pension

1. HIGHER PENSION TO ALL
PRIVATE SECTOR EMPLOYEES

2. CONTENT
EPFO
EPS & EPF
CONCLUSION
ROLE OF KERALA HIGH COURT
FINAL JUDGEMENT BY SUPREME
COURT

3. INTRODUCTION :
The Employees' Provident Fund Organisation (EPFO) , is an organization tasked to assist the
Central Board of Trustees, a statutory body formed by the Employees' Provident Fund and
Miscellaneous Provisions Act, 1952 and is under the administrative control of the Ministry of
Labour and Employment, Government of India.
EPFO assists the Central Board in administering a compulsory contributory Provident Fund Scheme, a Pension Scheme
and an Insurance Scheme for the workforce engaged in the organized sector in India. It is also the nodal agency for
implementing Bilateral Social Security Agreements with other countries on a reciprocal basis. The schemes cover Indian
workers as well as International workers (for countries with which bilateral agreements have been signed. As of now 17
Social Security Agreements are operational).It is one of the largest social security organisations in India in terms of the
number of covered beneficiaries and the volume of financial transactions undertaken.

4. SCHEMES
Presently, the following three schemes are in operation under the Act:
Employees' Provident
Fund Scheme ,1952
01
Employees' Deposit
Linked Insurance
Scheme, 1976
02
Employees' Pension Scheme,
1995 (replacing the Employe
es' Family Pension Scheme,
1971)
03 04

5. Employee
Pension Scheme
The Employees Pension Scheme (EPS) was
brought into force in the year of 1995 to cater to
the employees of the organized sector. The
scheme is applicable to all employees who are
covered under the Employees Provident Fund
(EPF) Scheme. Employees covered under this
scheme will receive pension on a permanent
basis, the pension amounts will eventually pass
on to the family members upon the death of the
employee. This article is an account on the
various aspects of the scheme that every
employee and employer should be aware of.

6. Pensionable salary – the average income received by him in the preceding 5 years.
Pension amount = (Pensionable salary * Service Period) /70
The calculation pertaining to such employees involves the usage of a formula:
Monthly Pension Calculation
Note: – Salary=Basic salary + DA
Employers enrolled in this scheme must make a monthly contribution of 8.33% out of the salary offered to the employee. The Central
Government contributes 1.16% of the same. The Governing Body can make a maximum contribution of Rs 6,500. Employees are exempted
from making any contributions.
Quantum of Contribution

10. Background:
The Ministry of Labour & Employment issued a notification dated 22 August 2014 amending the Employees'
Provident Fund Act, 1952 effective 1 September 2014. The highlights of the amendments are as follows:
Highlights:
Changes to the provisions of the Employees' Provident Fund contribution (EPF)
The present basic wage ceiling of INR 6,500 per month has been raised to INR 15,000 per month for the
purpose of calculating contribution to the EPF. This implies that provident fund contribution is now mandatory
for all employees whose monthly basic salary is lower than or equal to INR 15,000, compared to INR 6,500
previously.
Now, new entrants whose basic salary is more than INR 15,000 per month have the option to not opt for PF.

11. 1ST SEPTEMBER 2014
In 2014, the Employees’ Pension (Amendment) Scheme, 2014 was
brought in to replace provisions of the 1995 Pension Scheme
prospectively with effect from September 2014. The 2014 Scheme made
changes to the pensionable salary as well as the pensionable service
period. The changes so introduced included the following:
The 2014 Pension Scheme brought in a cap on Pensionable Salary. The maximum
pensionable salary was limited to Rs 15,000 per month. Prior to the amendment, the
maximum pensionable salary was Rs. 6,500 per month. However, under the 1995
scheme, a provision permitted an employee to be paid pension on the basis of the
actual salary drawn by him as well after a joint request is made for such purpose by the
employee and the employer. This provision was also eliminated when the contribution
to 8.33% of a maximum Rs 15, 000 was introduced.

12. Normally, both the employer and employee contribute 12% each of the ‘basic salary’ of
the employee plus DA (if any). The entire 12% of employee’s contribution is added
towards EPF, while 8.33% out of the total 12% of the employer’s contribution is
diverted to the EPS or pension scheme and the balance 3.67% is invested in EPF.
However, if the basic pay of an employee exceeds Rs. 6,500 per month, the
contribution towards pension scheme is restricted to 8.33% of Rs. 6,500 (i.e. Rs. 541
per month) and the balance of employer’s contribution goes into EPF.
Thus, the employer contributes only up to Rs. 541 per month (8.33% of Rs. 6,500 in the
employee’s pension scheme account.

13. • Changes to the provisions of the Employees' Pension Scheme Contribution
(EPS)
• The present wage ceiling of INR 6,500 per month has been raised to
INR 15,000 per month for the purpose of calculating contribution to the EPS.
As a result, the maximum limit of contribution to EPS has been raised to
INR 1,250 from INR 541.
• New entrants to the PF scheme, joining on or after 1 September 2014 and
whose basic salary is more than INR 15,000 per month, will not be able to join
the EPS. EPS benefit continues to remain for the employees with a basic salary
of up to INR 15,000.
• In addition, For the purpose of calculating monthly pension, last 60 months'
average EPS wages are taken into consideration. Under the new scenario, the
maximum EPS wages would be INR 6,500 per month up to 31 August
2014, and INR 15,000 per month from 1 September 2014.
• Employees' Deposit Linked Insurance (EDLI) contribution and EDLI
administrative charges will also be revised accordingly.

