PF Act and Section 9A of ID Act

We began by examiningthe meaning of the amendment of the provident fund act with effect from September 2014 and as to whether contributions were supposed to be made on a notional amount of Rs. 15,000. We then adverted to the question as to whether employers paying contributions on the entire salary can revert to paying provident fund on the ceiling limit of Rs. 15,000. At this stage we dwelt upon section 9-A of the industrial disputes act. Then the question with regard to the applicability of the industrial disputes act to software industries arose. Having discussed all these aspects, the latest article covered the relationship between section 12 of the provident fund act and section 9A of the industrial disputes act. After these series of articles we have now reached the stage of conclusion.

Let us begin by understanding section 12 of the provident fund act. The section begins with the heading “employer not to reduce wages, etc” . In the entire section there is only one word that is very important and that’s “wages”. This section talks only about reducing the wage of an employee in order to avoid provident fund contributions. The very same provident fund act through its scheme gives every employer the right to restrict the contribution to a maximum ceiling amount which is presently 15,000 with effect from September 2014. This means if the salary of an employee is 25,000 and the basic wage when calculated as per the definition of the provident fund act comes to about 20,000, the employer has a right to restrict the calculation of contribution to the amount of 15,000. The provident fund act does not expect the employer to contribute beyond this. However if contributions are paid beyond this amount they are deemed as voluntary contributions and such voluntary contributions can be restricted to the ceiling limit at any point of time. So far the provident fund act has not been amended to restrict the reversion from payment of contributions on the entire salary to payment on ceiling limit.

On the other hand we have section 9A and the industrial disputes act. It would be apt to provide a cautionary reminder that this provision would apply only to those who are covered by the industrial disputes act under the definition of Workman as stated in section 2 (S). Therefore there is a clear classification at this point, i.e persons covered by the industrial disputes act and persons who are not covered by the industrial disputes act such as officers etc.

As far as persons who are not covered by the industrial disputes act, there is no problem at all and the link between section 12 of the provident fund act and section 9A of the industrial disputes act need not be examined at all.

Therefore reversion from payment of contribution on entire salary to payment of contribution on the ceiling amount which is presently 15,000 is easy as far as non-workmen are concerned. But when it comes to workmen covered under the industrial disputes act, we have already understood that the fourth schedule of the industrial disputes act covers contributions paid or payable under any enactment with reference to which notice has to be given before any changes in the condition of service is made.

The first requirement of section 9A is that the condition of service must be one which is talked about in the fourth schedule, and there is a change in the condition of service.But there is a change in the conditions of service only if the practice has become a custom or usage over a long period of time. Then the section requires that the period of notice is 21 days and such notice need not be given if the change is in pursuance of a settlement or an award under the industrial disputes act. Also certain employees are exempted from this provision like those who are covered by the civil services rules, Indian Railway rules defence services etc.

So even under the category of workmen covered under the industrial disputes act, further category is created, cases where there is no settlement at all, cases where there is a settlement that contribution must be paid on the entire salary, cases where there is a settlement that contribution on the entire salary can be reverted to the ceiling limit. Here 9A would come into play only with regard to the first two circumstances. The third category is an exception to section 9A of the Industrial Disputes Act.

According to the industrial disputes act a change in the contribution payable under any provident fund related enactment is a change in the condition of service. This is so because a reduction in the amount of the contribution would affect the pensionary benefits and other benefits of the employee. Therefore when an employee is workmen under section 2S of the ID act and there is no settlement between the employer and the employee with regard to the amount of contribution, then section 9A has to be followed. The employer will have to give this category of persons are notice under section 9A of the industrial disputes act and wait for 21 days before implementing the change. Once a notice is issued under section 9A the change would come into effect only upon the actual implementation of the change. This is because change cannot be implemented during the period of 21 days of notice and there might be cases where the change is not implemented at all. Another very important aspect that has to be mentioned here is the nature of the change. If the nature of the change is beneficial to the employee, or does not change the benefit of the employee in any manner, the notice under section 9A would not be necessary. However if the change is adverse then section 9A notice is mandatory. Having said this, last but not the least, the consequence of violating section 9A of the industrial disputes act is a criminal prosecution wherein one has to appear before the magistrate. However the punishment is only a fine of rupees hundred and does not include imprisonment. That being the case, the code of criminal procedure provides for payment of fine through the pleader. That’s another arena all together which we can deal with some other time.

For now , over the past weeks we have dealt with the Provident Fund Act and section 9 – A of the Industrial Disputes Act. Today we have concluded the series.

So catch you next week with something new. Until then enjoy the spice of life !!!

By K Sribhoomi Yesaswini