India

EPFO wants wage, headcount limits to be removed

The Employees’ Provident Fund Organisation (EPFO) has proposed that the wage ceiling and headcount restriction be removed to allow all formal workers as well as the self-employed to enrol in its retirement saving schemes. It’s discussing the issue with stakeholders and has even reached out to the states.

Currently, there is a mandatory wage ceiling of ₹15,000 for employees and only enterprises with 20 or more workers can join its schemes, including the flagship Employees’ Provident Fund (EPF) scheme, which has over 55 million active subscribers.

Dropping the restrictions from the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952, will give the EPFO flexibility to offer its schemes to even the self-employed. A senior government official told ET that the act will need to be amended to open up the scheme to all formal sector workers and the self-employed.

“The key changes will include removal of headcount and wage threshold of coverage,” the official said, adding this will enable coverage of all workers irrespective of income or size of the enterprise.

The EPF scheme contributions are payable on a maximum wage ceiling of ₹15,000 per month.

Changes to Boost EPFO Corpus

Employees can pay at higher wages but the employer is not under any obligation to pay a matching contribution at these increased salaries.

The EPFO provides provident fund, pension, and insurance benefits to its subscribers through the EPF, Employees’ Pension Scheme and Employees’ Deposit Linked Insurance Scheme. A larger number of subscribers will increase the EPFO corpus, currently estimated at about Rs 12 lakh crore, potentially stepping up inflows into stocks. The EPFO currently invests 15% of its incremental income in equity through exchange-traded funds (ETFs) and the retirement fund body is planning to raise this further to 25% to obtain better returns for its subscribers.

Social Security Code

The Social Security Code, 2020, provides for retirement security to unorganised, gig and platform workers through the Employees’ State Insurance Corporation (ESIC) or EPFO. The code permits necessary changes in the existing legislation through a notification to allow wider coverage under them.

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