Higher PF Pension: 1.16% to be taken from employer’s share announcement by Labour Ministry –

A higher PF pension cut has been announced by the Labour Ministry, of 1.16%, for the implementation of a new provident and pension fund scheme. It has been decided to draw 1.16% additional contribution from within 12% of the contribution of the employers into the PF.

What is news ?

The Union Labour Ministry announced and has issued two notification on the implementation of the Supreme Court verdict on higher Provident Fund(PF) pension 

About the news – The notifications announced by the ministry tells that – 

  • It gives the Employees’ Provident Fund Organisation (EPFO) the authority to withdraw an additional 1.16% of the 12% that employers contribute to the PF.
  • The relevant Social Security Code sections also permit this action.

New Functioning of the fund 

  • The provision will be implemented in a retrospective manner  and the employers will contribute 8.33% on entire wages and 1.16% on wages from September 1, 2014.
  • Only the legal infirmity has been corrected by the government in compliance with the apex court judgment.
  • Now, the same 1.16% of income that came from the employee’s PF contribution will come from the employer’s PF share.
  • The government pays 1.16% of the basic wages of up to Rs.15000 as subsidy for contribution towards the Employees Pension Scheme. 
  • The employer’s contribute 12% basic wages towards the social security scheme run by EPFO.

Employee-Employer conflict 

  • 9.49% of the employer’s share of 12% is directed to be remitted to pension funds instead of the present 8.33%.
  • Only the remaining 2.51% will get credited to PF account instead of 3.67%.
  • The loser is the employee here, not the employers. His PF account suffers a shortfall of 1.16%.
  • The interest on PF accumulation also will reduce to that extent.
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