EPF Act remains operational despite being repealed in new labour laws - Here's why

On November 21, the Code on Social Security repealed eight existing laws

The EPF Act continues to operate outside the new Code on Social Security (CSS), even as the Centre has notified all other major provisions of the revamped labour law.

To be sure, the CSS under Section 164 (3) repeals the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, or the EPF Act, but this clause has not been notified yet.

“The clause for EPF Act hasn't been notified under the social security code. Even though the idea was to subsume the act once this labour code is notified,” a source privy to the matter told Moneycontrol.

Another person said that the labour ministry is currently working on releasing the rules and guidelines to make the social security code operational. “These rules would be in sync with the nine social security laws, including the EPF Act, and finalising them may take a few months.”

The Employees' Provident Funds and Miscellaneous Provisions Act gives statutory backing to three social-security schemes--the Employees' Provident Fund Scheme (EPF), 1952, the Employees' Pension Scheme (EPS), 1995, and the Employees' Deposit Linked Insurance Scheme (EDLI), 1976.

What are the EPF schemes?

The EPF Scheme is a retirement savings scheme where both the employer and employee make regular contributions (presently 12 percent of wages every month) to the EPFO.

The EPS scheme, on the other hand, provides a post-retirement pension, and a portion of the employer's contribution to EPF is diverted to this scheme.

The EDLI scheme provides insurance cover to members of the EPF scheme.

The new social security code 

On November 21, the Code on Social Security was notified, which repealed eight existing laws: Employee's Compensation Act, 1923; the Employees' State Insurance Act, 1948; the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; the Maternity Benefit Act, 1961; the Payment of Gratuity Act, 1972; the Cine-Workers Welfare Fund Act, 1981; the Building and Other Construction Workers' Welfare Cess Act, 1996; and the Unorganised Workers Social Security Act, 2008.

Experts say the notified sections of the Code on Social Security (CSS) include a comprehensive segment relating to provident fund and scheme related provisions, including Central Government’s power to issue notifications to frame employees’ provident fund schemes for superannuation pension, retiring pension, widow or widower’s pension, amongst others.

Provisions relating to central government’s power to establish a provident fund, modalities in respect of contributions for employees as well as contractors, and mechanism relating to transfer of provident fund accounts have also been notified, they say.

“Since operational implementation of a majority of these effective sections relating to provident fund are linked to notifications which are yet to be released, employers must watch out for Centre’s notifications on appropriate schemes and related aspects for social security contributions which will replace the extant schemes operational thus far,” said Sonakshi Das, Partner, JSA Advocates and Solicitors.

Adil Ladha, Partner at Saraf and Partners, said that companies will grapple with changes to the definitions, particularly the expanded "wages" construct-which could increase the PF base and require restructuring of compensation packages.

“The bigger hurdle will be staggered compliance. All departments, including HR, payroll, finance, tax and legal will need a phased plan to run old and new rules in parallel, map notifications and update systems and contracts in sequence,” he added.