1. News

In-Hand Salaries May Increase as Government Proposes Cut in Employees Provident Fund (EPF) Contribution: A Report

Abha Toppo
Abha Toppo

In order to improve in-hand salaries, the Labour and Employment Ministry has suggested a cut in worker’s contribution to the Employees' Provident Fund (EPF), as reported by the Business Standard. The report said that eligibility of workers would depend on their age, gender or pay grade whereas the employer's share will remain unchanged.

At present, the mandated EPF contribution is 24% of basic pay, which is divided equally between the employers & employees. It is mandatory for employees to earn Rs 15,000 per month & for employers with at least 20 staff.

The ministry said, "Flexibility has been suggested to be introduced in the (EPF & MP) Act to prescribe different rates of contribution for such period for any class of worker. However, no change in employer’s contribution has been proposed."

It must be noted that the recommendation is a part of the proposed Employees’ Provident Fund & Miscellaneous Bill, 2019. This is in-line with announcements made by ex Finance Minister Late Arun Jaitley in Budget 2016.

However, the former FM specified "below a certain threshold of monthly income, contribution to the EPF must be optional". An officer told the paper that the enabling provision for cut had been adopted as worker’s share cannot be made elective completely to give "some sort of social security cover".

Another proposal is allowing workers to switch between the Pension Fund Regulatory & Development Authority-run NPS or National Pension Scheme to EPFO or Employees Provident Fund Organisation scheme.

The plan suggests limiting the inspection of backdated records only up to 5 years. This is currently not time-bound & turns into a cause for "harassment".

The ministry said, "Section 7A of the Act does not give any limitation for initiation of inquiries to decide applicability of the Act to an establishment & to determine the amount due from an employer under any provision of the Act & the schemes framed there under. Such a provision is receptive to misuse & against a predictable policy for an employer / establishment".

Also there is a 5-year limit proposed for the Employees’ State Insurance (ESI) Act, 1948 & a 7-year cap proposed for the Income Tax Act.

The ministry added that "To instill discipline in the working of assessing officers, the Centre has suggested a time period of 2 years for inspectors to finish their inquiries, under this Act or else, they will have to submit reasons in writing to the EPFO’s central provident fund commissioner".

According to the Economic Times report, to widen the social security net, the Ministry’s proposal also introduces provident fund for self-employed workers like domestic help & drivers. It added that for this an amendment to the Employees’ Provident Fund & Miscellaneous Provident Act has been recommended that would specify rates of contribution & the period for which such rates shall apply for any class of employees.

The progress is in line with the Pradhan Mantri Shram Yogi Maan Dhan pension scheme unveiled for the unorganised sector workers. A draft of the Amendment Bill dated 23rd August has been circulated & will be open for comments up to 22nd September.

Like this article?

Hey! I am Abha Toppo. Did you liked this article and have suggestions to improve this article? Mail me your suggestions and feedback.

Share your comments

Subscribe to our Newsletter. You choose the topics of your interest and we'll send you handpicked news and latest updates based on your choice.

Subscribe Newsletters