Labour Ministry to trim cos' EPFO coverage threshold to 10 workers

At present, it is mandatory for firms with 20 or more workers to subscribe to social security schemes

In a bid to provide social security to additional five million workers under retirement fund body Employees’ Provident Fund Organisation (EPFO), the labour ministry has decided to halve the threshold for coverage of firms to 10 workers through an executive order.

At present, it is mandatory under the Employees’ Provident Fund and Miscellaneous Provisions Act for firms having 20 or more workers to subscribe to social security schemes run by the EPFO.

The Labour Ministry wants to reduce the threshold to 10 workers through an executive order. This move will bring over five million additional formal sector workers under the net of social security schemes run by the EPFO, said a senior official. Elaborating further, he said It was also included in the proposed amendments to the EPF & MP Act. There is a provision for changing threshold limit through a notification after giving two months' notice for consultations.

The official added, “Labour ministry has planned to go ahead with amendments in the labour laws which does not require approval from the Parliament. We will give notice for consultations by first week of the next month.”

Thus the threshold can be changed by April or May. The proposal to reduce the threshold was approved by the EPFO’s apex decision making body the Central Board of Trustees, headed by the labour minister, on July 5, 2008. But it could not be implemented so far.

The 183rd meeting of the CBT approved the reduction of threshold limit for coverage of establishment under the Act from 50 to 20 in respect of cooperative institutions working with out any aid of power and from 20 to 10 in respect of other establishments.                  

Prior to the CBT approval, the second Labour Commission and the Parliamentary Standing Committee on Labour had also recommended reducing the threshold limit to reduce gap between coverage under EPF & MP Act, 1952 and the total workforce of the country.

The social security benefits provided under the Employees State Insurance Corporation (ESIC) Act are already applicable to the establishments having employment of 10 or above.

Therefore, the reduction of threshold for EPFO would have brought the parity with ESI Act with regard to coverage and would have helped in unifying social security efforts of the Government.

The move will also help channelising the registration of establishments and members of both ESIC and EPFO.

EPFO has a subscriber base of around 5 crore workers and it receives around Rs 1 lakh crore as incremental deposits every year.