees Provident Fund Scheme, 1952 (“EPF Scheme”) provide for contribution by the employer of a portion of the salary payable to the employee and a deduction of an equal amount from the salary of the employee towards the provident fund.

The EPF Act was the first provision made for workers after their retirement or for their dependents in case of their death2. At the time of its introduction, considering that the Pension Act was not yet enacted, it was the only savings that the worker would have after his retirement.3 The statement of objects and reasons of the EPF Act and the judgments in the 1970’s discussing the EPF Act state that the object of the EPF Act is to provide some amount as savings for difficult times on retirement and in case of death of the employee. It was never intended to create a situation where the money in the hands of the employee is not enough for the employee to sustain himself in the present. This understanding is in line with that of the courts who have stated that although deductions from wages result in saving for the future, any retrospective application of the EPF Act would negatively affect the current life of the employees who anyway live in dire economic need.4