How does the Amendments to the Statutory Benefits Affect Employees: An Illustration
- Posted By Amritesh
- On October 26th, 2014
- Comments: 20 responses
The Government of India (Ministry of Labour & Employment) recently issued notification regarding the amendments to the Employees Provident Fund Scheme,1952 (EPF),Employee Pension Fund,1995 (EPF), and Employees Deposit Linked Scheme,1976 (ELDI) which came into effect from 1st September,2014.
The changes were aimed at improving the social security provided to the employees. The changes are Employee friendly as more employees will be inducted into the EPF and EPS scheme. The amendments ensured that minimum Monthly Pension for retired employees be fixed at Rs 1,000/- which previously stood at Rs 250/-.
You can follow series of articles in this issue on my blog. I have posted an article where you will find amendments made in this regard. Here I will illustrate the changes which will impact the deductions and contribution to the respective fund. The illustrations given will help you find out the differences and impact of the same.
Employees’ Provident Fund Scheme
Employees’ Provident Fund (EPF) Reforms: Online PF Withdrawal/Settlement
Amendments to Statutory Benefits to the Employees’, September 2014
Employees’ Provident Fund (EPF) Reforms: Online PF Withdrawal/Settlement
Amendments to Statutory Benefits to the Employees’, September 2014
1stScenario:- Till 31/08/2014
Employee with Basic Pay: Rs15,000/.
*As per the new rule contribution to EPS will be calculated on the maximum wage ceiling of Rs 15000/- @ 8.33% and excess will be contributed to EPF.
BASIC PAY (`15,000/- p.m) | EMPLOYEES’ PROVIDENT FUND (EPF) | EMPLOYEES’ PENSION SCHEME (EPS) |
EMPLOYEE’S CONTRIBUTION | Rs 1800/- | NIL |
EMPLOYER’S CONTRIBUTION | Rs 1259 | Rs 541/- *(8.33% of Rs 6500) |
*As per the old rule contribution to EPS was calculated on the maximum wage ceiling of Rs 6500/- @ 8.33% and excess was contributed to EPF.
Basic Pay means “Pay including Basic plus Dearness Allowance, and Retaining Allowance if any.”
2ndScenario : From 01/09/2014
Employee with Basic Pay : Rs 15,000/-.
BASIC PAY (`15,000/- p.m) | EMPLOYEES’ PROVIDENT FUND (EPF) | EMPLOYEES’ PENSION SCHEME (EPS) |
EMPLOYEE’S CONTRIBUTION | Rs 1800/- | NIL |
EMPLOYER’S CONTRIBUTION | Rs 550/- | Rs 1250/- *(8.33% of Rs 15000) |
*As per the new rule contribution to EPS will be calculated on the maximum wage ceiling of Rs 15000/- @ 8.33% and excess will be contributed to EPF.
Basic Pay means “Pay including Basic plus Dearness Allowance, and Retaining Allowance if any.”
3rdScenario: From 01/09/2014
Employee with Basic Pay: Rs 20,000/-.
BASIC PAY (`20,000/- p.m) | EMPLOYEES’ PROVIDENT FUND (EPF) | EMPLOYEES’ PENSION SCHEME (EPS) |
EMPLOYEE’S CONTRIBUTION | Rs 2400/- | NIL |
EMPLOYER’S CONTRIBUTION | Rs 2400/- | NIL |
*As per the new amendment any employee earning Basic Pay above Rs 15,000/- do not need to make any contribution to EPS. Hence the entire contribution goes to EPF.
Basic Pay means “Pay including Basic plus Dearness Allowance, and Retaining Allowance if any.”
IMPACT OF THE AMENDMENTS
Subscribers would now contribute maximum of Rs 1250/- instead of Rs 541/- to Employees’ Pension Fund.
New Subscriber with Basic Salary of more than Rs 15000/- would no longer become the member of Employees’ Pension Fund.
Subscribers who contribute to EPS and have a salary of more than Rs 15,000/- p.m will continue to do so.
Minimum Pension for the Employees’ raised to Rs 1000 p.m.
Amendments do give an indication of a drive towards National Pension Scheme or other such scheme as Individuals with Salary above Rs 15,000/- are exempted from contributing to NPS.
For calculation of contribution of Employees’ Pension Fund wage limit has been increased from Rs 6500/- to Rs 15,000/-.
Employees’ Deposit Linked Insurance Scheme benefits have also been hiked by 20% in addition to the existing admissible benefits.
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