Controversial circular, interest rates kept EPFO busy in 2012

Controversial circular, interest rates kept EPFO busy in 2012

From slashing interest rates on EPF to a controversial circular that proposed to make it difficult to probe defaulting employers and recover provident fund dues of workers, it was an unusual year for the retirement fund body EPFO.

The circular, issued by EPFO head on his last day in service, was red flagged by trade unions as well as internally.

Only after the Labour Ministry's intervention, the Employees' Provident Fund Organisation (EPFO), which manages PF accounts of over 5 crore subscribers, decided to keep in abeyance its implementation.

The EPFO circular has sought to tighten norms for initiation of inquiry against employers in provident fund (PF) cases and clubbing of allowances with basic wages for computing PF contribution.

Government to review EPF circular on salary, allowances

You can breathe easy with the government reviewing a circular issued by the Employee Provident Fund Organization (EPFO) that had asked employers to deduct the subscription from the gross salary, including allowances, a move that would have reduced the take-home salary of over 5 crore workers.

A senior labour ministry official said there was a "rethink" on the circular that was issued on November 30, although a final decision is yet to be taken.

The official added that the circular did not actually change the rules and had not clarified which allowances needed to be included in the calculation of basic wage. The circular was meant to ensure that employers did not shirk their responsibility, the official added.

Ministry of Labour asks EPFO to explain assessment circular

The labour ministry on Friday sought an explanation from the Employees’ Provident Fund Organisation (EPFO) on a controversial circular that will make it difficult for the agency to initiate proceedings against defaulting employers and recover provident fund dues of workers.

Labour minister Mallikarjun Kharge is understood to have asked the EPFO to explain the urgency in issuing the circular without consulting the ministry. “Neither was it discussed with the ministry, nor was it put up before the Central Board of Trustees. It took everyone by surprise,” the official said, adding that the missive may be withdrawn or modified. Former central PF commissioner RC Mishra on November 30, his last day in service, issued the circular which has been red flagged by union leaders and has also been opposed internally.

Kharge has also raised questions on a clause for lump sum assessments of agencies that hire migratory workers on short term basis. Referring to the construction sector, the circular has barred assessments unless individual members are identified.

http://www.indianexpress.com/news/labourmin-asks-epfo-to-explain-assessment-circular/1042161/

Not all allowances exempt from PF: EPFO

Not all allowances exempt from PF: EPFO

However, circular does not clarify which these allowances are 

The flexibility exercised by employers and the provident fund authorities in the definition of basic wages has finally caught the attention of the Employees Provident Fund Organisation ( EPFO). It has sought to clarify the definition of basic wages based on which provident fund is calculated seeking to include payments made by employers under sundry heads to ensure that the basic wages remain small.

The clarification is meant to help workers get higher PF contributions from employers, PF officials said, adding that only an amendment in the EPFO Act can ensure that allowances do not eat into basic wages or that the latter is as big as the minimum wages.

 

The Central Provident Fund Commissioner has in a circular issued on November 30 clarified the definition of basic wages based on which provident fund is calculated for workers.

Save more in provident fund, but take home less as salary

A recent circular issued by the Employees Provident Fund Organisation - which comes under the ministry of labour and employment - will reduce the take home pay of salaried employees. As per this circular, various allowances paid to employees will have to be added back to the basic salary and provident fund contributions computed against this higher value. This, in turn, will mean a lower take home pay.

The circular dated November 30, 2012, was issued after internal review meetings held in late November and has been forwarded to Employee Provident Fund offices across India.
Historically, most companies have been computing provident fund (PF) contributions (at 12% each by the employer and employee) against basic salary and dearness allowance only. However, the definition of basic wages has been a contentious issue, with PF authorities claiming that companies split the basic wages into various allowances to reduce the quantum of PF contributions.

The circular deals with this "splitting up" practice adopted by employers. It states that basic wages will include all allowances which are "ordinarily, necessarily and uniformly" paid to the employees. Thus, various allowances such as conveyance, educational allowance, medical allowance, etc., will have to be taken into consideration while computing the PF contribution. 

Revised Clarification on International Worker - EPFO Circular

Revised Clarification on International Worker (IW) - EPFO Circular No. IWU/7(29)/2012/review/16266 dtd. 31-Aug-2012.

Indian Employees  going to SSA countries are not considered as IW. The EPS should be paid only on capped salary and not on full salary for such employees.

Excess EPS contribution remitted to such employees will be diverted to PF accounts of employees if employer submits requests to the EPFO.

For Details..........Please see EPFO Circular No. IWU/7(29)/2012/review/16266 dtd. 31-Aug-2012 on EPFO website.