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

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.

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