Driven by a policy to extend social security benefits to workers who are currently outside its ambit, the government is considering lowering employers’ liability towards Employees’ Provident Fund (EPF) in the construction sector to 10% of the basic pay from 12% now.
Of an estimated over 3 crore workers in the building and construction sector, around just 15 lakh have EPF cover at present, as most builders, especially the smaller ones, keep fewer than 20 people on their payrolls to avoid the extra cost. It is mandatory for units employing 20 or more to provide EPF benefit to workers.
The labour ministry feels that by reducing the quantum of employer’s contribution, it can persuade more building/construction units to extend the EPF benefits to workers. The construction industry has been pitching for this relaxation, contending that the current level of EPF liability was too onerous for it, especially since the units already pay 1% of the construction cost to the government as labour cess.
While employee contributes 12% of the basic pay to EPF, the employer contributes 8.33% towards employees’ pension scheme and 3.67% to the EPF itself. Additionally, employers also pay 0.5% towards EDLI, 0.65% as EPF administrative charges and 0.01% as EDLI handling fee, taking the total contribution to 13.61%.
The idea is to cut their cumulative EPS/EPF contribution to 10% from 12%.
The labour ministry found the concern of builders and developers as “genuine” and was considering whether builders’ contribution towards EPFO could be reduced to 10%, an official source said.
However, no change in their contribution towards ESIC, now 4.75%, was being considered, the source added. He said no amendment of the EPF Act would be required to effect the change; only the scheme required to be modified.
Jute, beedi, brick, coir and gaur gram factories are now entitled for lower (10%) EPF contribution by employers. So are units with fewer than 20 workers and “sick industrial companies.”
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Under a special package for the textile and garment sector unveiled in June last year, the government had committed to bear the entire 12% employer’s contribution to EPF for the first three years in case of new employment— against 8.33% for other sectors under the Pradhan Mantri Rozgar Protsahan Yojana. However, in the case of the construction industry, the government has no plans to bear the cost but only to reduce the employer contribution.
The Employees’ Provident Fund (EPF) is a retirement planning tool. A member can withdraw the accumulations to cater to financial exigencies like a child’s marriage, education and buying a home before retirement. She also gets pension benefits and insurance cover.