Research Methodology

Statement of the Problem

While the Employee’s Pension Scheme, 1995, was designed to offer social security to
workers in the organized sector, several challenges have reduced its effectiveness:
1. Inadequate Pension Amount: The pension amount under EPS is relatively low, often
insufficient to meet post-retirement living expenses, especially in the face of
inflation.
2. Wage Ceiling Restrictions: The contribution limit tied to wage ceilings (initially
₹6,500, later revised to ₹15,000) excludes higher contributions, reducing overall
pension benefits.
3. Legal and Policy Ambiguity: Frequent amendments, Supreme Court judgments, and
disputes over higher pension entitlement have created confusion among employees
and employers.
4. Limited Coverage: EPS primarily covers workers in the formal/organized sector,
leaving a vast majority of informal sector workers without pension benefits.
5. Sustainability Concerns: With increasing life expectancy and growing beneficiary
numbers, the financial sustainability of the EPS corpus is under strain.
6. Administrative Delays: Inefficiencies in pension disbursal, documentation, and
processing affect the timely access of benefits.
Thus, the problem lies in the mismatch between the objectives of the scheme and its actual
outcomes, making it necessary to re-examine its structure, implementation, and
sustainability.
Aims & Objetives of the Study
• To critically analyze the functioning and effectiveness of the Employee’s Pension
Scheme, 1995.
• To examine the adequacy of pension benefits in ensuring post-retirement
financial security.
• To assess the challenges of coverage, contribution, and sustainability.
• To evaluate recent reforms, court interventions, and government policy measures
regarding EPS.
• To provide an overview of EPS-1995: its origin, structure, and key features.
• To identify and analyze the major challenges such as low pensions, wage ceilings,
and coverage gaps.
• To study the legal and policy developments (including Supreme Court rulings)
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affecting the scheme.

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 • To examine the impact of EPS on employees’ retirement security in the organized
sector.
• To suggest policy recommendations for strengthening the scheme in terms of
adequacy, inclusiveness, and long-term sustainability.

Research Methodology
In this paper I have primarily used descriptive and analytical mode of research. I have
mainly relied upon the secondary sources, which includes books articles and journals.

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INTRODUCTION

EPS 95, or Employee Pension Scheme 1995, is a social security scheme that was
launched by the Employees’ Provident Fund Organisation on November 19th 1995. This
scheme provides pension benefits after retirement to employees working in the organised
sector. EPFO administers the system and assures that employees who have reached the age
of 58 will receive a pension.

The benefits of this scheme are available to both existing as well as new EPF members. Both
the contracting parties, which include the employee and employer, contribute 12% of the
employee’s wage, including the basic salary and dearness allowance (DA), to the EPF. Every
month, an employee's entire contribution is made to the EPF. On the other hand, 8.33% of
the employer’s contribution goes to the Employees’ Pension Scheme, and the remaining
3.67% goes to the Employees’ Provident Fund. No matter how much you contribute towards
the Employee Pension Scheme, there is a minimum range of pensions set by the
Government of India. Employees will receive this amount irrespective of how much you
contribute.

As per a press release issued on May 3rd, 2023, by the Ministry of Labour & Employment,
employees opting for a higher EPS pension will not have to contribute to it. The additional
1.16% of the salary they would have to pay from above the wage ceiling will now be drawn
from the 12% of the employer's contribution. This decision has been taken as per the
announcement of the Supreme Court to devise a replacement methodology.

Along with this, the deadline to apply for a higher pension has been extended to June
26th 2023. According to the current pension calculation method under EPS 95, your pension
will depend on the total length of service and average basic salary in the last 5 years.
Therefore, the longer your service period, the more you will benefit from the pension rule.
However, the benefits of the scheme can be availed only if the employee has provided a
service for at least 10 years (this does not have to be continuous service). Existing as well as
new EPF members can join the EPF scheme.
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Features of Employees’ Pension Scheme

Some key features of EPS are as follows:

• Since Employees’ Pension Scheme (EPS) is an Indian Government scheme, the

returns are guaranteed and there are no risks to invest in the scheme. The amount
that will be returned is fixed and no changes are made.

• Employees earning a basic salary plus DA of Rs.15,000 or less have to enroll in the
scheme.

• You can withdraw the amount in your EPS account once you are at least 50 years old.
However, the amount that you get will be at a reduced rate of interest.

• In case the widower/widow of the member remarries, the children will be classified
as orphans and would receive the additional pension amount.

• Employees enrolled in the EPF scheme are also automatically enrolled in the EPS
scheme.

• The minimum monthly pension amount that the individual shall receive is Rs.1,000.

• If a widow/widower is receiving the EPS amount, they will continue to receive the
pension amount until his/her death. After that, the children will get the pension
amount until they attain the age of 25 years.

• In case the child is physically challenged, he/she will get the pension amount until
his/her death.

Eligibility

In order to opt for the benefits of EPS 95, you need to fulfil the following eligibility criteria:

• You need to be a member of the EPFO.

• You need to serve a minimum of 10 years in the service.

