Labour regulations are generally concerned with the protective
aspects of social security, encompassing laws and programmes that
provide fallback mechanisms to help employees cope with the
occasional crises that affect households. Social security
regulations are crucial not only for the welfare of society, but
also for the productivity of the workforce in any activity.
The most essential parts of labour rules include financial and
social security protection. For everyone, financial security and
financial freedom are critical. In India, retirement financial
preparation is becoming increasingly important. There are several
tax-advantaged investment options available. Employees’ pension scheme 1995 is an
example of a programme that provides safety nets or fallback
mechanisms to assist workers to cope with crises that hit
households from time to time, such as illness, work injury, death,
or old age.
OVERVIEW OF EMPLOYEES PENSION SCHEME, 1995
Employees’ Pension Scheme, 1995 not only improves benefits
for families, but also offers members with a pension and other
advantages. Within the restrictions of a sponsored scheme, this
system provides full benefits for participants while also providing
for numerous contingencies.
BENEFITS UNDER THE PROVISIONS OF EMPLOYEES’ PENSION SCHEME,
1995, TO THE MEMBERS AND THEIR FAMILIES.
From the time they begin withdrawing their pension, all
qualified EPFO members can get pension benefits based on their age.
The amount of the pension varies depending on the
- Pension on Retirement at the Age of 58
When a member retires at the age of 58, he becomes eligible for
pension payments. When he becomes 58, though, he must provide
service for at least 10 years in order to be eligible for pension
payments.” For withdrawing the monthly pension, an EPS Scheme
Certificate is generated.
- Pension on leaving service before becoming eligible for
If a member is unable to serve for ten years before reaching the
age of 58, he may withdraw the entire amount by filling out
‘Form 10 C’ at the age of 58. It’s worth noting that he
won’t be receiving monthly pension benefits after he
- Total Disablement Pension during Service
Regardless of whether or whether he has served the pensionable
service period, an EPFO member who becomes totally and permanently
incapacitated is entitled to a monthly pension. To be eligible for
the pension, his employer must deposit funds in his EPS account for
at least one month.
From the date of permanent disability, the member is qualified
for the monthly pension, which is payable for the rest of his life.
The member may, however, be required to undergo a medical
examination to determine whether or not he is unsuited for the work
he was doing prior to becoming incapacitated.
- Pension for the Member’s Family in the Event of
In the following circumstances, a member’s family becomes
eligible for pension benefits:
- In the event that the member dies while on the job and the
employer has deposited funds in his EPS account for at least one
- In the event that the member has completed 10 years of service
and dies before reaching the age of 58
- In the event that the member dies after the monthly pension
CHALLENGES POSED BY EMPLOYEES’ PENSION SCHEME
There are a few obstacles that have been presented after
the implementation of EPS Scheme’95, just as there are varied
benefits of employees’ pension schemes. The Employees’
Pension Scheme, 1995 has three primary challenges:
- A static pension is one that is not adjusted for
- Contributory wage has a statutory ceiling of Rs. 6500 per
- Given the current set of benefits, there is an ongoing
Because of the impacts of inflation, the amounts of benefit
anticipated at the time of the Employees’ Pension Scheme’s
implementation in 1995 have declined in actual terms with each
passing year. The failure to adjust these benefits to
inflation has resulted in a genuine pension reduction. Furthermore,
the wage ceiling of Rs. 6500 per month, above which contributions
can be made, is out of step with rising wage levels. As a
result, the amount of pension benefit received by retirees is
becoming more insufficient to meet their day-to-day demands. The
actuarial deficit, on the other hand, continues to grow with each
consecutive valuation, given the current rate of contribution and
the benefits established in the scheme.
In addition to the fundamental difficulties outlined above,
there are a number of demands from members and retirees connected
to the Employees’ Pension Scheme, 1995, as well as various
RECOMMENDATIONS OF THE PARLIAMENTARY STANDING COMMITTEE ON
LABOUR ON THE EPFO
The EPFO Employees’ Pension Scheme, 1995, has also received
recommendations from the Parliamentary Standing Committee on
The following are the demands/recommendations:
- Amount set aside for a minimum pension.
- The provisions of commutation and capital return have been
- Regular declaration of pension relief, as was done after the
first four valuations
- An increase in the employer’s and government’s
contributions to EPS’95
- Payment of a pension before reaching the age of 50
- DA to retirees based on price index
- Increase in the wage ceiling by seven percent.
- Increasing the retirement age from 58 to 60 years
- Pension equal to that of the federal government.
Other demands include: providing a membership option to those
retiring before April 1, 1993; granting a lump sum upon the death
of the pensioner; the Central/State Government providing unused
agricultural land free to pensioners who do not own houses; free
medical assistance to EPF Pensioners, and so on.
EMPLOYEES’ PENSION SCHEME AMENDMENT 2014
The 2014 Amendment increased the maximum salary cap to INR
15,000 per month from the previous INR 6,500 per month, thereby
excluding all new members earning more than this amount from the
pension system entirely, with the 8.33 percent employer
contribution going into the EPF account instead. Furthermore, it
only provided existing members a six-month window to decide whether
or not they wanted to make uncapped pension contributions, that is,
contributions to the Pension Scheme at their uncapped wage without
being limited to INR 15,000. If the employee earning INR 100,000
per month were a new PF member, he or she would be completely
excluded from the pension i.e. became a member after the 2014
members’ pension contributions would be capped at INR 1,250 per
month (i.e. 8.33 percent of INR 15,000), unless they chose to
continue making uncapped payments within the six-month window. As a
result, the pension payable to employees was significantly cut,
prompting petitions to be filed in opposition to the revision.
