The Ministry of Labour and Employment, Government of India has, with effect from 1 September 2014, brought into force several important amendments to the schemes framed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("EPF Act") i.e. (i) The Employees' Provident Funds Scheme, 1952 ("PF Scheme"); (ii) The Employees' Pension Scheme, 1995 ("Pension Scheme"); and (iii) The Employees' Deposit-linked Insurance Scheme, 1976 ("Insurance Scheme").
Key Amendments
PF Scheme
- The definition of 'excluded employee' has been amended whereby the members drawing wages exceeding INR 15,000 per month are excluded from the provisions of the PF Scheme. Accordingly, the wage ceiling for an employee to be eligible for the PF Scheme has been increased from INR 6,500 per month to INR 15,000 per month.
Pension Scheme
- New members (joining on or after 1 September 2014) drawing wages exceeding INR 15,000 per month shall not be eligible to voluntarily contribute to the Pension Scheme.
- The maximum pensionable salary for the purpose of determining the monthly pension has been revised from INR 6,500 to INR 15,000 per month.
- The pensionable salary shall be calculated on the average monthly pay for the contribution period of the last 60 months (earlier 12 months) preceding the date of exit from the membership.
- The monthly pension for any existing or future member shall not be less than INR 1,000 for the financial year 2014-15.
Insurance Scheme
- The contribution payable under the Insurance Scheme shall now be calculated on a monthly pay of INR 15,000, instead of INR 6,500.
- In the event of death of a member (on or after 1 September 2014), the assurance benefits available under the Insurance Scheme has been increased by twenty percent (20%) in addition to the already admissible benefits.
Implications of the Amendments
The amendments to the three schemes by the Government of India, post the proposal made by the Union Minister of Finance in his Union Budget speech (for the financial year 2014-2015), have enhanced the applicability, scope and benefits provided to employees under the EPF Act. However, at the same time, it has also increased the liability of the employers who would now be responsible to enroll additional eligible employees and to contribute on the increased statutory wage ceiling.
*Clasis Law is Clyde & Co's associated firm in India.
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