There are signs of a major change in the Employees’ Provident Fund Organisation (EPFO). As part of the revision of the eligibility criteria for mandatory PF and pension, the organisation is considering a proposal to increase the salary limit from Rs 15,000 to Rs 25,000. If the decision is implemented, more than 1 crore employees in the country will come under the EPF and EPS for the first time.
During an event in Mumbai, Secretary M. Nagaraju of the Department of Financial Services (DFS) stated that it is “very unfortunate” that most individuals earning more than Rs 15,000 a month are not covered under the pension system. He mentioned that the prevailing threshold is very outdated and it is time to increase it.
What are the present provisions?
At present, employees who have a salary base of Rs 15,000 or less will be and will automatically come under EPF and EPS. Those with a salary base more than Rs. 15,000 shall be able to register as a choice, but employers have no requirement to register those employees. Due to this, employees with a low wage in urban locations are also not benefitting from a formal pension system.
What new changes are likely to come?
According to reports, the EPFO is moving ahead with a proposal to increase the salary limit to Rs 25,000. The issue is likely to be raised in the Central Board of Trustees early next year. The increase in the limit by Rs 10,000, estimated by the Labour Ministry, will bring over 1 crore additional workers under the mandatory PF and pension scheme. Trade unions have been demanding this amendment for a long time, as the gap between the current wage structure and the cost of living has widened significantly.
Impact on both sides – employees and employers
The new rules will increase the monthly contribution of employees and strengthen the PF corpus. Currently, employees contribute 12% of their basic salary to PF and employers also contribute an equal amount, a part of which goes to EPS. If the salary limit is increased, the contribution of both sides will increase.