Less than four months after it reduced the administrative charges (ACs), the Employees’ Provident Fund Organisation (EPFO) is planning to slash these imposts further. The move would allow employers — from whose share to the EPF these charges are deducted — to increase workers’ salaries.
If the EPFO’s latest plan to reduce the ACs to 0.4% of the basic pay from the current 0.65% materialises, these charges will fall to their lowest level since 1998.
The amount to be freed and that employers could potentially pass on to workers by the latest move is around `1,900 crore annually. In January 2015, the retirement fund body had reduced the ACs to 0.85% from 1.1%, the rate that existed for 16 years.
Currently, while an employee contributes 12% of her basic pay to EPF, the employer contributes 8.33% towards employees’ pension scheme and 3.67% to the EPF itself. Additionally, the employer also pay 0.5% towards Employees’ Deposit-linked Insurance (EDLI) Scheme, 0.65% as EPF ACs and 0.01% as EDLI handling fee, taking her total contribution to 13.61%.
Currently, a little over 25% of the basic pay of an employee earning less than Rs15,000 per month goes towards the mandatory provident fund/insurance/pension cover. In India, the AC on the state-managed retirement fund is among the highest in the world.
However, the amount collected by the EPFO through ACs has consistently been higher than its administrative expenditure.
In the three years till 2015-16, EPFO saved a whopping Rs 8,372 crore on the ACs’ account, according to its latest annual report.
EPFO uses the AC fund to run the organisation including the capital expenditure to purchase land and buildings, expenses for salary including the payment of pension to staff and officers upon retirement.
EPFO’s highest decision-making body Central Board of Trustees (CBT) recommends the rates for administration and inspection charges and it is fixed by the central government and notified in the gazette.