The government is set to raise the monthly wage ceiling for mandatory Employees’ Provident Fund (EPF) cover to `21,000 from `15,000 at present, a move that could inflate the government’s annual Employees Pension Scheme (EPS) outflow by 50% to Rs 3,000 crore. Once implemented, the change could also raise the number of active EPF subscribers by around 50 lakh to 4.25 crore The labour ministry’s proposal to raise the ceiling has been pending for quite sometime now. The finance ministry, which had asked the labour ministry to assess the financial implication of the proposal, has received the inputs recently and given the go-ahead.
The government pays 1.16% of the wages to each subscriber earning less than Rs 15,000 a month towards EPS. Under the current rules, it is mandatory for units employing 20 or more people to provide EPF benefits to workers. While employees contribute 12% of the basic pay to EPF, the employer contributes 8.33% of the pay (up to Rs 15,000) towards EPS and 3.67% of the pay to EPF. Employers also pay 0.5% towards employee deposit linked scheme (EDLI), 0.65% as EPF administrative charges and 0.01% as EDLI handling fee. Though the threshold exists for mandatory cover, employers and workers can opt for the scheme even if the salary levels are higher.
The government provides a grant to the tune of Rs 3,000 crore per annum towards payment of minimum pensions of Rs 1,000 per month. The Central Board of Trustees, the highest decision-making body of the Employees’ Provident Fund Organisation (EPFO), gave approved the proposal to raise the wage cap for mandatory EPF cover to Rs 25,000 per month for organised-sector workers long ago.
Following this, the labour ministry sent the proposal to the finance ministry for its approval which would require to be notified by the government subsequently. Since inception, EPFO has raised the wage threshold for nine times with the last revision in November 2014 from Rs 6,500 a month. The wage threshold for medical/cash and insurance benefits under the Employees’ State Insurance Corporation (ESIC) was also raised last year to `21,000 per month, from 15,000 previously.
ESIC, another social security venture of the government, had in September last year raised the threshold to Rs 21,000 per insured persons in sync with the hike in minimum wages. In ESIC, the employer contributes 4.75% of the wages and the employee 1.75% The labour ministry has proposed that provident fund, pension and insurance benefits currently being accorded to a section of organised-sector workers be extended to the entire working population under a comprehensive social security net. India has an around 49 crore working population.
Source: The Financial Express