EMPLOYMENT LAW UPDATE
09th May 2023
Issue No. 01/23-24
THE MINISTRY OF LABOUR AND EMPLOYMENT ISSUES NOTIFICATIONS IN COMPLIANCE OF THE HON’BLE SUPREME COURT JUDGEMENT IN THE CASE PERTAINING TO PENSION ON HIGHER WAGES
The Ministry of Labour and Employment (“Ministry”) on 3 May 2023 has held that the additional contribution of 1.16% of the basic wages for subscribers opting for higher pension will be managed from the employer’s contributions to the Employees Pension Scheme (“EPS”) run by Employee Provident Fund Organization (“EPFO”).
BACKGROUND
Previously, a three- judge bench of the Hon’ble Supreme Court of India (“SC”) in Employees Provident Fund Organization vs B Sunil Kumar and other connected cases on 4 November, 2022, held the Amendment which required members to contribute an additional 1.16% of their salary exceeding Rs 15,000 a month as ultra vires of the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“Act”).
The SC stated that that they would be suspending the operation of part of the order holding the additional contribution ultra vires, for a period of six months. This was done so that it could enable the authorities to make such adjustments in the EPS so that the additional contribution could be generated from some other legitimate source within the scope of the Act, which could include enhancing the rate of contribution of the employers. (For further information please refer to our previous update.)
CURRENT STANCE
The Ministry has therefore stated that “the spirit of the Act as well as the Social Security Code do not envisage contribution from the employees into the pension fund.” Accordingly, they have now clarified that keeping in mind the letter and spirit of the Act and the Social Security Code, 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.
Secondly, the increased contribution shall be applicable to basic wages, dearness allowance and retaining allowance to the extent such basic wages, dearness allowance and retaining allowance exceed Rs. 15,000/- a month.
To comply with what was directed by the SC, it has been decided that this change shall be retrospective in nature shall be deemed to have come into force on the 1 September, 2014.
The Ministry has also extended the deadline to opt for higher pension under EPS from 3 May 2023 to June 26 2023, to facilitate and provide ample opportunity to the pensioners/members so as to ease out any difficulty being faced by them.
The notification can be accessed here.
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