A senior government official told ET that lower contribution rule under PF will not apply to all.
"It will not be universal... This will be permitted for certain class of workers," the officials said, adding that these class of workers will be decided based on a certain criteria.
Working women and professionals with disabilities could be included in the class of workers as per the criteria being discussed.
The labour ministry has begun discussions on the proposed criteria to be adopted to classify the category of workers who can be given an exemption of up to 2-3% in their share of contribution, and a decision is expected shortly.
“Government is seized of the fact that social security is needed at the time of retirement. However, young employees need enough funds at disposal for wedding, housing and other needs in the initial years of their careers and hence the proposal,” the official quoted above said.
Currently, all employees are mandated to contribute 12% of their basic wage under the Employees Provident Fund Organisation and a matching contribution is made by the employer.
As part of the Code on Social Security, 2019, the labour ministry has proposed flexibility in the Employee Provident Fund & Miscellaneous Provisions Act, allowing for different rates of contribution. No change has been proposed in employer’s contribution. The bill, tabled in Parliament, is now before the standing committee on labour.
The rule defining the criterion for applicability will be notified by the ministry once the Code is approved by the Parliament. The idea is to allow some flexibility to a certain category of workers in a fixed age bracket to reduce their contribution to PF and thus allow them to increase their take home salary.
As per the current EPF & MP Act, 12% of basic salary (capped at Rs 15,000) is contributed to an employee’s EPF account, with amatching contribution from the employer. Of the employer’s contribution, 8.33% goes to Employee Pension Scheme (EPS). Also, the EPS contribution is calculated on a basic pay of Rs 15,000 or actual basic pay, whichever is less. If the basic exceeds Rs 15,000, then EPS contribution is calculated as 8.33% of Rs 15,000, which is Rs 1,250 per month.
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8 Comments on this Story
Srinivasan Vedantam364 days ago
Not a good idea. Government nowadays do not need public savings but only external borrowings as it wants our resources to be drained out by way of interest dividends and profit payouts to external entities. Prudent way is to allow liberal withdrawals for housing and other needy long term investments if government do not need funds.
Ashwani Kumar364 days ago
Allowing Lower PF contribution is a bad idea as PF contribution is a great social security tool in the hand of working class.
ALAKA MOHAPATRA364 days ago
This is really a niece decision.The employees can avail more cash for purchase of vehicles,electronic gadgets and invest independently. As long as employer is giving its contribution it is alright.After all it is an option and those who are intelligent enough will avail.