Source | Financial Express : By Surya Sarathi Ray
The Central Board of Trustees (CBT), the highest decision-making body of the employees’ provident fund organisation (EPFO), on Saturday rejected the government’s proposal of pruning employers’ contribution to the employees’ provident fund (EPF) to 10% from 12% at present, even as it gave the retirement fund body its go-ahead for enhancing its exposure to the stock market to 15% of the incremental deposits from 10% now. Sources present in the CBT meeting said the proposal of reducing employers’ contribution saw vehement protests from the states, as well as workers’ and employers’ representatives, leaving the Centre with no option but to withdraw the proposal.
Under the present law, it is mandatory for units employing 20 or more persons and earning up to Rs 15,000 a month to provide EPF benefits to workers. While employees contribute 12% of the basic pay to EPF, the employer contributes 8.33% towards the employee’s pension scheme and 3.67% to the EPF itself. Employees also make matching 12% contribution. Additionally, employers also pay 0.5% towards EDLI, 0.65% as EPF administrative charges and 0.01% as EDLI handling fee.
The Centre had mooted the idea of pruning contribution to ensure that the take-home pay of employees increases and also to promote formal employment. But the employees’, as well as employers’ representatives, argued that lowering the contribution is not in the interest of the workers and should be done away with.
“The proposal to lower the employer’s contribution was rejected by the states and by the employers’ and employees’ organisations. As such, the Centre has dropped the proposal,” CITU president AK Padmanabhan told FE. BMS general secretary Brijsh Upadhyay also said the proposal was opposed by all as a “direct attack on the workers’ rights”.
The other proposal, increasing EPFO’s equity exposure in the stock market, has been approved, Padmanabhan said, adding that CITU had, however, objected to the proposal. Though there were no representatives present, AITUC also sent its letter of resentment.
Breaking away from its past practice of investing subscribers’ deposits mainly in government securities and corporate bonds, the EPFO has since 2015-16 started investing in exchange traded funds (ETFs) to diversify its portfolio and optimise returns. As per the investment pattern notified in 2015, the EPFO can invest up to 15% of its incremental deposits, estimated at Rs 1.4 lakh crore per annum, in the stock market.