The Karnataka HC ruling on EPF benefits
- May 12, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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The Karnataka HC ruling on EPF benefits
Sub: Polity
Sec: National body
Context:
- The Karnataka High Court recently invalidated the provisions (paragraph 83 of the Employees’ Provident Funds Scheme, 1952 and paragraph 43A of the Employees’ Pension Scheme, 1995) allowing for the inclusion of foreign workers in India’s Employees’ Provident Fund (EPF), citing these provisions as unconstitutional.
Details:
- This ruling targets the amendments made in 2008 to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which had previously broadened the scope to include international workers, obligating them to contribute to the EPF based on their entire salary without the usual wage ceiling applicable to domestic workers.
- The court’s decision highlighted the act’s original intention to provide retirement benefits specifically for industrial workers within lower salary brackets, pointing out the inapplicability of these provisions to highly paid employees.
- The judge noted a disparity in the treatment of Indian workers overseas and foreign workers in India, deeming it discriminatory and in violation of Article 14 of the Indian Constitution, which guarantees equality before the law.
How has the EPFO responded?
- The EPFO argued that these provisions were designed to protect the interests of Indian workers internationally.
- However, the court found the classification between international workers from SSA and non-SSA countries to lack a rational basis and reciprocity.
- The ruling, though specific to Karnataka, raises questions about the uniform application of EPF provisions to international workers across India.
Significance of the judgement:
- Overall, this judgment emphasizes the need for careful scrutiny of international labour laws and equity in social security provisions, which should align closely with the objectives of both national policy and international obligations.
About Employees’ Provident Funds and Miscellaneous Provisions Act, 1952:
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is India’s pivotal social security legislation and regulates three main schemes — the Employees’ Provident Funds Scheme (EPF) Scheme1952, the Employees’ Pension Scheme (EP) Scheme 1995 and the Employees’ Deposit-Linked Insurance Scheme, 1976.
- It is administered through a statutory body — the Employees’ Provident Fund Organisation (EPFO).
- An establishment with a minimum of 20 employees is required to register with the EPFO and make Provident Fund (PF) contributions for eligible employees.
- The EPFO is under the administrative control of the Ministry of Labour and Employment, Government of India.
- The benefit amount is 20 times the wages, a maximum benefit of 6 Lakh.
- 2008 Amendment to the Act:
- Amended to bring international workers or expatriates within the fold of the statute.
- As per the amendment, international workers employed in India for a minimum period of six months are mandated to make PF contributions which include 12% of the employee’s total salary.
- A matching contribution is made by the employer for each of these workers.
- However, contrary to their domestic counterparts, the wage ceiling of ₹15,000 per month for availing PF benefits does not apply to international workers.
- Withdrawal of PF accumulations by international workers based in India is permitted only upon retirement from service in the establishment at any time after the attainment of 58 years of age; upon retirement on account of permanent incapacity for work due to bodily or mental incapacity and pursuant to any stipulations under existing Social Security Agreements (SSAs).
Provident Fund (PF):
- A provident fund is a financial scheme that aims to provide retirement benefits to employees.
- It is a savings scheme established by employers and/or employees to accumulate a fund over a period of time, which can be withdrawn by the employee upon retirement or under certain specified conditions.
Social Security Agreements (SSAs):
- Bilateral instruments executed to protect the social security interests of workers posted in a foreign country.
- SSAs have been set up between India and 21 countries to ensure protection and continuity in social security contributions for Indian workers abroad.
- They may also be required to make similar contributions under the host country’s laws.
- However, due to restrictions on withdrawals and stipulations relating to their duration of stay, such employees rarely reap benefits from PF contributions made outside India.
- As a result, SSAs are executed to avoid such double coverage — coverage under the social security laws of both the domestic as well as the host countries.
Source: TH