Amount of Contribution

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Q-4      Explain contribution and the amount contribution under section 2(5).


As per [Section 2(5)] ‘Contribution means the sum of money payable to the institution fey the employer or by the Federal Government in respect of an insured person under the provisions of the Act.

Contributions are required to be paid every month by the Employer to the Institution in respect of ever person in his insurable employment at the rate of 5% of his wages in the period manner. Employees drawing wages in excess of Rs. 3000/- are excluded from the scheme if the above Act. Moreover no contribution shall be payable in respect of an insured person who is in the receipt of pension under the above Act or has attained the age of sixty years, or fifty-five years in the case of a woman.

With effect from July 1986, contribution shall be payable on quarterly basis by the Federal Government to the Institution in respect of every insured person at the rate of 5% of his wages. The restrictions mentioned above in respect of contributions are also applicable of the Government contribution.

Any official of the Institution has the following powers:

1.         Require an employer to furnish to him such information as he may consider necessary; or

2.         At any reasonable time, enter any establishment or other premises occupied by such employer and require any person found Incharge thereof to produce and allow him «:o examine such accounts books and other documents relating to the employment of persons and payment of wages, or to furnish to him such information, as he may consider necessary; or

3.         Examine, with respect to any matter relevant to the purposes aforesaid, the employer, his agent or any person found in such establishment or other premises or any other person whom the said official has reasonable cause to believe to be or to have been an insured person



An employer is not required to pay any contribution in the following stations:

(a)        When an independent contractor is engaged by an employer.

(b)        Where a contractor is engaged for running a canteen within the premises of an industry.

(c)        When the workmen employed by a contractor are not engaged in connection with the work of the employer.


Amount of Contribution [Sec. 20]

The employer shall pay contributes? the prescribed rate for this purpose daily wages be calculated in such manner aft may be proved by regulations. Where the mode of. payment of remuneration whether is: cash or in kind, makes it difficult to determine the amount of wages for computing the contribution, the Commissioner may determine such wages.

Under the law an employer is liable to pay contribution at the rate of 7% of the wages.

Records of Contribution

The employer is required to maintain records showing the payment of contribution. The employer is also required to file a return, on the basis of such records. Showing the particulars of the persons employed in prescribed form.

The authorized office, shall check the aforesaid records to ensure its correctness. Such officials shall have power:

(a)        To ask any employer to provide them any information they need,

(b)        To enter any premises occupied by any employer,

(c)        To ask any person Incharge of the premises to provide documents relating to the employment of persons and payment of wages.

(d)        To examine the Incharge and any secured person.

If the in situation fails to produce the required information the Institution will be free to assess the contribution on the basis of the evidence, which is satisfactory for the purpose of assessment.


Increase of Unpaid Contribution

Under the following situations the contribution payable by the employer can be increased:

(a)        Where the employer falls to pay the contribution on due date.

The amount shall be increased by a prescribed percentage but the amount of increase shall in no case exceed 50% of the amount due.

(b)        When the employer does not observe the safety and hygienic rules. In this case the Commissioner shall increase the rate of contribution by an order in writing- But this increase shall not be more than 20%.

The amount of contribution due together with the increase made due to failure of payment

on due date shall be recovered as arrears of land revenue.

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