Salaries of government employees, private staff likely to rise; EPF is the reason why

If the government accepts the ministry's report, the EPF contribution will come down to 10% from the current 12% for both employees and employers. For establishments having less than 20 employees, the contribution limit currently is 10 per cent, and the same could be applicable for all organisations now.

For crores of private and government employees, Centre's proposal to slash employees’ social security contribution can lead to a hike in their take home salary. Image source: PTI

For crores of private and government employees, Centre's proposal to slash employees’ social security contribution can lead to a hike in their take home salary. Union Labour Ministry is presently working on the contributory ceiling by the government towards universal social security for employees, adding that the panel is likely to recommend a 2% less contribution each as compared to the current ceiling of 24 per cent.

If the government goes ahead with the proposal, the total EPF contribution from an employee's salary will decrease to 10% as against the current mandatory contribution of 12%, said the Economic Times report.

Notably, 3.67% of an employee’s basic salary goes to the EPF kitty while 8.33% goes to the EPS (employee’s pension scheme). The labour ministry committee is reportedly looking into the matter and is likely to come out with its recommendation by end of August.

“We are enhancing the scale of coverage by five-fold. Hence, we think that going forward the contribution by and for each worker eligible for a social security cover will come down, benefitting both employee and the employer,” the report quoted an official as saying.

If the government accepts the ministry's report, the EPF contribution will come down to 10% from the current 12% for both employees and employers. For establishments having less than 20 employees, the contribution limit currently is 10 per cent, and the same could be applicable for all organisations now.

According to the ET report, the government aims to increase those covered under the social security scheme 5-fold to 50 crore from the current base of about 10 crore people.

For private sector employees, the report said that their employers' contribution to their EPF and EPS is already factored in their cost-to-company, therefore, a reduction in employee and employer's contribution is expected to be available to employees on some other head.

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This will no doubt boost the salary of employees if the government decided to implement the labour ministry's proposal.

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Employee Provident Fund (EPF)