EPFO mulls further reduction in admin fee charged from firms

In a move that could substantially reduce the financial burden of around 800,000 employers, the Employees' Provident Fund Organisation (EPFO) is considering a further cut in the administrative fee it charges companies. The industry has called for a reduction in the administrative fees as this is a part of the employers' contribution towards the EPFO.

The EPFO is planning to reduce the administrative fee from 0.85 per cent to 0.65 per cent of the monthly basic salary. The Union labour ministry had already reduced the administrative charges from 1.10 per cent to 0.85 per cent with effect from January this year.

"As the services of EPFO improve with changing technology, a case is made out to reduce the administrative fee. We are in discussion to reduce it to 0.65 per cent of the monthly salary," said Central Provident Fund Commissioner K K Jalan. However, the move will need the approval of EPFO's apex decision-making body, the Central Board of Trustees (CBT). The CBT is scheduled to meet on September 16 in Hyderabad. However, this proposal is not a part of the agenda as yet.

Industry representatives had requested the Union labour ministry recently to reduce the administrative charges. "While reduction in the administrative charges will not bring any adverse impact to the social security benefits of employees, it will be a huge relief to the employers, which is very important in the present competitive environment," said a letter by G P Srivastava, chief advisor, Associated Chambers of Commerce and Industry of India. The industry has, however, demanded a reduction to 0.5 per cent of the basic salary from the present 0.85 per cent.

According to sources, EPFO employees are usually apprehensive of the move as the fund collected through this fee is used to pay their salary. Apart from this, the fund is also utilised for expenditure on maintenance of its infrastructure, bank commission and also to pay the portfolio managers EPFO hires to manage the fund. In 2014-15, the EPFO had earned around Rs 5,000 crore through administrative charges.

Allaying these concerns, an EPFO official said: "The reduction will have no impact on the salaries of the employees and on other expenses at all. The collection of administrative fees is in surplus."

According to EPFO's balance sheet, it collected Rs 5,015 crore through administrative charges from employers, but the actual expenditure stood at Rs 1,766 crore thereby leaving a surplus of Rs 3,249 crore. Despite a cut in the administrative fees, the EPFO was able to collect more funds than in 2013-14, when its contribution stood at Rs 4,176 crore.