The government is not currently planning any specific changes to the Employees’ Provident Fund Organisation (EPFO) scheme as part of the new labour codes, according to the Labour Ministry’s response in the Rajya Sabha.
In a written reply to a question raised by Rajya Sabha MP Sandosh Kumar P, Minister of State for Labour and Employment Shobha Karandlaje clarified the government’s position on possible changes to EPFO provisions and the interest rate on provident fund deposits.
The response also sheds light on how the upcoming labour reforms under the Code on Social Security, 2020 will treat existing EPFO schemes once the new framework is implemented.
EPFO interest rate: How it is decided
The question raised in the Rajya Sabha asked whether the EPFO is considering an enhancement in the interest rate paid on provident fund deposits.
In response, the Labour Ministry explained that the interest rate for EPF deposits is determined as per the provisions of the Employees’ Provident Funds Scheme, 1952.
Under paragraph 60(1) of the EPF Scheme, the EPFO credits interest to members’ accounts at a rate determined by the Central Government in consultation with the Central Board of Trustees (CBT) of the EPFO.
The Central Board of Trustees is the apex decision-making body of EPFO and includes representatives from the government, employers and employees.
The ministry further clarified that while deciding the interest rate, the government must ensure that the EPF interest account remains financially sound.
According to paragraph 60(4) of the scheme, the government must ensure that there is no overdrawal from the interest account while crediting interest to EPF members.
This means the interest rate is determined after considering the EPFO’s earnings from its investments and overall financial sustainability.
Are changes planned under the new Labour Code?
The Rajya Sabha question also asked whether the government is planning to introduce any changes to the EPFO scheme as part of the new labour codes.
In its reply, the Labour Ministry said that under the Code on Social Security, 2020, the existing EPFO schemes will continue for a certain period even after the new code is implemented.
Section 164(2)(b) of the Code on Social Security states that the current EPFO schemes will remain in force for up to one year from the date the Code comes into effect, as long as they are not inconsistent with the provisions of the new law.
This means that the existing EPF framework will continue initially, and any changes under the new labour code framework will be implemented gradually.
What is the Code on Social Security, 2020?
The Code on Social Security, 2020 is one of the four labour codes passed by Parliament to consolidate and simplify India’s labour laws.
The four labour codes are: Code on Wages, 2019; Industrial Relations Code, 2020; Occupational Safety, Health and Working Conditions Code, 2020; and Code on Social Security, 2020.
The Code on Social Security replaces and merges several earlier laws related to social security benefits, including:
-Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
-Employees’ State Insurance Act, 1948
-Payment of Gratuity Act, 1972
-Maternity Benefit Act, 1961
The objective of the code is to streamline social security provisions and expand coverage to more workers.
EPF provisions under the new Social Security Code
The new social security code retains the core structure of the EPF system but also introduces certain enabling provisions.
Some key provisions include:
1. Continuation of EPF benefits
Employees in establishments that meet the eligibility criteria will continue to receive provident fund benefits under the EPF framework.
2. Government’s power to frame schemes
The central government will continue to frame EPF schemes for employees and establishments covered under the law.
3. Universalisation of social security
The code aims to extend social security benefits to workers beyond the traditional organised sector.
4. Coverage of gig and platform workers
For the first time, gig workers and platform workers may receive certain social security benefits through separate schemes.
5. Retirement benefits for organised sector workers
The social security code also consolidates several retirement-related benefits that are currently provided under different laws.
These include:
Provident fund (EPF): A retirement savings scheme where both employer and employee contribute a portion of wages.
Pension benefits (EPS): Employees covered under EPF may also receive pension benefits under the Employees’ Pension Scheme.
Gratuity: Employees become eligible for gratuity after completing a specified period of service with an employer.
The new code also introduces provisions allowing fixed-term employees to receive gratuity benefits on a pro-rata basis, even if they have not completed five years of service.
Wider coverage for workers
Another key objective of the new labour codes is to expand the reach of social security schemes.
The Code on Social Security allows the government to design welfare schemes for gig workers, platform workers, unorganised sector workers.
These schemes may include benefits related to life insurance, disability cover, health insurance and retirement protection.
Public feedback sought on labour codes
The government is also in the process of finalising the rules required to implement the labour codes.
In December, the Labour Ministry invited public comments and suggestions on the four labour codes, giving stakeholders 30 to 45 days to submit feedback. The consultation process is part of the government’s effort to refine the rules before the labour codes are fully implemented.
What this means for EPF subscribers
For now, EPF subscribers are unlikely to see immediate changes to the EPFO scheme solely due to the new labour code framework.
The Labour Ministry’s response indicates that the existing EPF scheme will continue initially, and any modifications under the new social security code will be implemented gradually once the rules are finalised and the code comes into force.
For millions of salaried employees in the organised sector, EPF will therefore remain a key pillar of retirement savings under the upcoming labour law framework.