Press Trust of India

New Delhi

Additional contribution of 1.16% of basic wages for subscribers opting for higher pension will be managed from employers’ contributions to social security schemes run by retirement fund body EPFO.

“It has been decided to draw 1.16% additional contribution from within the overall 12% of the contribution of the employers into the provident fund,” a labour ministry statement issued on Wednesday said.

The ministry said that the spirit of the EPF & MP Act as well as the Code (Code on Social Security) do not envisage contribution from the employees into the pension fund.

At present, the government pays 1.16% of basic wages of up to `15,000 (threshold basic wage) as subsidy for contribution towards Employees Pension Scheme (EPS).

The employers contribute 12% of basic wages towards social security schemes run by the EPFO.

As much as 8.33% out of the 12% contributed by the employers goes into the EPS and the remaining 3.67% is credited into the Employees Provident Fund.

Now all those EPFO members who are opting to contribute on their actual basic wage which is higher than the threshold of `15,000 per month for getting higher pension, will not have to contribute this additional 1.16% towards EPS.

This provision is retrospective in nature in line with the directions given by the Supreme Court, the ministry said. Accordingly, the Ministry of Labour and Employment has issued two notifications on 3rd May, 2023 implementing the above (decision), it stated.

The ministry said that with the issue of the notifications, all the directions of the Supreme Court contained in judgment on November 4, 2022 have been complied with.

The Supreme Court had held the requirement of the members to contribute at the rate of 1.16% of their salary to the extent such salary exceed `15000 per month as an additional contribution under the amended scheme to be ultra vires of the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act).

The apex court had directed the authorities to make necessary adjustments in the Scheme within a period of six months.