Employee Relations

Dec 13, 2022 15 min read

Employees Pension scheme, 1995- A saga of Litigation

Ms Gunjan Jain has nearly a decade of experience of working in Human Resource in various facets of HR including compensation management, policy formulation, presidential directives, industrial Relations, HRIS, HR audit etc.
Mr. Awadhesh Kumar Mishra holds a Post Graduate Diploma degree in Personnel Management & Industrial Relations (PM&IR) from XISS, Ranchi. He has a versatile career of 20 years in Human Resource with multi-domain exposure that includes Policy formulation, HR Operations, IR & Disciplinary matters, Contract Labour regulation etc.


In the year 1971, family pension scheme (FPS-71) was introduced by amending 'the Employees' Provident Funds & Miscellaneous Provisions Act, 1952', providing for payment of family pension in the event of death of the member while in service.

Subsequently, The Employees' Pension Scheme, 1995 (EPS-95) was brought into force on 16.11.1995 replacing the existing FPS-71. The EPS-95 is a ‘Defined Contribution-Defined Benefit’ Social Security Scheme. The corpus of the Employees’ Pension Fund is made up of (i) monthly contribution by the employer @ 8.33% of wages; and (ii) monthly contribution from Central Govt. through budgetary support @ 1.16 % of wages, up to an amount as stipulated from time to time.

Since then, the EPS-95 has been a bagful of litigations and has a continuous history of being entangled in legal disputes as detailed in the sections below.

FPS-71 vs EPS-95

Various Trade Unions and Political Parties opposed this Scheme. Many Establishments, Employees Associations etc approached High Courts against implementation of the EPS-95, being it unreasonable, arbitrary, and discriminatory leading to depletion of PF to a great extent by diversion of 8.33% employer's share and pension payable under the new scheme is not commensurate to the accruals in the pension fund.

These challenges were made in the High Courts of Madras, Kerala and Karnataka. Appeals against orders passed by the High Courts were filed. Some of the employers also filed petitions or appeals before Supreme Court as their applications for grant of exemption from the operation of EPS-95 were rejected by EPFO. The matter finally travelled to Supreme Court vide Special Leave Petition (SLP) (Civil) in year 1997.

In the matter, interim orders were issued by the Hon’ble Supreme Court and vide an interim order in the year 1999, the Apex court ordered the employers to obtain option from the employees regarding their willingness to choose between erstwhile FPS-71 and the EPS-95. Accordingly, employers sought options from their employees and parallel accounts were operated and maintained towards the membership under either FPS-71 or the EPS-95, based on the option exercised.

Four years later, the matter reached finality & the Apex Court vide order dated 11.11.03 upheld the validity of the EPS-95 and FPS-71 ceased to exist.

Litigations Continue..

A couple of months after introduction of EPS-95, PF department had added a proviso to Clause 11(3) w.e.f. 16.03.1996 giving an option to the employer and an employee for contribution on monthly salary exceeding Rs.5,000/- /Rs.6,500/- (w.e.f. 08.10.2001). In such cases 8.33% of such contribution on full salary was required to be remitted to the Pension Fund.

After the matter of EPS-95 was settled in Nov.’ 03, a group of retiring employees sometime in the year 2005 contested the above said amendment of 1996 contending that the same was not within their knowledge and, therefore, they may be given the benefit thereof. This plea was not accepted by EPFO on the ground that the proviso visualized a cut-off date for exercise of option namely, the date of commencement of Scheme or from the date the salary exceeded the ceiling amount of Rs.5,000/- or 6,500/- p.m, as may be and as the request of such employees was subsequent to either of the said cut off dates, the same cannot be acceded to.

The matter became sub-judice again since the aggrieved employees moved to High Court of Himachal Pradesh. The Writ petition was decided in favour of the appellant-employees against which EPFO made an appeal before the Division bench in year 2012. The Division Bench vide its judgement dated 22.07.15 reversed the said decision upholding the view of EPFO that under the proviso to Clause 11(3) of the Pension Scheme there was a cut-off date.

Meanwhile new amendments had been made in the EPS-95 which inter-alia included the amendment made in 2014 by omitting the proviso to clause 11 (3) by G.S.R. No.609 (E), dated 22.08.2014 (with effect from 01.09.2014). During the period 2004 to 2014 many cases were filed in various forums and High Courts, praying for payment of pension on higher wages by allowing to contribute on higher wages under EPS-95. On being aggrieved by the orders of the High Courts, EPFO appealed to the Hon’ble Supreme Court wherein the department filed 8 SLPs in series against the orders of Hon’ble Kerala High Court. The said SLPs were disposed by the Hon’ble Supreme Court vide orders dated 31.03.2016 & 12.07.2016. After dismissal of the aforesaid SLPs by the Apex Court, compliance of the orders in the respective Writ Petitions was required to be made

However, since higher pension was not allowed by EPFO to certain section of employees, further Writs were filed and orders allowing option to contribute on Higher wages retrospectively were issued by the Courts.

