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EPFO to ease eligibility norms to expand reach

Workers may also be forced to save more for retirement with the labour ministry revising the definition of wage.

Written by Surabhi | New Delhi | Published: December 23, 2014 2:58:50 am

The government is planning to expand the coverage of the Employees’ Provident Fund Organisation (EPFO) by halving the threshold for eligible establishments from those employing 20 workers or more to 10 workers.

The move, which is a part of proposed amendments to the EPF and Miscellaneous provision Act, 1952 that would provide social security benefits to more than 50 lakh workers by bringing more than 82,000 factories within its ambit. Workers may also be forced to save more for retirement with the labour ministry revising the definition of wage and mandating that employers must pay 12 per cent of the wage as PF contribution.

The ministry of labour and employment, which has been working on the amendments has now called for stakeholder comments on the proposed changes that include re-defining the term “wage”, “employer” and “employee as well as suggesting stricter punishments for defaulting employers. The government will also have the power to waive or reduce the PF contribution payable by employees of any sector for a certain period of time.

“With the changed economic scenario, employment patterns and social security needs of workers in the organised sector, amendments to existing provisions were necessary. Several representations were also received from various employer and employee organisations,” said the labour ministry circular, adding that all comments on the draft amendments must be submitted by December 30.

Sources said that the ministry will try to table the amendments in the Budget session which is expected to commence in February next year.

The draft amendments have also proposed that the term “wage should include all remuneration paid or payable to an employee excluding traveling allowance, gratuity and contribution to the Employees’ State Insurance Corporation. This is the base on which 24 per cent of the salary would be deducted for PF.

Under the current definition, basic wages mean all emoluments earned by the employee excluding dearness allowance, cash value of any food concession and gifts from the employer. Further, the term employer has been expanded to include not only the owner but also any person who has ultimate authority over the functioning of the establishment including managing director and managers.

Recognising the large number of workers engaged through contractors, the ministry has also proposed enlarging the scope of the term “employee” to include all those employed by the establishment through a contract of employment, “whether written or oral and whether expressed or implied to work for an establishment or contractor”.

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