Central Govt proposes to corporatize EPFO & ESIC and handover the control to a central body

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The reduced rate of contribution (10%) is minimum rate of contribution during period of the package. The employer, employee or both can contribute at higher rate also.

Ministry of Labour & Employment has circulated a draft of the Code on Social Security, 2019 and sought stakeholder and public comments till 25 October.

“Under this draft, the labour ministry proposes the change in the constitution of Employee Provident Fund Organisation (EPFO) and Employees State Insurance Corporation (ESIC), saying the two bodies would be “body corporate”.

According to draft, Govt proposes to hand over control of the over Rs 10 lakh crore corpus of provident fund, pension and insurance schemes under the Employees’ Provident Fund Organisation (EPFO) to a central body, which will have a central government-appointed chairman. Unlike the central board of trustees of the EPFO, the labour minister will no longer be the chairman of the board, as per the proposal.

At present, EPFO and ESIC work more like autonomous bodies run by trustees and board, respectively under the administrative control of Ministry of Labour & Employment. The draft code provides that the Centre would appoint the chairman and vice-chairman of the two bodies. Thus, the appointees could be other than the labour minister and labour secretary.

The draft code also provides for the appointment of CEOs for the first time, who would be executive heads of EPFO and ESIC. At present, a Central Provident Fund Commissioner and Director General run EPFO and ESIC, respectively. Now, CEOs can be appointed from the Indian Administrative Service as well as other services after consultation with the Union Public Service Commission.

The Code on Social Security, 2019 will subsume 8 Central Labour Acts namely Employees’ Compensation Act, 1923; Employees‘ State Insurance Act, 1948, Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952; Maternity Benefit Act, 1961; Payment of Gratuity Act, 1972; Cine Workers Welfare Fund Act, 1981; Building and Other Construction Workers Cess Act, 1996 and Unorganized Workers‘ Social Security Act, 2008.

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