On the heels of the Employees’ State Insurance Corporation (ESIC), the Employees’ Provident Fund Organisation (EPFO) is also set to raise the threshold for mandatory cover. And the raise is likely to be of the same magnitude as ESIC’s, meaning that employees earning up to R21,000 per month will come under the EPFO soon. Currently, the wage threshold for mandatory EPFO cover is R15,000 per month.
The EPFO’s wage threshold was last raised in 2014, from R6,500 a month, to bring it on par with the wage ceiling for assured ESIC benefits.
The EPFO’s highest decision-making body, the Central Board of Trustees, can take the final call on raising the ceiling after consulting on the matter with the finance ministry as the government, as an employer, is a major contributor to the scheme and any raise in ceiling will have a bearing on the exchequer. Over 4 crore people are now covered under the EPFO.
Labour minister Bandarau Dattatreya recently said that a raise in the ceiling for mandatory cover under the EPFO is under consideration, and the matter will be taken up for discussion at the next CBT meeting.
Sources said the proposal to raise the limit to R21,000 could face stiff resistance from the employers’ representatives in the CBT meeting, as many believe that this would be a great pain, particularly for small-scale industries. The Employees’ Provident Fund (EPF) is a retirement planning tool; a subscriber contributes 12% of his/her basic salary to the EPF and the employer also makes a matching contribution. However, of the 12% employers’ contribution, 8.33% goes to the Employees’ Pension Scheme (EPS) and the remaining towards the PF account. A member can withdraw the accumulations to cater to financial exigencies like a child’s marriage, education and buying a home before retirement. A subscriber also gets pension benefits and insurance cover.
The Union 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 whole working population by 2030. Given the current level of the workforce and labour force growth, this would mean that an additional 50 crore people would enjoy the above benefits given under state patronage over the next one-and-a-half decade.