• The retirement age for a regular pension is 58 years. If you retire earlier, you can also
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get a pension at a reduced rate.

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 • In case you are willing to receive your pension from the age of 60, you will get an
additional 4% every year.

• If you have not completed 10 years of service, but more than 6 months, then you are
eligible to withdraw your EPS amount if you are unemployed for more than 2
months.

• In case an employee becomes disabled totally as well as permanently, then he/she

would be eligible for a monthly pension. He/she will receive a monthly pension even
if they have not served for the pensionable service period. However, the employee
has to undergo a medical test to confirm whether they are unfit for fulfilling the job
role due to their disability.

• Family members of an employee also might be eligible for pension benefits in case
the employee passes away while in service

Rules

Following is a list of rules in relation to the Employee Pension Scheme 95:

• Employees who earn Rs.15,000 or less every month need to mandatorily enrol under
this scheme.

• The employer needs to contribute within 15 days of the closing of every month.

• If after the death of an employee, their widow or widower remarries, then the
children will receive the pension.

• Contribution made by the employee contains components of basic salary, dearness

allowance, admissible cash value of food concessions and retaining allowance.

• In case you wish to transfer EPS online, you can do so using a composite claim form.

• A family member of the EPFO member can avail the benefit of EPS by submitting a
number of forms. Form 10C is for withdrawal before the completion of 10 years of
service. In case of monthly pension withdrawal after the age of 50 years, a member
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needs to fill up Form 10D. To declare that the widow has not remarried, one needs to

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 get a Non-Remarriage certificate. A life certificate is needed so as to certify that the
employee is alive.

• In order to check the amount accumulated in the EPS account, you can check the EPF
passbook. You can download it from the EPF passbook portal. The last column of the
passbook will show the monthly contribution to the account.

• In case you are switching jobs, you need to fill up Form 11 as well as Form 13 and
submit them. However, in case you have an existing Universal Account Number
(UAN) and you have used Aadhaar as your KYC in the EPF database, submitting only
Form 11 will do. Form 11 certifies that you are a member of the EPF scheme,
while Form 13 is used to move your PF balance from your previous company to the
new one.

Types of Pensions under Employees’ Pension Scheme

There are different types of pensions under EPS such as pensions for widows, children and
orphans. These pensions provide an income to the family member of the EPF subscriber.

1) Widow Pension

Widow pension or vridha pension is applicable to the widow of the member eligible for a
pension. The pension amount will be payable until the death of the widow or her
remarriage. In case of more than one widow, the pension amount will be payable to the
eldest widow.

The monthly vridha pension amount depends on Table-C of the EPS, 1995. The minimum
pension amount has been increased to Rs. 1000 as of now.

2) Child Pension

In case of death of the member, monthly children pension is applicable for the surviving
children in the family in addition to the monthly widow pension. The monthly pension will
be paid till the child attains the age of 25 years. The amount payable is 25% of the widow
pension and can be paid to a maximum of two children.
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3) Orphan Pension

In case the member dies and has no surviving widow, his children will be entitled to get the
monthly orphan pension of 75% of the value of monthly widow pension. The benefit will be
applicable for two surviving children from oldest to youngest.

4) Reduced Pension

A member of the EPFO can withdraw an early pension if he has completed 10 years of
service and has reached the age of 50 years but is less than 58 years. In this case, the
pension amount is slashed at a rate of 4% for every year the age is less than 58 years.

In case the member decides to withdraw the monthly reduced pension at the age of 56
years, he will get the pension at a rate of 92% (100% – 2 x4) of the original pension amount

Landmark case law — Analysis

Mafatlal Group Staff Association v. Regional Commissioner, P.F. [(1994) 4 SCC 58] —
social-welfare character of the schemes

Mafatlal is an older and foundational decision where the Supreme Court upheld the
constitutionality of the Employees’ Family Pension Scheme and emphasized that benefits
under such schemes are social-welfare measures. The Court observed that social legislation
may classify beneficiaries differently without violating Article 14, so long as the classification
is reasonable and linked to the scheme’s social objective. Mafatlal is frequently cited in EPS
litigation to underline that pension schemes are created to serve social policy rather than
confer contractual entitlements akin to private bargains.

Significance: The case supports the legislative power to design pension schemes and to
implement classifications (e.g., by date of joining), but it does not entirely insulate
administrative actions or amendments from judicial review—especially where rights are
unduly abridged.
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R.C. Gupta & Others v. Regional Provident Fund Commissioner (various High Court orders
and subsequent citations)

The R.C. Gupta line of decisions (writ petitions and High Court rulings) addressed the
application of paragraph 11(3) and issues surrounding the right to contribute to the pension
fund on higher wages even after wages exceeded the pensionable ceiling. Several High Court
benches held in favour of employees, directing recalculation of contributions and
recognising the right to opt for pension on higher wages without an arbitrary time-bar. The
R.C. Gupta rulings were influential in pressing EPFO to accept that the option under para
11(3) could not be subject to constricting temporal limitations.

Significance: R.C. Gupta contributed to jurisprudence that protected employees’ option

rights and argued against retrospective denial of higher pension benefits by administrative
fiat.

