An option to switch between Employees’ Pension Scheme (EPS) and National Pension System (NPS), a reworked definition of wage to include certain allowances and allowing prioritisation of payment of EPF dues over other debts of a company are some of the major changes proposed by the government in the draft The Employees’ Provident Funds and Miscellaneous Provisions (Amendment) Bill, 2019.
RSS-affiliated trade union Bharatiya Mazdoor Sangh (BMS) has, however, objected to the proposal to amend EPF law to allow workers to switch between EPS and NPS along with proposal to give an option to reduce the PF contribution rate from 12 per cent to 10 per cent. In the tripartite consultation held on Tuesday to discuss the proposed amendments in EPF MP Act 1952, which was chaired by Labour and Employment Minister Santosh Gangwar, the trade union opposed the new amendment to EPF law. This is the second time, after 2015, that the proposal to bring NPS in EPF law is being opposed by BMS and other trade unions. “NPS is risky market linked, return in EPS is much more than NPS as per the study of EPFO, EPS has more benefits like benefits to family members, insurance, widow pension etc. NPS has a lock period of 15 years for withdrawal, NPS is only a savings scheme with uncertainty of the return at the time of retirement,” BMS said in a statement following the consultative meeting with Labour Ministry.
The central trade union further said that the government has not come out with any study about the comparative advantage of the new amendment to workers. BMS also opposed dilution of the latest Supreme Court judgement on the question of inclusion of allowances in the calculation of EPF contribution along with opposing reduction of PF contribution rate from 12 per cent to 10 per cent and giving arbitrary power to government to fix the rates. “So the amendments will only help erring employers and private players and is against the interest of workers, hence Bharatiya Mazdoor Sangh opposed the new amendments to EPF law. None of the demands of trade unions is included in the amendment,” it said. The Ministry, on its website, said that most of the proposed amendments were “welcomed by the stakeholders”.
In the draft amendment Bill, the government has proposed to allow EPF members to choose to switch their contribution towards EPS to NPS. At present, 8.33 per cent of the employer’s contribution (12 per cent of basic pay and dearness allowance and capped at Rs 15,000) goes into the EPS for pension payouts post-retirement.
Also, the amendment proposes to fix computational basis for ‘wage’ with allowances paid above 50 per cent or as notified percentage, of all remuneration, to be included in wage. Currently, the computational basis for determining provident fund contribution is basic wage, dearness allowance and retaining allowance.