With an aim to provide the social security benefits to maximum number of employees, Government is planning to table a Bill in the Budget session of Parliament to amend the existing Provident Funds and Miscellaneous Provisions Act.
The Budget session of the Parliament is scheduled to begin on 23rd February, 2015.
Probable changes in Budget 2015:
- Currently, Employees’ Provident Fund Organisation (EPFO) covers the organization having 20 or more employees. The Bill may seek to decrease the number of employees from 20 to 10 to be covered under the Provident Fund Act.
- Bill also proposes to reduce or waive off the mandatory contribution of employees towards Provident Fund based on the financial standing of the employee.
- Need of a “Negative List” instead of “Schedule of Industries” is also proposed, as the “Schedule of Industries” has already passes the 182 mark. Thus to ensure the wider coverage and extension of social security benefits, negative list should be instituted rather than amending the existing Schedule of Industries.
- Also, uniformity in regard definitions of ‘Wages’ is proposed to be induced in line with the Employee State Insurance Act.
Changes made in Provident Fund Rules in September 2014
- Last year, all the employees who earns up to Rs.15,000 per month were brought under the ambit to Employees Provident Fund Organisation. Earlier, the maximum salary for mandatory contribution towards Provident Fund was Rs.6,500 which was hiked to Rs.15,000 w.e.f. 1st September, 2014.
- The contribution towards EPS was also increased due to augmentation in the salary limit to Rs.15,000. Earlier, the contribution towards EPS was Rs.541 i.e. 8.33% of Rs.6,500 which was now enhanced to Rs.1,250 i.e. 8.33% of Rs.15,000.
- The Insurance Coverage of the members of EPFO was also almost doubled from Rs.1,56,000 to Rs.3,00,000.
- The minimum monthly pension received by the legal heirs of the deceased members was fixed as follows:
- Widow: Rs.1,000 per month
- Children: Rs.250 per month
- Orphans: Rs.750 per month
Also, the basis of calculating the pension was changed to average of 60 months last drawn salary instead of 12 months average salary, as earlier.
Provident Fund Contribution Break-up
Employee has to contribute minimum of 12% of his salary (basic salary plus dearness allowances) towards Provident Fund. Employer has to match the contribution of employee i.e. 12%.
Employee can also voluntarily contribute more than 12% but employer is not bound to match the contribution anything more than 12%.