Higher PF pension: 1.16% to be taken from employers’ share, says Centre

"It has been decided to draw 1.16% additional contribution from within the overall 12% of the contribution of the employers into the provident fund," a Labour Ministry statement issued late in the evening on May 3 said.

Updated - May 04, 2023 09:18 pm IST

Published - May 04, 2023 11:44 am IST - New Delhi

File photo used for representational purpose only.

File photo used for representational purpose only.

The Union Labour Ministry issued two notifications on May 4 on the implementation of the Supreme Court verdict on higher Provident Fund pension. While one notification empowers the Employees’ Provident Fund Organisation (EPFO) to draw 1.16% additional contribution from within the overall 12% of the contribution of the employers into the provident fund, the second notification notifies the relevant provisions in the Code on Social Security to legalise this step. The provision will be implemented in retrospective and employers will contribute 8.33% on entire wages and 1.16% on wages from September 1, 2014.

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Explaining the decision, a senior EPFO official said the contribution into the pension fund is exactly the same as prior to the Supreme Court order on the matter on November 4, 2022. “Only the legal infirmity has been corrected by the government in compliance with the apex court judgment. Instead of 1.16% of wages from employee’s share of PF, now the same will come from employer’s share of PF,” the official said.

‘Brutal attack’

Legal experts, however, differed from what the Centre has claimed. Lawyer appearing for pensioners in several cases, S. Krishna Moorthy, said the Supreme Court had ordered that the 1.16% on the amount in excess of ₹15,000 levied from the employees to enable them to get enhanced pension on actual salary was ultra vires. “The employees were directed to continue that additional payment for six months within which period the Union government was authorised to bring in necessary changes in the Scheme to meet the requirements, including additional contributions from employers. But what has now been done is that 9.49% of employer’s share of 12% is directed to be remitted to the pension fund instead of the present 8.33%. Only the remaining 2.51% will get credited to PF account instead of 3.67%. The loser is the employee, not the employer. His PF account will suffer a shortfall of 1.16%. The interest on PF accumulations also will reduce to that extent,” he said, adding that the move is a “brutal attack” on the PF pension beneficiaries. It is a very intelligent protection to employers under the guise of the judgment,” Mr. Moorthy added.

The Centre said it examined in detail all the aspects of the matter and decided that since the Code on Social Security, 2020 had already been notified, it would be appropriate to bring relevant provisions of the code into effect. The code also provides for repeal of the Employees Provident Fund and Miscellaneous Provisions Act. “The spirit of the EPF & MP Act, as well as the code, do not envisage contribution from the employees into the pension fund. Accordingly, keeping in mind the letter and spirit of the EPF & MP Act and the code, it has been decided to draw 1.16 % additional contribution from within the overall 12% of the contribution of the employers into the provident fund,” the Centre said in a release.

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