P. Sasikumar and Ors v Union of India and
The monthly cap on pensionable salary, as you can see from the
example above, results in a relatively low pension payout from the
scheme. In response to a petition, the Kerala High Court ruled down
the September 2014 EPS modifications in October 2018. The Supreme
Court upheld this decision in April of this year.
The petitioners in Sasikumar were employees from various
establishments who had moved the Kerala High Court to question the
validity of the EPS Amendment on the argument that it had put them
in a disadvantage by requiring them to contribute to the pension
fund based on their actual salary. It was also maintained that the
cap of INR 15,000 (Indian Rupees 15,000) was unreasonable and had
little bearing on actual pay paid to employees across the country.
The petitioners further claimed that the EPS Amendment’s
cut-off date for creating a new option to contribute on the basis
of a higher wage was incompatible with the requirements of the
Employees’ Provident Funds and Miscellaneous Provisions Act
1952 (EPF Act) and the schemes designed thereunder. They cited
paragraph 26(6) of the EPF Scheme, which does not provide a
deadline for making a similar contribution to an employee’s
The Kerala High Court ruled in favour of the
petitioners, stating that nowhere in the EPF Act does it allow
for an additional rate of interest to be charged for making
contributions based on the employees’ actual wage. No
further restriction could be put on employees’ right to make
contributions in excess of the wage ceiling because they have the
opportunity to do so. The respondents’ allegation of
depletion of the pension fund was unsustainable, the Kerala
High Court added since the respondents failed to adduce any
proof in this regard. On the contrary, the contributions made
by India’s growing workforce based on their actual earnings
resulted in the pension fund growing. The requirement of a cut-off
date for bestowing benefits under the EPS Scheme was also found to
be unconstitutional, because such a requirement would result in
employees being classified based on whether they retired before or
after the stipulated period.
As a result of the foregoing, the Kerala High Court struck down
the EPS Amendment, as well as any subsequent orders and procedures
issued by the provident fund authorities as a result of the EPS
Employees Provident Fund Organisation v Sunil Kumar
and Ors. (2019)
The Supreme Court of India (Supreme Court) dismissed a special
leave petition filed by the Employees Provident Fund Organisation
(EPFO) against the Kerala High Court’s judgement in P.
Sasikumar and Ors v Union of India and Ors, (2019) ILLJ 494 Ker
(Sasikumar), holding that the petition found no merit. The
Employees’ Pension (Amendment) Scheme, 2014 (EPS Amendment),
which, among other things, capped the maximum pensionable salary at
INR 15,000 (Indian Rupees Fifteen Thousand) per month and imposed
additional contribution obligations on salaries above that ceiling,
was struck down by the Kerala High Court.
The Supreme Court has paved the way for a higher pension for all
private sector employees by dismissing the special leave case
filed by EPFO against the Kerala High Court Judgement. The
EPFO has been ordered by the Supreme Court to offer pensions to
private sector workers in proportion to their entire salary.
Previously, EPFO provided a pension based on the employee’s
pay, with a maximum cap of Rs. 15,000 per year. Now that the Rs.
15,000 cap has been lifted, EPS contributions will be calculated at
8.33 percent of the employee’s actual wage.
Based on the foregoing study, it is clear that the
Employees’ Pension Scheme, 1995, has had a significant impact
on employees, despite facing numerous hurdles from the outset. Over
time, the advantages have surpassed the drawbacks.
Subscribers are projected to be impacted in three ways as a
result of the SC’s decision. One, employees who joined the
company after September 2014 and are now only contributing to the
EPF may be eligible for EPS benefits previously unavailable to
them. Two, if the INR 15,000 salary cap on EPS contributions and
pensionable salary is removed, employees may be eligible to
increase their pension by asking their employer to contribute more
to the EPS rather than the EPF. Three, they may be eligible for a
greater pension because the pensionable salary will be based on the
average pay of the previous 12 months rather than the previous 60
months. Furthermore, the future breadth of this programme has the
potential to be extremely beneficial to employees. Every month, the
minimum pension amount is expected to rise from Rs. 1000 to
2000. However, the increase in pension is projected to come at the
expense of the employee’s net EPF corpus. More than 60 lakh
people are members of the Employees’ Pension Scheme, 1995, and
more than 40 lakh of them receive a monthly pension of fewer than
1500 rupees. It will benefit EPFO subscribers and cost the
government an additional 3000 crores. It is advised that the
quantity and quality of data collected on EPS members, pensioners,
and their families be greatly enhanced, and that data collecting is
prioritized. While all of this is wonderful news for employees,
they shouldn’t get their hopes up until the eggs hatch. A
sufficient amount of data will ensure that the pension fund’s
valuation displays a true and correct image while minimizing the
number of assumptions as much as feasible.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.