Additional contribution of 1.16% for higher pension to be drawn from employers’ payout

“It was decided to withdraw an additional 1.16 percent contribution out of a total of 12 percent of the employers’ contribution to the provident fund,” said a Labor Ministry statement issued late on Wednesday.

The ministry said that the spirit of the EPF & MP Act as well as the (Social Security Act) Act does not envisage the contribution of employees to the pension fund.

At present, the government pays 1.16 per cent basic wages of up to Rs 15,000 (minimum basic wage) as contribution support to the Employees Pension Plan (EPS).

Employers contribute 12 percent of base wages to social security programs administered by EPFO.

Up to 8.33 percent of the 12 percent contributed by employers goes into EPS and the remaining 3.67 percent is deposited into the Employees Provident Fund.

Now, all EPFO ​​members who choose to contribute their actual basic wage above the threshold of Rs 15,000 per month for a higher pension will not have to contribute the additional 1.16 per cent to EPS.

The ministry said that this ruling is retrospective in nature in line with the directives issued by the Supreme Court.

Accordingly, the Ministry of Labor and Employment issued two notifications on May 3, 2023 to implement the above (decision).

With the issuance of the notifications, the ministry said, all directives of the Supreme Court contained in the judgment of November 4, 2022, have been complied with.

The Supreme Court held that the requirement for 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 as additional contribution under the amended scheme to be beyond the powers of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act).

The Supreme Court had directed the authorities to make the necessary amendments to the scheme within six months.