Pension increased manifold but EPFO in denial


What should have been good news for as many as five crore employees of the organised sector has instead led to a lot of confusion. A Supreme Court verdict of October 2016 made it mandatory for the Employees Provident Fund Organisation (EPFO) to allow employees the option of raising their pension contributions to 8.33 per cent of their full salary (basic plus dearness allowance), as per a 1996 amendment to the Employee Pension Scheme (EPS) Act.

AITUCHowever, the EPFO has been trying to twist the judgement out of context to save its treasury from paying handsome amounts to employees, some of whom are eligible to receive as much as 1200 per cent of the pension received by them earlier!

The EPFO has been embroiled in a controversy wherein it had refused to honour requests for hike in the pension contribution despite the amendment of March 1996 that raised the pension multiple times. The employee pension scheme, which is part of Employee Provident Fund (EPF), has over five crore members. However, for a decade hardly anybody opted for the new option of higher contribution. But following media reports in 2005, several private EPF fund trustees and employees approached EPFO with the demand to remove the ceiling on their EPS contribution and raise it to their total salary. EPFO rejected the demand claiming that the response was too late as it should have come within six months of the 1996 amendment.

Cases were filed against EPFO in various high courts. By 2016, all except the Himachal Pradesh high court ruled against EPFO stating that the six-month deadline was arbitrary and the employees must be allowed to raise their pension contribution whenever they wish to. The case went to the Supreme Court which, in two separate rulings in 2016, ruled in favour of the employees’ right to raise their contributions to pension fund without imposing any cut-off date for eligibility.

Every employee in the organised sector contributes 12 per cent of basic salary and dearness allowance to EPF. The employer makes a matching contribution. Of the employer’s contribution, 8.33 per cent goes to the EPS. When people withdraw their EPF after a job switch or during unemployment, the EPS is not given out. It’s payable only after superannuation. There is a ceiling on EPS contributions. The current cap on salary (basic + DA) is Rs 15,000 per month. So, the maximum one can contribute to the EPS is 8.33 per cent of Rs 15,000, which is Rs 1,250 a month. From July, 2001 to September, 2014, the EPS salary cap was Rs 6,500 a month, which meant a maximum contribution of Rs 541.40 a month. Before 2001, the ceiling was Rs 5,000, which resulted in a maximum contribution of Rs 416.50.

However, only all those who joined EPFO before September 1, 2014 – the date on which the EPS imposed the Rs 15,000 salary cap – can contribute on their full salary to EPS. They can submit applications to their companies and the EPFO and get up to half of their last average monthly salary as pension. Those who have joined EPFO after September 1, 2014 and have a salary above Rs 15,000 are not eligible for pension while those starting with salaries lower than 15,000 can contribute to EPS but the cap of Rs 15,000 will kick in when their salary rises.

Thus, the EPFO is being accused of discriminating against employees who are members of privately managed EPF trusts, officially called Exempt Establishments, which totals to around 80 lakh employees, and those who directly contribute to the government-run trust called Un-exempt Trusts, which will affect around 4.25 crore employees.

However, a prominent anomaly in this distinction by the EPFO is that one of the twelve employees to have got relief by the apex court in 2016 belonged to Haryana Tourism, an exempt organisation. The petitioner employee got a hike of a whopping 1200 per cent as a consequence of the favourable Supreme Court verdict. So how can the EPFO deny this right to other employees of the exempt establishments? Moreover, there is no equality between those who retired before the deadline of September 2014 and those who retired afterwards. The SC order neither talks about a deadline nor of a ceiling of Rs 15000.

Vikram Rao, President of the Indian Federation of Working Journalists (IFWJ) told Tehelka that his organisation had, on behalf of journalists, been asking the Central government for a year to initiate talks in this regard but nothing came out of their requests.

“Mr Bandaru Dattatreya, the previous Labour Minister, was sometimes involved in labour policies but he wasn’t a successful minister. Santosh Gangwar (current labour minister) has hardly ever involved himself in labour issues. He hardly knows labour economics,” Rao said.

He further said that the Provident Fund money is the workers’ contribution to their pension and that the government has no business in interfering with it. “The government has no business telling us workers what to do with our own money. It has no right over PF money,” he said.

Rao, who retired as an employee of The Times of India and was earlier president of the ToI Employees’ Union in Ahmedabad, also questioned why the labour ministry, under guidance from Finance Minister Arun Jaitley, does not set up a cell to help retiring employees get their Provident Fund dues.