The union government seeks to reduce the provident fund contribution of organised sectors’ employees to increase their take-home salary. This provision is the part of the Social Security Code bill 2019 which is going to be tabled in Parliament this week. This will allow employees to contribute less than the current 12% of basic salary in provident fund. However, the rule has not changed for the employers. The employer’s contribution will remain the same at 12%.
This move of the union government is expected to boost the falling domestic consumption rate as the employees will have more as take-home salary to spend.
The EPFO annual accruals due to the statutory contribution of employee and employer are to the tune of Rs. 1.3 lakh crores per annum. After reducing the contribution of employees in some sectors, it will lead approximately Rs. 3,000 crores per annum increase in spending. At the time when GDP has touched the six-year low point, how such a meagre amount will boost consumption is an issue of concern for all of us. The official said that the details on how low employees’ PF contribution can be brought down will be worked out once the Bill is passed from both houses.
The bill also entitles the fixed-term contract workers eligible for gratuity on a pro-rata basis. Currently, the workers having completed five years of continuous service are only considered eligible for gratuity as per the Payment of Gratuity Act, 1972.
The Bill also proposes for setting up a social security fund using corpus available under corporate social responsibility (CSR) to provide multiple benefits such as pension, medical cover, and death and disablement benefits to all workers. The ministry has reiterated to retain the existing autonomy of EPFO and Employees’ State Insurance Corporation (ESIC).
All institutions with at least 10 workers will have to provide multiple benefits to employees under ESIC, while it would be mandatory for all workers engaged in hazardous sectors, the bill proposes. On the other hand, companies with less than 10 workers can voluntarily opt to provide benefits under the schemes.
The union labour ministry has merged a total of 44 labour laws into four codes – on wages, industrial relations, social security and safety, and health and working conditions – as part of its reform initiatives.
The Social Security Code is the last of the four labour codes that have been approved by the Cabinet and is expected to be tabled in parliament this week.