Additional Contribution Of 1.16% For Higher Pension To Be Drawn From Employers' Payout

Additional contribution of 1.16 per cent of basic wages for subscribers opting for higher pension will be managed from employers' contributions to social security schemes run by retirement fund body EPFO.

"It has been decided to draw 1.16 per cent additional contribution from within the overall 12 per cent of the contribution of the employers into the provident fund," a labour ministry statement issued late in the evening on Wednesday said.

The ministry said that the spirit of the EPF & MP Act as well as the Code (Code on Social Security) do not envisage contribution from the employees into the pension fund.

At present, the government pays 1.16 per cent of basic wages of up to Rs 15,000 (threshold basic wage) as subsidy for contribution towards Employees Pension Scheme (EPS).

The employers contribute 12 per cent of basic wages towards social security schemes run by the EPFO.

As much as 8.33 per cent out of the 12 per cent contributed by the employers goes into the EPS and the remaining 3.67 per cent is credited into the Employees Provident Fund.

Now all those EPFO members who are opting to contribute on their actual basic wage which is higher than the threshold of Rs 15,000 per month for getting higher pension, will not have to contribute this additional 1.16 per cent towards EPS.

This provision is retrospective in nature in line with the directions given by the Supreme Court, the ministry said.

Accordingly, the Ministry of Labour & Employment has issued two notifications on 3rd May, 2023 implementing the above (decision), it stated.

The ministry said that with the issue of the notifications, all the directions of the Supreme Court contained in judgment on November 4, 2022 have been complied with.

The Supreme Court had held the requirement of the members to contribute at the rate of 1.16 per cent of their salary to the extent such salary exceed Rs 15000 per month as an additional contribution under the amended scheme to be ultra vires of the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act).

The apex court had directed the authorities to make necessary adjustments in the Scheme within a period of six months.