If you are a salaried employee, the amount you take home may soon increase. The government is mulling allowing employees to reduce the proportion they give towards employee provident fund (EPF) in order to increase consumption. There would be no change in the contribution of the employer.
This change, according to Livemint, is being made as part of the Social Security Code Bill of 2019, which will be tabled this week.
The Social Security Code seeks to combine provisions from eight Acts — the Employees‘ Compensation Act of 1923, the Employees‘ State Insurance Act of 1948, the Employees‘ Provident Funds and Miscellaneous Provisions Act of 1952, the Maternity Benefit Act of 1961, the Payment of Gratuity Act of 1972, Cine Workers Welfare Fund Act of 1981, Building and Other Construction Workers Cess Act of 1996 and the Unorganised Workers‘ Social Security Act of 2008.
Forty four labour laws were amalgamated into four codes, which were accepted by the Cabinet. The four codes are wages, industrial relations, social security and safety, and health and working conditions. Social security is the final one among the four.
Till now, the percentage required by employees towards their PF was 12%, with the employer matching this. Now, while the employee contribution will become lesser, the company’s contribution will remain at 12%. However, according to reports, it is possible that the percentage of decrease may not be the same across the board.
Government officials told Livemint that it is possible that this deduction may only be in certain sectors like MSME, textile, and starups. However, officials told Economic Times that how much it would be reduced, and other details would be worked out after the Bill is passed.
A trade union leader told Deccan Herald that they had not seen the Bill, but it seems that the government cannot ensure social security. “They want to take away savings from the employees to boost consumption. For their failure, why should employees suffer? This will have an impact on their savings at the time of retirement,” the trade union leader said.
This move to boost consumption comes after the GDP growth rate was at a six-year low, and a survey by the RBI showed that consumer confidence is reportedly at its lowest in nine years.
The labour ministry also had a proposal to give people who have the Employees Provident Fund Organisation an option to switch to the National Pension System. This is because the ministry believes that the current system provides a higher rate of return.