The government has decided to shelve the plan of raising the monthly wage ceiling for mandatory Employees' Provident Fund (EPF) cover from Rs 15,000 to Rs 21,000, ending the possibility of more workers being added to the provident fund pool.
At present, EPF is optional for workers earning more than Rs15,000 per month. The initial plan of raising the limit was in the wake of the pay commission award for government employees, which has resulted in higher salaries for several people in the private sector as well.
While only those earning up to Rs 15,000 a month have to mandatorily contribute 12 percent of their basic salary towards EPFO and Employees Pension Scheme (with a matching contribution coming from the employer), a majority of the corpus comes from those who are above the wage limit.
For those above the wage cap, it is not mandatory to contribute to EPFO, but they prefer to do it since the returns are higher and remain tax-free at all stages. The previous wage ceiling was revised in September 2014 when the limit was increased from Rs 6,500 to Rs15,000 per month.
The proposed plan was aimed to bring more workers under mandatory EPF coverage and give them PF and pension benefits, however, it has been shelved now to avoid putting a strain on the government's finances, Mint reported.
The decision of not increasing the salary threshold may not go down well with workers' unions at a time of rising anti-government protests across the country, the report said.
Enhancing the threshold to Rs 21,000 per month would have added some 6 million workers under the social security net at a time when the Union government is talking about expanding social security net to a larger pool of people and even for unorganized sector employees, according to Mint.
However, the increase in the salary cap would have cost the government up to Rs 3,000 crore per year.