Additional 1.16% contribution for pension fund to come from employers: Govt

Labour ministry issues clarification about social security schemes run by EPFO

An additional contribution of 1.16 per cent of basic wages for subscribers opting for higher pension will be managed from employers' contributions to social security schemes run by retirement fund body EPFO, the labour ministry has said.

The move will be retrospective and relieve the burden on the employees whose monthly wages exceed 15,000 and had subscribed to the Employees Pension Scheme, thus complying with the Supreme Court directive dated November 4, 2022.

The Labour ministry, in a statement released late Wednesday, said the spirit of the Employees’ Provident Fund & Miscellaneous Provisions Act as well as the Code on Social Security do not envisage additional contribution from the employees into the pension fund.

“Accordingly, keeping in mind the letter and spirit of the EPF & MP Act and the Code, 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 provident fund,” the statement read.

The Supreme Court last year ruled that the additional requirement of the members to contribute at the rate of 1.16 per cent of their salary to the extent such salary exceeds Rs 15,000 per month under the amended scheme to be ultra vires of the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act,1952 (EPF & MP Act) and directed the authorities to make necessary adjustments in the scheme within a period of six months.

“For implementing the above direction, all aspects of the matter including legal and administrative were examined in detail. It was decided that since the Code on Social Security,2020 (the Code ) has already been notified, it would be appropriate to bring relevant provisions of the Code into effect,” it had said.

The ministry said certain provisions of the EPF & MP Act get repealed while giving effect to the relevant provisions of the Code. Earlier, section 142 of the Code was operationalised as a singular provision in May 2021  to collect Aadhaar details for the database of beneficiaries under various social security schemes.

The ministry issued two notifications on Wednesday implementing the Supreme Court’s decision. "With the issue of above notifications, all the directions of the Hon’ble Supreme Court contained in judgment dated 04.11.2022  have been complied with," said the ministry's statement.