Thereafter, two SLPs were filed by employees of M/s Himachal Pradesh Tourism Development Corporation against the orders of the Division Bench of Hon’ble High Court of Himachal Pradesh disallowing the option for contributing to Pension Fund on higher wage. The Hon’ble Supreme Court disposed off the SLPs vide order dated 04.10.2016 (R.C. Gupta Vs RPFC Shimla) allowing the petitions and decided the matter of pensionary benefit on higher wages with detailed order examining the provisions of the EPF Scheme, 1952 and EPS-95 and also citing the orders passed by the Apex Court for dismissal of SLPs filed by EPFO with reference to the orders passed by Hon’ble Kerala High Court.

Subsequent to the judgment of Hon’ble Supreme Court, many groups of employees belonging to Exempted Establishments approached EPFO for extending the benefits to them also. However, EPFO found that the Supreme Court order is not applicable to the exempted establishments. Being aggrieved by this decision employees belonging to exempted establishments filed petitions in various High Courts challenging the decision of EPFO and claiming for benefits misrepresenting the instant judgment of the Hon’ble Supreme Court.

EPFO filed a petition for transfer of all such petitions filed in various High Courts to the Hon’ble Supreme Court to have uniform and finality in the matter. Accordingly, all such cases were transferred to the Hon’ble Supreme Court and an interim order dated 15.12.2017 was passed in the said transfer petition wherein it requested the other High Courts to await for the outcome of the order passed by the High Court of Kerala in the cases reserved for judgment and only thereafter to proceed further in the matter and that too subject to further orders to be passed by the Hon’ble Supreme Court in these matters.

Landmark judgement pronounced by Supreme Court on 4.11.2022

In the timelines of EPS 95, 4th November’2022 became another milestone when the Hon’ble Supreme Court disposed off the matter finally. The apex court decided that:

• Provisions of notification no. G.S.R. 609(E) dated 22nd August 2014 are legal and valid.

• No flaw in altering the basis for computation of pensionable salary.

• Amendment shall apply to the exempted establishments. The employer and the employee, simultaneously with exercising option shall also have to give an undertaking of transferring the employers’ contribution at the stipulated rate maintained by the trusts, which shall be equivalent to and not lower than the sum which would have been transferable, had such fund been maintained by the provident fund authorities.

• Who all can get pension on higher wages:

• Employees who exercised option and continued to be in service as on 1st September 2014,

• The members, who did not exercise option, as per paragraph 11(3) of the pension scheme (as it was before the 2014 Amendment) would be entitled to exercise option. Their exercise of option shall be in the nature of joint options. Time to exercise option shall stand extended by a further period of four months.

• Employees who retired prior to 1st Sep’14 without exercising any option have already exited from the membership thereof. They would not be entitled to the benefit of this judgment.

• The employees who have retired before 1st Sep’2014 upon exercising option shall be covered by the provisions of the para 11(3) as it stood prior to the amendment of 2014.

• Contribution @ of 1.16 per cent of their salary as an additional contribution is held to be ultra vires the provisions of the parent Act i.e. EPF 1952 Act. For the period of six months or till such time any amendment is made, whichever is earlier, the employees’ contribution shall be as stop gap measure. The said sum shall be adjustable on the basis of alteration to the scheme that may be made.

SC verdict: a mixed bag of hopes

The PF pension plan when introduced in 1995 created high hopes of social security amongst the intended beneficiaries. However, those who joined the plan in 1995 are still drawing a low pension. Only recently was a pension amount of Rs 200 and Rs 300 was raised to Rs 1,000. However, this is still a small amount for those who may have worked for some 35 years. The verdict does not clearly state if those who retired before 2014 will get any benefits.

Moreover, the Supreme Court suggested that an employer’s contribution to pension can be increased as a possible solution to compensate for the employee’s contribution of 1.16%. There is concern that employers’ burden may increase

The provisions of the Employees’ Pension Fund 1995 have been subjected to litigation from its inception in different courts starting from District Consumer Forums. And in its journey of 27 years, larger part has been in litigations. Now with the Hon’ble Supreme Court verdict in the matter, it can only be hoped that there will be no further litigation over EPS 95! otherwise the acronym ‘EPS’ for some may be relatable to ‘Employees Pain Scheme’???????


[1] Case Name: Employees Provident Fund Organisation Vs Sunil Kumar (Supreme Court of India) Date of judgement: 4.11.2022, Appeal No.: Civil Appeals Nos. of 2022)

[2] Case Name: R.C. Gupta & Ors. Etc. Etc. Versus Regional Provident Fund Commissioner Employees Provident Fund Organisation & Ors Etc., Civil Appeal No(S).10013-10014 OF 2016

[3] G.S.R. No.609 (E), dated 22.08.2014

[4] https://www.researchgate.net/

[5] https://www.indialegallive.com/magazine/employees-pension-scheme-epfo-supreme-court/

[6] Various other articles available on web.


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Comments (2)

Ashok kumar

A veryd well summarized note by Author.

  • 16 Dec 2022

Sukanta Kumar Kayastha

Very Informative

  • 05 Jun 2023

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