Employees’ Provident Fund Organisation & Anr. v. Sunil Kumar B. & Ors. — Supreme
Court, 4 November 2022

This is the most consequential modern decision. A three-Judge Bench of the Supreme Court,
in Civil Appeal Nos. 8143–8144 of 2022, examined the constitutional validity of the
Employees’ Pension (Amendment) Scheme, 2014 (which effectively introduced the ₹15,000
wage ceiling and other changes) and interpreted the scope of paragraph 11(3)/option rights.
The Court upheld the constitutional validity of the 2014 amendment subject to certain
directions intended to protect the rights of existing members and to provide procedural
clarity. The judgment made important observations about the scope for employees and
employers to submit joint option applications, the effect of prior High Court rulings
(including R.C. Gupta), and the need to ensure that deserving members get the benefit of
higher pension where appropriate. The judgment also mandated timelines and directed the
EPFO to issue circulars and facilitate implementation.
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Key holdings (summary)

• The 2014 amendment could not be struck down on the ground of arbitrary exclusion
alone; it was a legislative choice within the state’s policy domain. However, the Court
protected certain existing rights and clarified mechanisms for exercising joint option
to claim higher pension.

• The Court read earlier precedents (including Mafatlal and R.C. Gupta line) and
directed procedural measures to ensure eligible members could opt for higher
pension contributions within prescribed timelines following the judgment.

• The EPFO was required to issue FAQs and circulars to operationalize the directions.

Significance: The judgment significantly altered the legal certainty around higher pension
claims—recognizing the amendment’s validity but expanding pathways for members to
exercise rights to higher pension with administrative directions to EPFO. It also triggered
EPFO circulars and implementation FAQs.

Discussion: Policy and jurisprudential implications

Balance of social policy and individual expectation: The courts have repeatedly held
that pension schemes are social welfare measures (e.g., Mafatlal), but they have also
read protective interpretations into the scheme provisions to prevent arbitrary denial of
benefits (e.g., R.C. Gupta, and the reliefs ordered in Sunil Kumar B.). The Supreme
Court’s 2022 decision strikes a middle path—validating legislative amendments while
ensuring relief for those who were placed at disadvantage by administrative or
interpretational roadblocks.

Administrative readiness & implementation: Judicial orders require EPFO to

operationalize complex recalculations, joint option mechanisms and timelines—tasks
that raise administrative load and resource needs. EPFO circulars and FAQs followed the
Supreme Court judgment to assist field offices and pensioners.

Sustainability concerns: Increasing the number of beneficiaries eligible for higher

pension calculations (or allowing retrospective recalculation) may impose additional
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financial pressure on the pension corpus. Courts have acknowledged welfare

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objectives but have also recognized legitimate policy choices relating to fund
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sustainability. This political-economic balancing act remains squarely with legislators
and administrators.

Legal uncertainty & delay: The long judicial journey (High Court to Supreme Court)
created prolonged uncertainty for many beneficiaries. Although the Supreme Court
clarified major questions, procedural clarity and timely EPFO action are crucial to
realize entitlements.

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Conclusion

The Employee’s Pension Scheme, 1995 stands at the intersection of social policy,
labour welfare and fiscal prudence. Judicial interventions—from Mafatlal to the R.C.
Gupta decisions and the Supreme Court’s EPFO v. Sunil Kumar B. judgment of 4
November 2022—have shaped the current contours of entitlements and
administrative duties. While the Supreme Court upheld the constitutional validity of
the 2014 amendment, it also mandated remedial measures and clarified employees’
rights to claim higher pensions under defined conditions. To translate judicial
pronouncements into meaningful pension improvements, policymakers and the
EPFO must act decisively on administrative reforms, policy re-calibration, transparent
communication, and fiscal planning. Only then can EPS-1995 fulfil its dual promise of
social security and dignity in retirement for India’s organized workforce.

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 References

• Employees’ Provident Fund Organisation (EPFO), Employees’ Pension Scheme, 1995

(official PDF & FAQs). EPFO website.

• Employees’ Provident Fund Organisation & Anr. v. Sunil Kumar B. & Ors., Civil Appeal
Nos. 8143–8144 of 2022, Supreme Court of India (Judgment dated 04.11.2022).
(Official judgment PDF).

• Press Information Bureau (PIB), “Hon’ble Supreme Court judgment dated 04.11.2022
in Employees’ Provident Fund Organisation vs. Sunil Kumar B. etc.” (EPFO
implementation directions).

• EY India, “Supreme Court Order on EPFO and EPF Pension (Higher pension) —
commentary,” technical alert (2023).

• Nishith Desai Associates, “Pension Contributions for Employees in India” (background

on EPS ceilings and amendment history).

• R.C. Gupta & Others v. Regional Provident Fund Commissioner — Himachal Pradesh
High Court & associated writ petitions (analyses and case reports).

• Mafatlal Group Staff Association & Others v. Regional Commissioner, Provident Fund
& Ors., (1994) 4 SCC 58 — Supreme Court decision on the social-welfare character of
pension/family pension schemes.

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