Employee Provident fund is the oldest social security scheme that is currently serving as many as 6 crore subscribers. To make it further, subscriber-friendly, the government is pushing changes to the original EPF law which has for last many years gone digital.
Definition of wages: The definition of wages decides the EPF contribution and in the previous instance it included basic pay and dearness allowance. But, now after the SC’s ruling this year, the wage would include all non-variable allowances. And in line with the SC ruling, the centre in mulling over a proposal to include basic wage, retaining allowance if any and DA within the scope of wages so as to decide on the EPF contribution.
Also, there is a caveat that in case the allowances that are excluded are more than 50% of the monthly pay or any other specified percentage as presented by the Centre, then the excess amount will be added to the wages to decide on the PF contribution. So, if the proposal is passed then on employers will have to ensure that remuneration and other allowances are less than 50% of the overall amount they pay as else they will have to make a higher EPF contribution towards their employee’s EPF account.
Reduced as well as varying contribution: There has been also a proposal made to charge a differential rate of contribution for different employee category for a certain period. The move shall be good for low income earners as it may increase their take home salary after reduced contribution.
Transfer from EPS to NPS: There is also a proposal made to transfer the funds from the EPF pension scheme i.e. EPF to NPS. In EPF’s EPS account, of the employer’s 12% contribution nearly 8% goes to this fund. The benefit from the amendment will serve employee base who expect a more transparent return regime as well as can afford a higher risk to get market-linked returns. Also, the bill proposes greater flexibility in the sense that shift can be again made to EPF from NPS, if the subscriber is not satisfied.