New Delhi: Industry body Ficci on Tuesday opposed any move to club allowances with the basic wages for PF deductions stating besides increasing financial burden on it and government, it will "dampen" investment sentiments.
"The proposal to renotify definition of 'basic wages' under the Employees Provident Fund & Miscellaneous Provisions Act 1952, has huge financial implications both for industry and the government", the industry body said in a statement.
"The move is ill-conceived and if brought into force will dampen business and investment sentiments," it said. "This may even be counterproductive to the Employees' Provident Fund Organization (EPFO) as organizations who are extending coverage to employees receiving salaries above Rs 6,500 may choose to opt out, depriving employees coverage under a globally renowned social security scheme," Ficci said.
According to the provisions of EPF scheme 1952, every employer has to contribute 12 percent of the basic pay and dearness allowance towards the PF deposits of workers every month. Thus with increase in basic wages, the employers' liability would increase.
Out of employers' 12 percent contribution, 8.33 percent is deposited into workers' Employees' Pension Scheme 1995 accounts.
Central Government also contributes 1.16 percent of the basic wages of workers toward their pension account. Therefore, the decision would also result in higher contribution by the central government towards workers' pension accounts.
At present, there are over 50 million subscribers of the scheme. EPFO has a corpus of over Rs 5 lakh crores in EPF and EPS schemes. As per the notification issued by the EPFO on November 30 last year, all allowance which are 'Ordinarily, Necessarily and Uniformly' paid to workers were to be clubbed with basic wages for the purpose of PF deductions.
However, the notification was put on hold later on. EPFO had constituted a committee comprising unionist and employers to deliberate on the issue. The panel had reportedly suggested allowing clubbing of wages with minor changes in the provisions to Labour Ministry. The final decision to notify the clubbing of wages, has not taken so far by the ministry.
The body feels that the introduction of a triple test-'Ordinarily, Necessarily and Uniformly'- for the purposes of defining basic wages will arm the field staff to use their discretion to put additional burden on employers.


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