Economy

EPFO Invites Suggestions on Employees Provident Fund & Miscellaneous Provisions Amendment Bill, 2019

EPFO takes a step forward towards ending legacy issues associated with the Employees Provident Fund & Miscellaneous Provisions Act, 1952. These amendments are necessary for further ease of doing business and to bring the old law in sync with current business situation.

EPFO has invited public suggestions on draft of The Employees Provident Fund & Miscellaneous Provisions Amendment Bill, 2019. The draft amendments have some very important points which directly helps employers in ease of doing business.

Another objective behind the amendment is to synchronize with the Code of Wages, 2019 passed by the parliament.  Key pointers are:

Wages vs. Basic Wages

Instead of the current basic wages definition, the amendment will allow EPF contribution computation on “Wage”. Definition of wage shall be borrowed from the Code on Wages, 2019.

Excluded allowances have been defined under the proposed bill for computation of EPFO Contribution. The labour ministry has also tried to stipulate the quantum of excluded allowance to 50% or as notified percentage of total remuneration. This was the biggest litigation prone issue/paint point of the Act  till date.

Recently after a Supreme court judgement, which clarified the definition of basic wages, gave opportunity to the department for harassment. Central EPFO had to issue a circular in this regard.

No Employee Contribution

Employee drawing salary below a certain threshold limit will be exempted from employee’s contribution whereas employer contribution will have to be deposited.

This move will increase take home salary of the employees as well as boost compliance. This idea was put forward in budget 2015-16 and also pursued in Draft Social Security Code by the government.

No EPFO Inquiry Beyond 5 Years

Similar to Income Tax Act, government is aiming to cut the maximum period of inquiry which can be conducted by the department. This timeline is proposed to be kept at 5 years. This is also a good step to discourage non-compliance without demotivating the genuine compliance makers.

Choice of New Pension Scheme vs. National Pension Scheme

The government will provide an option to subscriber wherein the employee can choose National Pension Scheme (NPS) in lieu of benefits under EPF & MP Act.

Few other suggestions include rewording of sections due to introduction of the new Insolvency and Bankruptcy Code. Penalties and fines is proposed to be increased by almost 10 times under various sections.

Suggestions on the draft bill can be sent to the labour ministry by 22nd September 2019. These amendments will definitely reduce  litigation between department and the business community. Click here for detailed draft note.

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