Formal sector workers may soon have an option to choose between EPF scheme run by retirement fund body EPFO...
Formal sector workers may soon have an option to choose between EPF scheme run by retirement fund body EPFO and New Pension Scheme (NPS) and a proposal in this regard is expected to be discussed by the Cabinet next week.
The proposal is part of the bill to make comprehensive amendments to the Employees’ Provident Funds and Miscellaneous Provisions Act 1952.
“The tripartite discussion on the bill is over and it would be put up for Cabinet’s approval sometime next week,” a source said.
One of the proposed amendments also authorise Central Government to waive off mandatory PF contributions by workers with certain threshold of monthly income.
The source further revealed that the Employees’ Provident Fund Organisation (EPFO) will be regulatory body for monitoring the implementation of the scheme as there could be cases where worker neither go to EPF nor NPS.
The proposal to provide these options of choosing social security schemes to workers was announced by the Finance Minister Arun Jaitley in his Budget speech for 2015-16.
“With respect to the EPF, the employee needs to be provided two options. Firstly, the employee may opt for EPF or the New Pension Scheme (NPS)…for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution,” Jaitley had said in Parliament.
Another amendment in the bill proposed to change the definition of wages, which would include basic pay and all allowances paid to workers. This would increase PF contributions by workers and employers but result in higher saving for employees.
The bill provides “Wages”, meaning all emoluments or remunerations including all allowances payable to an employee in cash.
Under the scheme, the employees contribute 12 per cent of their basic wages towards EPF contribution, with employers pitching in equally.
Out of employers’ contribution 3.67 per cent goes towards EPF, 8.33 per cent towards Employees’ Pension Scheme and 0.5 per cent towards the Employees’ Deposit Linked Insurance Scheme.
In the present scenario, some employers split wages of workers into numerous allowances to reduce their PF liability. The amendment would address this issue.
The employees’ representatives are in favour of the clubbing of wages. However the unionists have reservations against providing option to workers to choose between EPF and NPS, saying that NPS is not a social security scheme rather it is a saving scheme.