Security cover: Pension plan for construction workers likely under EPF0 3.0

EPFO is weighing a pension scheme for construction workers using surplus BoCW cess funds, potentially expanding social security coverage to millions of informal-sector workers

The Employees’ Provident Fund Organisation (EPFO) is considering a pension scheme for construction workers using surplus funds accumulated from the Building and Other Construction Workers (BoCW) cess, as part of its proposed EPFO 3.0 platform, according to people aware of the matter. 

Construction workers with at least 10 years of service could be considered for a pension under the proposal, which was discussed at a meeting of EPFO’s Central Board of Trustees (CBT). 

The proposal will be placed before the CBT for consideration once the scheme is formulated. 

The move seeks to better utilise funds collected under the BoCW cess, whose utilisation has remained a concern for several years. The cess is levied on construction activity and its proceeds are managed by state governments through welfare boards for registered construction workers. 

State representatives on the CBT backed using the cess funds for pension benefits, while the CBT vice-chairman called for a plan to improve their utilisation. 

Queries sent to EPFO and the labour ministry remained unanswered until press time. 

The proposal comes amid efforts to expand social security coverage to construction workers, a large proportion of whom work in the informal sector and remain outside conventional employment-based social security systems. 

The BoCW cess was introduced under the Building and Other Construction Workers’ Welfare Cess Act, 1996. States collect the cess from construction establishments and use the proceeds for welfare schemes covering registered workers, including education, healthcare, housing, maternity benefits and pensions, depending on the state. 

As of June 30, 2024, around 57 million workers were registered with BoCW Welfare Boards across states and Union Territories. According to data provided by the labour ministry in a Rajya Sabha reply in July 2024, the boards had collected ₹1.12 trillion in cess and spent ₹64,190 crore as of March 2024. They reported an available balance of ₹65,970 crore, including bank interest and other receipts. 

Any nationwide pension arrangement, however, would require coordination with state governments, which manage the BoCW funds. States would need to agree on the use of accumulated funds and the mechanism for identifying eligible construction workers. 

The pension proposal is part of the broader EPFO 3.0 initiative to modernise the retirement fund body’s technology platform and expand access to social security, including for workers outside the traditional formal workforce. 

The CBT also considered a proposal to extend Employees’ State Insurance Corporation (ESIC) coverage to construction workers, with the possibility of their ESIC contributions being paid from the BoCW fund. This could provide workers access to medical and other social-security benefits alongside pension coverage. 

Security cover 

• Construction workers for at least 10 years of experience could be considered for pension 
• The proposal seeks to make better use of funds collected under the BoCW cess 
• State representatives at the CBT backed the use of the cess funds for pension benefits 
• The proposal comes amid efforts to expand social security coverage to construction workers 
• It also raises questions around coordination between EPFO and the state government