The additional contribution of 1.16% for members seeking higher pension will be taken from within the overall 12% of the contribution of the employers into the provident fund. This, in effect, means that in case of members who opt for higher pension and are found eligible, the employer’s contribution towards the pension fund would be 9.49% as against the current 8.33%.

The ministry of labour and employment has notified this change with retrospective effect from September 1, 2014 in order to comply with the ruling of the Supreme Court.

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“The spirit of the EPF & MP Act as well as the Code on Social Security, 2020 do not envisage contribution from the employees into the pension fund. Accordingly, keeping in mind the letter and spirit of the EPF & MP Act and the Code, it has been decided to draw 1.16 % additional contribution from within the overall 12% of the contribution of the employers into the provident fund,” said the ministry in a late night statement on May 3.

The Supreme Court, in its November 2022 ruling, held the requirement of the members to contribute at the rate of 1.16% of their salary to the extent it exceeds the cap of Rs 15,000 per month as an additional contribution to be ultra vires of the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act,1952 (EPF & MP Act) and had directed the authorities to make necessary adjustments in the scheme within a period of six months.

“With the issue of above notifications, all the directions of the Supreme Court contained in judgment dated November 4, 2022 have been complied with,” the ministry further said.

While many members and pensioners raised concerns over the move, stating it will impact the provident fund contribution. Pension activist Parveen Kohli called it a contemptuous decision. “The amount equal to 1.16% was earlier being paid by employees which was not approved by the apex court. Now, the same amount to be paid out of 12% of the employer’s share will reduce the employee’s kitty in his provident fund. The net financial effect to the employee remains the same,” he said.

Anshul Prakash, partner, Employment Labour and Benefits, Khaitan & Co, noted that the Supreme Court had suspended the part of 2014 notification that required additional contribution of 1.16% if the member wishes to go for higher pension contribution and asked the department to look for more avenues of income instead of adding to member liability. “Then came an idea to get this from the employer. No one will have to pay any additional amount for pension,” he said, adding that it will, of course impact employer PF contribution.

The EPFO, over the last few months, has issued a number of circulars to enable members and pensioners to apply for higher pension under the Employees’ Pension Scheme but not all of it has been met with a positive reaction with concerns over difficulties in filing the application, providing proof of past contributions as well as no facility for physical submissions. To help members, the EPFO finally extended the deadline for submitting applications to June 26 from the previous due date of May 3. It has also provided a new facility under which members can delete and re-file the application. The facility can, however, only be used if the employer has not acted on the application.

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KE Raghunathan, Central Board of Trustees’ member representing employers, said that compliance of court direction is a mandatory requirement of the government and we are happy that it is fully compiled with. “But what is more important is, has it delivered happiness to those who are eligible? This has to be addressed with ease of compliance and flexible mandatory requirement conditions,” he stressed.