Labour Laws
Provident Fund and Pension under the Social Security Code
Provident fund is the largest retirement savings system for Indian employees, run by the Employees' Provident Fund Organisation. Chapter III of the Code on Social Security replaces the EPF Act, 1952 and provides for three schemes: provident fund, pension and deposit-linked insurance. New schemes under the Code were notified in June 2026. This note covers the schemes, contributions, protections for contract workers, recovery and appeals, and the leading cases.
1. The Schemes
- Section 15. The Central Government frames the Employees' Provident Fund Scheme, the Employees' Pension Scheme and the Employees' Deposit-Linked Insurance Scheme, and may frame schemes for self-employed and other persons.
- 2026 schemes. The EPF Scheme, EPS and EDLI Scheme, 2026 were notified on 29 June 2026, replacing the 1952, 1995 and 1976 schemes under the old Act.
- Administration. The three funds vest in the Central Board of Trustees and are administered through the EPFO.
Figure 1: Contributions and benefits under the 2026 schemes
- Statutory rate, s.16. The Code fixes the employer's contribution at 10% of wages, with an equal employee contribution, and allows the Central Government to notify a different rate. The 12% rate has been notified for establishments generally.
- Above the ceiling. Employers and employees may jointly contribute on wages above ₹15,000; employees may also make voluntary contributions.
- Wage base. Contributions are calculated on wages as defined in s.2(88), including the 50% rule (Topic 3)
2. Protections and Procedure
Figure 2: Key provisions of Chapter III
- Principal employer's deposit. Under the 2026 scheme, the principal employer deposits both shares for contract workers within fifteen days after the close of each month.
- Withdrawals. The 2026 scheme allows a member with twelve months' membership to withdraw up to 75% of the balance, keeping 25% in reserve.
- Damages. Delayed contributions attract damages on a simplified slab system under the 2026 scheme.
3. Leading Cases
Figure 3: Provident fund in the Supreme Court
- Vivekananda Vidyamandir (2019). Allowances not linked to performance and paid to all employees could not be excluded from basic wages. The Code's 50% rule now addresses the same practice by statute.
- Pawan Hans (2020). Contractual workers engaged by a public sector company were held entitled to provident fund cover, reflecting the inclusion of employees engaged through a contractor.
⚠ Exam trap The statute says 10%, but the notified rate is 12% for establishments generally; of the employer's share, 8.33% goes to pension, on wages up to ₹15,000. EDLI is paid by the employer alone, up to 1%. The 2026 schemes were notified on 29 June 2026. An employer's appeal to the Tribunal needs a 25% deposit, and contractors cannot deduct the employer's share from wages. |
4. Frequently Asked Questions
What is the provident fund contribution rate under the Social Security Code?
Section 16 sets the employer's contribution at 10% of wages with an equal employee contribution, subject to a different notified rate. Under the Employees' Provident Funds Scheme, 2026, employer and employee each contribute 12% of wages up to the ₹15,000 ceiling, and 8.33% of wages from the employer's share goes to the pension fund.
Who pays provident fund for contract workers?
The principal employer is responsible for the contributions and may recover them from the contractor under section 17. A contractor may deduct the employee's share from wages, but never the employer's share.
5. Related Topics
- Topic 19: Social Security Code, Scheme and Coverage. Where Chapter III fits.
- Topic 22: Gratuity. The other retirement benefit.