Govt Plans to Amend EPF Rules to Allow Switching From EPS To NPS

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The Ministry of Labour and Employment had issued a preliminary draft on “Amendment in the Employees Provident Funds and Miscellaneous Provisions (EPF & MP) Act, 1952.

Here is a look at the five major changes proposed in the EPF Act as per the draft bill-

  • The Option of switching from EPS to NPS– The Draft bill proposes to allow EPF members to choose to switch their contribution currently made towards EPS (Employees’ Pension Scheme) to NPS (National Pension Scheme).
  • Definition of wages for EPF contribution calculation– The draft bill seeks to change the definition of ‘wages’ as per the EPF Act to that with the recent Code on Wages, 2019. The new proposed definition of ‘wage’ for EPF contribution includes basic, DA and retaining allowance and all other allowances such as special allowance, LTA etc. except for certain specified allowances and benefits. For the purpose of calculation of EPF contribution, the limit of Rs 15,000 still remains. Employers may either reduce the take-home salary or increase their CTC per employee.
  • Repayment of EPF dues over other debt– Another proposal in the draft bill to protect the interest of employees of those companies who are undergoing the resolution process under the Insolvency and Bankruptcy Code 2016 (IBC), the draft bill proposes to give priority to the EPF dues of the company over its other debts.
  • Employee contribution to EPF to be made optional– The budget -2015-16 (Para 62), included an announcement that for employees below a certain threshold of monthly income, contribution to Employees Provident Fund (EPF) should be optional, without affecting or reducing the employer’s contribution. Therefore, flexibility has been proposed to introduce in the Act to prescribe different rates of contribution for such period for any class of employee. This flexibility will enable, through notification, modification of the rates of contribution depending on various factors like age, income, gender etc. But no change in employers’ contribution has been proposed.
  • Exemption of certain establishments from EPFO– The present Act does not stipulate any precondition for grant of exemption. The Standing Committee on Labour in its 26th report on “Exempted Organisations, Trusts and Establishments from EPFO: Performance, Issues and Challenges” presented to Lok Sabha on 07.04.2017, had, inter-alia, recommended that proper strong guidelines may be prepared with regard to past performance, net worth, group performance, etc. as well as minimum strength of workers, collections, contributions, corpus of the companies establishments, to grant exemption.”

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