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Last Updated : Aug 27, 2019 06:11 PM IST | Source: Moneycontrol.com

Salaries may rise as Centre proposes cut in employees' PF contribution: Report

The worker's eligibility would depend on their age, gender or pay grade, while the employer's share will remain unchanged

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The Labour & Employment Ministry has suggested a reduction in worker’s contribution to the Employees' Provident Fund (EPF), to improve in-hand salaries, the Business Standard reported.

The worker's eligibility would depend on their age, gender or pay grade while the employer's share will remain unchanged, the report added.

Presently, the mandated EPF contribution is 24 percent of basic pay, divided equally between employers and employees. It is compulsory for employees to earn Rs 15,000 a month and for employers with at least 20 workers.

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As per the ministry, "Flexibility has been proposed to be introduced in the (EPF and MP) Act to prescribe different rates of contribution for such period for any class of employee. No change in employer’s contribution has been proposed."

The suggestion is a part of the proposed Employees’ Provident Fund and Miscellaneous Bill, 2019.

This is in-line with announcements by late Finance Minister Arun Jaitley in Budget 2016. However, Jaitley specified "below a certain threshold of monthly income, contribution to EPF should be optional", it noted.

An official told the paper that the enabling provision for reduction had been adopted as worker’s share cannot be made optional completely to provide "some sort of social security cover".

Another proposal is allowing employees to switch between the Pension Fund Regulatory and Development Authority-run National Pension Scheme (NPS) to the Employees Provident Fund Organisation (EPFO) scheme.

The proposal suggests restricting the inspection of backdated records only up to five years. This is presently not time-bound and turns into a cause for "harassment".

"Section 7A of the Act does not provide any limitation for initiation of inquiries (i) to decide the applicability of the Act to an establishment and (ii) to determine the amount due from any employer under any provision of the Act and the schemes framed thereunder. Such a provision is susceptible to misuse and against a predictable policy for an employer or establishment," the ministry said.

Further are a five-year cap proposed for the Employees’ State Insurance (ESI) Act, 1948 and a seven-year cap proposed for the Income Tax Act.

"To instil discipline in the working of assessing officers, the government has suggested a time period of two years for inspectors to conclude their inquiries, under this Act. Otherwise, inspectors will have to submit reasons in writing to the EPFO’s central provident fund commissioner," the ministry added.

To widen the social security net, the Ministry’s proposal also introduces provident fund for self-employed workers such as domestic help and drivers, the Economic Times reports.

For this an amendment to the Employees’ Provident Fund and Miscellaneous Provident Act has been suggested, which would specify rates of contribution and the period for which such rates shall apply for any class of employees, ET added.

"The government may notify whether in these cases the employer is liable to contribute or not," ET quoted an official saying.

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

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First Published on Aug 27, 2019 01:47 pm
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