New Delhi: The government is planning to introduce a single contribution towards provident funds, pensions and insurance for small enterprises, allowing them to make a single payment towards the social security of their employees in an earnest attempt to ease compliance for small entities.
At present, separate contributions need to be made towards Employees’ Provident Fund Organisation (EPFO) and Employees’ State Insurance Corporation (ESIC).
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According to the proposal, which is expected to be okayed by an expert panel, a single contribution of 10-12 per cent of wages may be fixed towards insurance, provident fund, pension and other benefits for establishments with 10-20 workers, the ET reported, citing an unnamed government official with knowledge of the matter.
Initial talks are being held with the stakeholders at the level of the EPFO and ESIC to evaluate the implications of the plan on both employees and employers.
“An expert committee will be set up to arrive at the final unified rate… the labour ministry will notify it subsequently,” the official told the financial on conditions of anonymity.
As per the Social Security Code, 2020, the government can formulate new schemes or modify the existing ones via notification to allow for enhanced coverage under various social security schemes.
Currently, organisations with 10 or more employees have to contribute under the ESIC scheme for health insurance of their workers. In establishments with 20 or more workers, contributions are made under the EPFO for provident fund, pension and insurance benefits.
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Also, the Centre is considering cutting the employee limit to 10 from 20 now under the EPFO as part of a plan to bring many small-scale firms under the ambit of the EPFO. Under the ESIC, the criterion for obligatory coverage is already 10 workers and above.
The employers contribute 3.25 per cent of the wages while the employees contribute 0.75 per cent % of the wages to the ESIC fund, which is then used to give insurance cover to the employees.
As per the Employees’ Provident Funds and Miscellaneous Provisions (EPF & MP) Act, the employers have to contribute 12 per cent of the basic wage of the employees. Wage floor for the coverage under the Act is fixed at 15,000.
