The government of India is planning to increase the wage limit of Employee State Insurance (ESI) and Provident Fund (PF). Employers may have to pay more and their compliance burden is also likely to increase
*- PF is payable at the rate of 12% (each by employers and employees) on basic salary. It applies to establishments employing 20 or more persons. The exclusion of Rs. 6,500 is not applicable to International Workers.
**- Employers contribute towards ESIC at 4.75% and employees at 1.75% of total salary.
Implications of the proposal:
Significant increase in the number of employees covered
Considering a white collar employee’s compensation range in India, the wage limits are low. However, the ceilings for PF are ‘basic salary’ ceilings (usually 30%-50% of total salary) and do not cover the entire compensation of an employee. Nevertheless the new proposed regulation will cover many junior to mid level employees who may be currently exempt. There will also be a substantial increase in the employees covered by the new ESI limit.
Cost increase for companies
The employers’ contribution towards the employees may increase with the increase of salary threshold and number of employees covered. For example: Employers’ contribution for PF may go up approximately by 130% per employee. As both contributions require monthly payments and returns, the compliance burden of companies is likely to increase.
The government is also planning to fix a minimum wage of Rs 10,000 for workers employed in the unorganized sector.
Dear Sheela ji,
The Governent is planning to do so many things. So many bills are pending as of now since quite long time. EPF earlier it was proposed 15000 but now it is proposed 10000.
GOD BLESS ALL.
From India, Mumbai
Please find below news article dated today on EPFO:
NEW DELHI: Business chamber Ficci has opposed the proposed changes to the definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act (EPF and MP Act) 1952.
The government had introduction a triple test - 'Ordinarily, Necessarily and Uniformly' - to define basic wages for provident fund deduction through a circular issued in November last year, but had later stayed its implementation.
Ficci warned that the proposal will have 'huge financial implications both for industry and government and may even be counterproductive to the EPFO, as organisations who are extending coverage to employees receiving salaries above 6,500 may choose to opt out, depriving the employees coverage under a globally renowned social security scheme'.
Under the current rules, an organised sector worker is not required to mandatorily join the provident fund scheme of the EPFO if his basic salary exceeds 6,500 a month.
"Most of the employees today join an organisation above this statutory limit and they are voluntarily covered by the industry," the industry chamber said in a statement. It has argued that PF deduction should be on the full amount of 'minimum wages' where such wages are being paid under the Minimum Wages Act, 1948. "For employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary," it said.
From India, Mumbai
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