The central board of trustees (CBT) of the Employees’ Provident Fund Organisation on Wednesday endorsed a comprehensive amendment to the EPF Act to hike the wage ceiling for mandatory PF coverage to R15,000 per month from R6,500 and guarantee a minimum pension of R1,000 per month.
"These decisions will be effective from this April onwards. However, a decision on the proposal to raise the retirement age for getting pension to 60 years from 58 has been deferred. The government will hold further consultations on the issue," an official told FE.
The move to raise the mandatory wage ceiling to R15,000 per month will help EPFO rope in more subscribers (estimated to be an additional 50 lakh employees), increase its corpus and help reduce the deficit in its pension scheme.
EPFO now has close to 8 crore subscribers.
Many companies now offer an option to fresh recruits starting with a basic salary of more than R6,500 per month of choosing the national pension system (NPS) regulated by PFRDA instead of enrolling for EPF.
Moreover, some companies even evaded PF coverage to employees especially contract workers by offering wages slightly over Rs 6,500 per month. Such options will be limited as the EPFO has raised the wage ceiling to R15,000, sources said.
Many of the proposals that are on the CBT’s agenda were long pending. After Oscar Fernandes took over as the labour minister, the pending issues were put on fast track.
The UPA top brass also wanted to announce some of the labour welfare measures, including a minimum pension of R1,000 per month — - a move that is expected to benefit around 35 lakh pensioners.
At present, employers contribute 8.33% of the basic wages towards EPS, and the government contributes just 1.16%. The new decision is to raise the government's contribution to 1.79% and hike the minimum mandated basic salary to come under EPF to R 15,000 per month from the present R6,500.