Govt. Rejects Demand for PF on Perks

In a setback to over five crore provident fund subscribers, the labour ministry has turned down a proposal to deduct 12% contribution on the basic salary as well as allowances even as it holds back several notifications.

Sources familiar with the development told TOI that the ministry went by the law ministry's opinion that the Employees Provident Fund Organisation (EPFO) could not ask for deduction on the salaries and allowances under the existing legal framework. Most companies have been computing provident fund contribution (12% each by employees and employers) on the basic salary and the dearness allowance but a November 2012 circular had sought to change it as employees were seen to be losing out on statutory savings.

A volley of protests by the employers, however, prompted the government to seek a review of the circular, who suggested that employees would lose out on take home salary even as they would have had to shell out more to meet the new obligation. 

An internal committee set up by the labour ministry had backed the circular as it was widely seen as an employee-friendly gesture. But industry chambers such as CII and Ficci lobbied hard against the implementation of the circular.

While labour ministry's stance will defer immediate implementation of the circular, the EPFO can make a fresh pitch citing court rulings, said sources. For India Inc, the bad news is that the circular had contained a provision that would have stopped PF authorities from seeking information without any time limit. The labour ministry is learnt to have asked the EPFO to put that proposal on hold as well.

But the ministry's unusual haste in pushing through the decision on the contentious circular has come as a surprise given that it is sitting on several proposals which had been cleared by the Union cabinet as well. For instance, the move to increase the cut-off limit for PF from Rs 6,500 a year to Rs 15,000 is yet to be notified. Similarly, there has been little progress on fixing a minimum pension of Rs 1,000 a month, although the cabinet had cleared the proposal.

There are at least three other decisions, which would have helped employees but have not been implemented. The list includes a cut in administrative charges as well as providing additional benefit to Employees Deposit Linked Insurance Scheme until an actuarial valuation has been done. These decisions had been ratified by the EPFO's Central Board of Trustees.

Times of India, New Delhi, 05-04-2014

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