15. Pensioners in different
states moved their
respective high courts
against the EPFO’s
unexpected turnabout.
Some pensioners also
approached the Kerala high
court.

16. Kerala High Court sets aside PF pension changes

17. The Bench comprising
Justices K. Surendra
Mohan and A.M. Babu
passed the verdict, while
allowing a batch of 507
writ petitions filed by
various organisations and
employees challenging
the amendment.
The petitioners pointed
out that the amendment
order issued on August
22, 2014, limited the
maximum pensionable
salary to ₹15,000 per
month. They contended
that it was against the
spirit of the scheme.
The amendment omitted
an earlier provision
allowing employees to be
paid pension on the basis
of the actual salary drawn
by them if they had
contributed on the basis
of actual salary drawn by
them on a request jointly
made by employees and
the employer.

18. The court also set
aside the orders of
the Employees
Provident Fund
Organization
declining to grant
opportunities to the
petitioners to
exercise a joint
option to remit
contributions to the
Employees Pension
Scheme on the basis
of actual salaries
drawn by them.
The court also
ordered that
employees shall be
entitled to exercise
the option stipulated
by the scheme
without being
restricted in doing so
by the insistence on
the date.
The employees who
have been making
contributions on the
basis of their actual
salaries after
submitting joint
option were denied
the benefits of their
contributions
without any
justification.
Besides, to cap the
salary at ₹15,000 for
quantifying pension
was absolutely
unrealistic. A
monthly salary of
₹15,000 then worked
out only to about
₹500. Even a manual
labourer was paid
more than the this
amount as daily
wage. Therefore, the
amendment limiting
the maximum salary
to ₹15,000 for
pensions would
deprive most of the
employees a decent
pension in their old
age.

19. Since the pension scheme was intended to
provide succour to the retired employees,
this objective would be defeated by
capping the salary. The court also added
that the Provident Fund authority had no
right to deny pension legitimately due to
the employees on the ground that the fund
would get depleted.
It also observed that the stipulation that average
monthly pay drawn over a span of 60 months
preceding the date of exit as the pensionable service
deprived the employees of a substantial portion of
their pension. The judges noted that “no scheme
that defeats the purpose of enactment by reducing
the pension payable to the employees in their old
age to a ridiculously low amount, which is not
sufficient even for ensuring a decent life to them
cannot be sustained.”

20. Centre urged to execute Kerala High Court order on Employees’ Provident
Fund pension
• The Labour Department has sent a letter to the Union Ministry of Labour
urging to take urgent steps to implement the High Court order in connection
with the Employees’ Provident Fund (EPF) pension.
• In a letter to Union Labour Minister Santosh Gangwar, Labour Minister T P
Ramakrishnan said the move to challenge the High Court order, which comes
as a big relief for lakhs of EPF pensioners, by the Employees’ Provident Fund
Organisation (EPFO) was against the interest of pensioners and the EPFO
should abstain from the move.

21. EPFO pension for private employees: Good news!
The Supreme Court on Monday APRIL 2ND 2019 , gave a major relief to private sector
employees by dismissing EPFO's plea against the HC ruling that had asked the organisation
to pay full pension to retiring employees on the basis of their total salary. The Special Leave
Petition was filed against a Kerala High Court order that asked Employees Provident Fund
Organisation to provide pension to all retiring employees, rather than capping the figure at
Rs 15,000 per month. After this decision, all employees will get a pension on their full
salary instead of the Rs 15,000 cap after their retirement.
The decision was taken by a bench comprising CJI Ranjan Gogoi, Justice Deepak Gupta and
Justice Sanjiv Khanna. It said that there is no merit in the special leave petition. The court
statement read: "We find no merit in the special leave petition. The same is, accordingly
dismissed." After this decision, the pension will increase but the PF corpus will be reduced
as more contribution will go to EPS and not PF.

23. NEW CHANGES IN PENSION FIGURES

25. CALCULATION TECHNIQUES :

26. CONCLUSION :

27. Thank you

28. REFERENCES
• Retrieve from :- https://www.indiafilings.com/learn/employee-pension-
scheme/warticle&dt=2016-09-02
• Retrieve from :- https://www.zeebiz.com/personal-finance/news-epfo-
pension-for-private-employees-good-news-now-you-may-get-more-money-
after-retirement-92635=warticle&dt=2019-04-02 17:06:24
• Retrieve from :- https://barandbench.com/employees-pension-proportionate-
salaraies-sc-kerala/June%25022018
• Retrieve from :- https://timesofindia.indiatimes.com/business/india-
business/supreme-court-clears-path-for-pension-to-rise-manifold-for-
employees-in-all-firms/articleshow/68678971.cms&dt=02-04-2019

29. • Retrieve from :- https://thewire.in/labour/retired-employees-kerala-hc-
ruling-pension-
• Retrieve from :- https://www.basunivesh.com/2014/09/05/employee-
provident-fund-epf-changed-rules-from-1st-sept-2014/amp/
• Retrieve from :-
https://www.skpgroup.com/data/mailer/skp_business_alert_volume_6_issue
_7_Wage-ceiling-raised-for-calculating-contributions-to-EPF-and-EPS.html
• Retrieve from :-
http://www.newindianexpress.com/cities/thiruvananthapuram/2018/oct/24/
centre-urged-to-execute-kerala-high-court-order-on-employees-provident-
fund-pension-1889188.html