The move follows the Pradhan Mantri Shram Yogi Maan Dhan pension scheme unveiled for unorganised sector workers. The objective is to allow rates of contribution for certain classes of employees lower than the mandatory 12% and even exemption for employers from any liability if the need arises, a senior government official said.
The new provision will empower the government to fix rates for a wider section of workers such as drivers, maids or the self-employed, the official told ET. “Besides, the government may notify whether in these cases the employer is liable to contribute or not,” the official said, requesting anonymity.
The labour ministry’s draft amendment to the Act proposes that the Centre “specify rates of contribution and the period for which such rates shall apply for any class of employees.”
A preliminary draft of the EPF & MP (Amendment) Bill, 2019, dated August 23, has been circulated for stakeholder consultation. It has sought comments until September 22. ET has reviewed a copy of the bill.
Currently, both employer and employee contribute 12% each to the Employees Provident Fund Organisation, while the rate is 10% for beedi, brick, jute, coir, and guar gum industries, any establishment declared a sick company or companies with accumulated loses equal to or in excess of their net worth at the end of a given financial year. The EPF & MP Act is applicable to every establishment employing 20 or more people.
“With the change in the industrial and economic scenario of the country leading to increased mobility of labour and outsourcing of services, need has been felt for introducing some amendments in the provisions of the Act,” the labour ministry said in a brief note sent with the proposed draft amendment.
Subscribers may be given the choice of switching between the EPFO and the National Pension Scheme and those with income below a certain threshold can opt not to contribute to PF without impacting the employers’ contribution. “This flexibility will enable modification of rates of contribution depending on various factors like age, income, gender,” it said.
The government proposes to change the definition of wages under the act to align it with the recently notified wage code. At present, the PF contribution is computed on the basis of basic wages, dearness allowance and retaining allowance.
The amendment seeks to stipulate that allowances paid above 50% or as a notified percentage of all remuneration be included as wages, according to the draft.
The move is in sync with the government’s endeavour to reform labour laws and bring all classes of workers in the ambit of social security, lower the provident fund burden on employers and increase the take-home salary for employees.
However, trade unions had opposed a budget announcement of 2015-16 with regard to NPS as an option, forcing the government to roll it back.
Referring to the budget announcement of 2015-16, Vrijesh Upadhyaya, general secretary of the Bhartiya Mazdoor Sangh, said, “We have opposed these changes earlier and will continue to do so as it is against the interest of the workers.”
National Pension Scheme cannot be an option to EPFO as the benefits under the two schemes are different, he said.