Centre defers move to cut EPF administrative charges 0.85% to 0.65%

The Employees’ Provident Fund Organisation’s (EPFO) long-pending proposal to reduce administrative charges for employers may face further delays till March due to the model code of conduct coming into force in various states going for polls beginning next month.

The Labour Ministry has informed the EPFO that its proposal will get approval after the polls are concluded in four states – Uttar Pradesh, Uttarakhand, Goa, Punjab and Manipur in March. The Election Commission had announced the poll dates on January 4.

The EPFO had incidentally sent a formal proposal to the Labour Ministry on January 4 to decrease administrative charges for companies from 0.85% to 0.65% of worker’s salary for its EPF scheme. It also proposed doing away with administrative charges 0.01 per cent of worker’s salary levied to implement the Employees’ Deposit Linked Insurance (EDLI) scheme, 1976.

The decision to reduce administrative charges was taken at EPFO’s central board of trustees meeting, chaired by Labour Minister Bandaru Dattatreya, in December.

“Considering the need to promote ‘ease of doing business’ in India and to make Indian business more competitive, and in response to the financial efficiency gained by EPFO, the Central Board decided to recommend further reduction of administrative charges to 0.65%,” the EPFO said in December.

Trade unions

The EPFO had proposed reducing administrative charges from 0.85% to 0.65% in September 2015. However, the decision was deferred due to opposition from the trade unions.

At present, employers contribute 9.69% as their own share and 12 per cent as employee’s share towards EPFO schemes. All companies with at least 20 workers are covered under the EPFO.

EPFO collects administrative charges from employers to meet its administrative and inspection costs, including staff pension and gratuity. In 2015-16, the EPFO had collected Rs 3,758 crore from administrative charges towards both EPF and EDLI schemes.

According to EPFO’s estimates, decreasing administrative charges for EPF scheme by 0.20 per cent will lead to a reduction in collection by ₹1,000 crore.

At present, employers contribute 9.69% as their own share and 12% comes from the employee towards EPFO schemes. All firms with at least 20 workers are covered under the EPFO.

The EPFO collects administrative charges from employers to meet its administrative and inspection costs, including staff pension and gratuity.

In 2015-16, the EPFO had collected ₹3,758 crore from administrative charges towards both EPF and EDLI schemes. According to EPFO’s estimates, decreasing administrative charges for the EPF scheme by 20 basis points will lead to a reduction in collection by ₹1,000 crore.

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