Over the last decade, the administrative account of the Employees Provident Fund Organisation (EPFO) consistently turned in considerable annual surpluses (see table), but it has reduced the administrative charge – ostensibly borne by employers but actually a cost to workers – only grudgingly.
Over the last decade, the administrative account of the Employees Provident Fund Organisation (EPFO) consistently turned in considerable annual surpluses (see table), but it has reduced the administrative charge – ostensibly borne by employers but actually a cost to workers – only grudgingly. Effective April 2017, the administrative charge was reduced to 0.65% of total wages of an employee. However, the account still had balance of Rs 1,278 crore for the April-December 2017 period, compared with Rs 1,976 crore for the whole of 2016-17, which showed the incremental EPFO business growth has moderated the impact of the cut in the administrative charge on its revenue. Labour minister Santosh Gangwar said after the EPFO Central Board of Trustees’ (CBT) meet on Wednesday that the CBT had decided to reduce the administrative charges from 0.65% to 0.50% of total wages paid by employers.
In fact, the agenda note for Wednesday’s EPFO trustee meet acknowledged the redundancy of the administrative charge at this point. It said: “The past reductions in administrative charge in 2015 & 2017 have not resulted in reduction in income of EPFO due to growth in business of EPFO in the long run. A further reduction in administrative charge to 0.50% is also not expected to reduce income of EPFO to the (proportionate) extent of Rs 980 crore due to expected growth in coverage under EPF schemes, better compliance and default management and expected future salary ceiling increase.”
The EPFO has a surplus accumulated corpus of Rs 20,871 crore that generates (interest of) Rs 1,670 crore as additional support, according to the agenda note. The lowering of the administrative charge would allow employers — from whose share to the EPF these charges are deducted — to increase take home salaries of employees. “The total collection of administrative charges in 2017-18 is estimated at Rs 3,760 crore. A decrease of administrative charges by 0.15% would lead to reduction in collection of administrative charges by Rs 870 crore. Thus, excluding the impact of future growth in EPFO business, the estimated revenue is Rs 2,980 crore. The estimated revenue expenses requirement are Rs 1,820 crore,” the EPFO said in the note.