Section 6 of the EPF & MF act 1952 provides for contribution payable. Scheme framed under the Act provides quantum of contribution and how the contribution to be paid to the authorities.
Paragraph 29 of the EPF scheme 1952 provides for the quantum of contribution. It reads -
29 CONTRIBUTION - (1) The contributions payable by the employer under the Scheme shall be at the rate of 2[ten per cent.] of the 3[basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any)] payable to each employee to whom the Scheme applies :
4[Provided that the above rate of contribution shall be 2[twelve per cent.] in respect of any establishment or class of establishments which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of section 6 of the Act.]
(2) The contribution payable by the employee under the Scheme shall be equal to the contribution payable by the employer in respect of such employee :
5[Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding 2[ten per cent, or twelve per cent.], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act.]
6[(3) The contributions shall be calculated on the basis of 3[basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any)] actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis.]
7[(4) Each contribution shall be calculated to 3[the nearest rupee, 50 paise or more to be counted as the next higher rupee and fraction of a rupee less than 50 paise to be ignored.]
Sub-para (1) opens with the words "The contributions payable by the employer under the Scheme shall be at the rate of 2[ten per cent.]…" The wording means that under the EPF Scheme, it is the employer, who is to pay contribution; whereas, Sub-paragraph (2) provides for the quantum of PF contribution to be paid by an employee i.e. the contribution payable by the employee under the scheme shall be equal to the contribution payable by the employer in respect of such employee. In this paragraph, there is no limit of pay laid down for contribution payable.
Paragraph 30 opens with the words "the employer shall, in the first instance, pay both the contribution payable by himself and also on behalf of members employed by him directly or by or through a contractor."
In this paragraph too, there is no reference of any ceiling of pay for contribution.
Para 2(f) and proviso to para 26A(2) talk of situations about exempted/excluded employee who draw pay above the ceiling of Rs. 15,000/ per month. It says about member exempted under paragraph 27 or 27A transferred to an un-exempted establishment. In that proviso, it is mentioned that such exempted employee, on joining an un-exempted establishment will be enrolled as PF member, but contribution of the employer shall be limited to ceiling amount, however, if such employee and his employer jointly agree to pay contribution on higher salary, then it is allowed by competent authority as per provisions laid down in Para 26 (6).
This shows that the pay limit for contribution is applicable only to those employees who are not excluded employees but, choose to become a PF member with the agreement of his employer under Para 26 (6). As such, the employer and employee become under obligation to pay contribution beyond ceiling of Rs 15000 per month. In that situation, no choice is left for employer to limit his contribution up to 15000 per month as Para 29 demands contribution from employer and equal to that in respect of his employee.
Para 29 (2) says that an employee may choose to contribute his PF contribution above the rate prescribed (10% or 12%) in such case the employer shall not be under obligation to pay contribution on such higher rate.
Above referred provision of paragraphs 26(6), 26 B, 29, 30 deals with contribution payable and membership as well. It means pay limit for contribution does not have independent meaning but depends on membership how an employee has been enrolled as PF member. Except paragraph 26 (6) all provisions deal with different conditions of becoming P.F. member.
From the above analysis, it is clear that there is no restriction to contribute on a pay higher than the ceiling fixed for the purpose of excluded employee or where a member's pay exceeds the limit prescribed for an employee to be treated as excluded, but for his continuing membership. In such a case, contribution is restricted to the ceiling amount of Rs. 15000 if he is not allowed to contribute on higher pay as per provision of paragraph 26 (6).
This is the very reason that in special provisions relating to News Paper establishments and News Paper employees (paragraph 80) and relating to International Workers (paragraph 83) there is no mention of ceiling of pay in any clause which attracts contribution on the full salary to qualify for PF contribution in both the cases; whereas, special provisions relating to Cine Workers (paragraph 81) and relating to Physically Handicapped (paragraph 82) specific mention of ceiling of pay superseding the mainstream provisions of the EPF Scheme, 1952 is there.
A decade ago, the Supreme Court has given judgment in the case of Marathwada Gramin Bank Karmchari Sanghathana and Another vs. Management of Marathwas Gramin Bank and others- 211 LLR 1130 (SC) that the employer may reduce his contribution up to the ceiling amount. It is hardly appreciable that when contribution on higher salary is based on the nature how an employee qualifies for PF membership. From the above discussion, it obvious that employees' contribution is to be equal to the employer's share of contribution. But when employer's share of contribution is limited to 15000 (or 6500 then), how employee's contribution can be more?
The above case came up subsequent to denial of payment of PF contribution on a pay above Rs. 6500 (prior to 01.09.2014) by the Bank management. The employees went to court seeking protection under section 12 of the PF Act. On failure, in Bombay High Court, employees knocked the doors of Apex Court which rules so. In this case, PF authorities were not made a party nor they intervened at any stage except diluting its wisdom.
Proviso to para 29 (2) says that Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding ten per cent, or twelve per cent, as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act.
It means that if a member desires to contribute at a higher rate (than 10% or 12%), he is permitted for such higher contribution, but his employer will not be under any burden to contribute at such a higher rate of contribution. There seems to be overlapping of provisions related to higher contribution to end the justice. It's all a matter of interpretation of provisions-in isolation or comprehensive, conservatively to put embargo or widely to enhance the meaning of social security.
So, the case of contribution on higher pay to the Pension Fund is weird.