Labor Ministry has clarified that the additional contribution of 1.16 per cent of basic wages for subscribers opting for higher pension under the Employees Pension Scheme (EPS) run by EPFO ​​would be met out of the overall 12 percent employers’ contribution

This would mean that all those EPFO ​​members who are choosing to contribute on their actual basic wage which is higher than the threshold of ₹15,000 per month for obtaining higher pension will not have to contribute this additional 1.16 per cent towards EPS.

The move will be retrospective in nature in line with the directions issued by the Supreme Court. For implementing these decisions, the Labor Ministry has now issued two notifications.

“It has been decided to draw 1.16 per cent additional contribution from within the overall 12 per cent of the contribution of the employers into the provider fund,” a Labor Ministry statement said.

Also Read:EPFO: How can EPS members apply for a higher pension?

EPF & MP Act

The Labor ministry highlighted that the spirit of the EPF & MP Act as well as the Code (Code on Social Security) do not envisage contribution from the employees into the pension fund.

The Labor Ministry also said that with the issue of the two notifications, all the directions of the Supreme Court contained in judgment on November 4, 2022 have been complied with.

At present, the Government pays 1.16 per cent of basic wages of up to ₹15,000 (threshold basic wage) as subsidy for contribution EPS towards.

The employers contribute 12 per cent of basic wages towards social security schemes run by the EPFO.

As much as 8.33 per cent out of the 12 per cent contributed by the employers goes into the EPS. The remaining 3.67 per cent is credited into the Employees Provident Fund.

It maybe recalled that the Supreme Court had held the requirement of the EPFO ​​members to contribute at the rate of 1.16 per cent of their salary to the extent such salary exceeds ₹15,000 per month as an additional contribution under the amended EPS scheme to be ultra vires of the provisions of Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act).

The apex court had directed the authorities to make necessary adjustments in the scheme within a period of six months.

Labor Ministry had recently extended the deadline to opt for higher pension under EPS to June 26.

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