To Expand In-Hand Salary, Government suggest Cut In Provident Fund Contribution
Observed Policies/Schemes

To Expand In-Hand Salary, Government suggest Cut In Provident Fund Contribution

Provident Fund
Provident Fund

To increase in-hand salaries, the Labour & Employment Ministry has recommended a slash in worker’s contribution to the Employees’ Provident Fund (EPF). 

The worker’s eligibility to get the benefit would be determined based on their age, gender, or pay grade while the employer’s portion will remain fixed.

The government’s intention from this move is to improve labor laws and secure all classes of workers with social security, lessen the burden of the provident fund on employers and to enhance employees take-home salary.

The report is such that to develop social security, the Ministry has also recommended introducing provident fund for self-employed workers such as domestic help and drivers.

This move is in sync with the Pradhan Mantri Shram Yogi Maan Dhan pension scheme which is suitable for unorganized sector workers.

 A draft of the Altered Bill dated August 23 has been reported and will be open for comments till September 22.

For this an amendment to the Employees’ Provident Fund (EPF) and Miscellaneous Provident (MP) Act has been recommended, which would specify rates of contribution and the duration for which such rates shall be applicable for every group of employees, ET added.

According to the EPF & MP Act, the EPF contribution is 24 %  of the basic pay, distributed evenly between employers and employees. The EPF & MP Act is suitable for every corporation employing 20 or more people.

The Employees’ Provident Fund Organisation (EPFO) contributors may be given the choice of switching between the provident fund and the National Pension Scheme and the one’s with income under a certain threshold can opt not to contribute to PF without affecting the employers’ contribution.

The labor ministry said, “This flexibility will enable modification of rates of contribution depending on various factors like age, income, gender,” 

The Ministry also added, “To instill discipline in the working of assessing officers, the government has suggested 2 years for inspectors to conclude their inquiries, under this Act. Otherwise, inspectors will have to submit reasons in writing to the EPFO’s central provident fund commissioner”.

This proposal suggests regulating the inspection of backdated records only up to 5 years. 

Currently, this is not time-bound and transforms into a cause for harassment.



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