Applicability of the Provident Fund Act

The Provident Fund Act is applicable to every Factory in India engaged in any industry specified in Schedule 1 in which 20 or more persons are employed and any other establishment which are notified by central government employing 20 or more persons employed. The criteria for applicability under the Provident Fund Act are number of persons employed in the Factory/establishment.

This brings us to a question; In considering the number of employees, can partners / directors/ employees drawing more than ceiling limit be considered?

With regard to the Provident Fund Act, in considering the number of ‘employees’, Partners and Directors cannot be counted as ‘employees’ of the establishment, as has been laid down by various High Court decisions such as Union of India V/s Patna Tyre House Pvt Ltd. as decided on 2. 12. 2003 and Sanatan Ghosh V/s Regional Provident Fund Commissioner, as decided on 15.2.1990. With respect to employees drawing a salary above the ceiling limit of Rs 6,500/-, they shall be counted in considering the minimum number of employees for the Act to be applicable, as they are ‘employee’s under Section 2(f) of the EPF Act.

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