Employees’ Pension (Amendment) Scheme, 2014

    0
    1346

    In News

    • Recently, the Supreme Court (SC) upheld the Employees’ Pension (Amendment) Scheme, 2014 of the Employees’ Provident Fund Organistion (EPFO) as “legal and valid”.

    Key Points

    • Background: 
      • An appeal was filed by the EPFO challenging the decisions of the Kerala, Rajasthan and Delhi High Courts quashing the 2014 amendments on determination of pensionable salary” under the EPS of 1995.
    • Extraordinary Power of the Supreme Court:
      • The court used its extraordinary powers under Article 142 of the Constitution to allow eligible employees who had not opted for enhanced pension coverage prior to the 2014 amendments, to jointly do so with their employers within the next four months.
    • Struck down provision:
      • The court struck down a requirement in the 2014 amendments that employees who go beyond the salary threshold (of ?15,000 per month) should contribute monthly to the pension scheme at the rate of 1.16% of their salary.
    • Ultra vires Requirement:
      • The requirement was ultra vires to the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
    • Time to authorities:
      • Operations are suspended for 6 months to enable the authorities to make adjustments in the scheme so that the additional contribution can be generated from other legitimate sources within the scope of the Act.
      • This could include enhancing the rate of contribution of the employers.
    • Dispute: 
      • It primarily concerned the controversial amendments made to clause 11 of the EPS-1995. 
    • EPS Amendment of 2014:
      • It had raised the pensionable salary cap to Rs 15,000 a month from Rs 6,500 a month.
      • Allowed only existing members (as on September 1, 2014) along with their employers exercise the option to contribute 8.33 per cent on their actual salaries (if it exceeded the cap) towards the pension fund. 
      • This was extendable by another six months at the discretion of the Regional Provident Fund Commissioner. 
      • It, however, excluded new members who earned above Rs.15,000 and joined after September 2014 from the scheme completely.

    About Employees’ Provident Funds (EPF) scheme

    • EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. 
    • It is managed under the aegis of Employees’ Provident Fund Organisation (EPFO).
    • It covers every establishment in which 20 or more persons are employed (and certain other establishments which may be notified by the Central Government even if they employ less than 20 persons each).
    • The employee has to pay a certain contribution towards the provident fund and the same amount is paid by the employer on a monthly basis. 
      • At the end of retirement or during the service (under some circumstances), the employee gets the lump sum amount including the interest on PF contributed which gets accrued
    • The Central Board of Trustee, which is a key decision making body for EPFO, takes a call on the interest rates that have to be provided on the provident fund deposits, every year.
      • Once CBT decides an interest rate on EPF deposits for a fiscal year, it is sent to the Ministry of Finance for concurrence.
      • EPFO provides a rate of interest only after it is ratified by the government through the finance ministry.
    • In 2021, the interest rates on deposits were set at 8.5% and the rates for the current financial year will depend on the income projections for the year.
    • EPFO and EPS: 
      • All organised sector employees in India who are enrolled with the Employees Provident Fund Organisation (EPFO) automatically become members of the Employees’ Pension Scheme (EPS) as well. 
      • Once you enrol in the EPF, your employer deducts 12% of your basic pay plus dearness allowance every month towards your retirement corpus, with your employer making a matching contribution.

    Challenges of Jobless growth 

    • For Working women: 
      • Between 2010 and 2020, the number of working women in India dropped to 19% from 26%, according to data compiled by the World Bank. 
      • CMIE estimated that female labour force participation plummeted to 9% by 2022.
    • Affects Demographic Dividend: 
      • A growing reserve of frustrated, unemployed youth threatens to turn India’s demographic dividend of having a young population into a curse. 
    • Declining Agriculture Employment: 
      • The proportion of Indians employed in agriculture had been falling for decades, but this process flattened some years ago and was reversed by the covid crisis.
      • Those who move out of farming mostly find themselves in low-paying construction work and informal services.
    • Skill shortages:
      • India’s economic growth has been largely services led, with a small pool of skills at the upper end, given a glaring failure in mass education.
      • India presents a paradox of skill shortages while being labour surplus.

    Way Ahead

    • It is the government’s responsibility to take initiative and create adequate roles for unemployed people within the main economy.
    • Government support for enhancing infrastructure is  particularly essential for small and medium-sized enterprises.

    Source: TH

    RELATED ARTICLESMORE FROM AUTHOR