It struck down a provision that allowed employees whose basic salary was more than Rs 15,000 to contribute to the scheme.
Employees of various establishments are covered by the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (The Act). The law provides for the formulation of a scheme and the creation of provident fund accounts in the name of each employee of an establishment. In this account, the employee contributes 12 per cent of her/his wages and the employer an equivalent amount
Section 6A was later inserted in the Act, authorising the creation of a scheme to provide pension. Accordingly, the Employees’ Pension Scheme, 1995 was framed.
According to the scheme, the maximum pensionable basic salary was Rs 6,500 per month and contributions to the pension fund were to be of that amount only. The corpus of the pension fund was to be constituted by transferring 8.33 per cent out of the employer’s contribution (12 per cent) under Section 6 of the Act.
A provision added to the scheme with effect from March 16, 1996 granted an option to the employer and the employee to contribute more amounts to the pension fund at the rate of 8.33 per cent of the basic salary drawn by the employee. Joint application by the employer and the employee could be made at any time.
Based on such a joint application they would be entitled to avail themselves of the scheme’s benefits. The pension scheme was amended with effect from September 1, 2014, and changes were made. The maximum pensionable salary was now Rs 15,000 per month. Before the amendment, the maximum pensionable salary was only Rs 6,500.
The scheme was also amended to confer an option to the existing members as on September 1, 2014, to submit a fresh option jointly with their employer to continue to contribute on salary exceeding Rs.15,000 monthly. However, upon such an option, the employee would have to make a further contribution at the rate of 1.16 per cent on the salary exceeding Rs 15,000/, additionally. Also, such a fresh option would have to be exercised within six months from the date of the amendment.
The Supreme Court struck down the threshold limit for the contribution of employees. The order is suspended for six months so that employees who have not exercised the option can join the scheme.