In a significant decision, the Supreme Court has endorsed the Employees’ Pension (Amendment) Scheme, 2014 but squashed the Rs 15,000 monthly wage ceiling for joining the pension fund. This article explores the background, implications, and details of the EPF Pension and its amended version introduced in 2014.
Understanding the Employees’ Pension Scheme
The Employees’ Pension Scheme (EPS) is a social security initiative offered by the Employees’ Provident Fund Organisation (EPFO). Launched in 1995, EPS ensures pensions for employees in the organized sector post-retirement at the age of 58. Employees who are members of EPF automatically qualify for EPS. Both employee and employer contribute 12% of the employee’s monthly salary (basic wages plus dearness allowance) to the Employees’ Provident Fund (EPF) scheme. Mandatory for employees drawing a basic wage of Rs. 15,000 per month, 8.33% of the employer’s share of 12% goes towards the EPS. Additionally, the Central Government contributes 1.16% of employees’ monthly salary.
Closer Look at EPS (Amendment) Scheme, 2014
The EPS amendment of 2014 raised the pensionable salary cap from Rs 6,500 to Rs 15,000 a month, allowing existing members and their employers to contribute 8.33% on their actual salaries (if exceeding the cap) towards the pension fund. This could be extended for another six months at the Regional Provident Fund Commissioner’s discretion. New members earning above Rs 15,000 and joining after September 2014 were, however, excluded from the scheme. Such members were required to contribute an extra 1.16% of their salary exceeding Rs 15,000 a month towards the pension fund.
Supreme Court’s Verdict on EPS
As per Article 142, the Supreme Court’s ruling offers EPFO members another opportunity over the upcoming four months to opt and contribute up to 8.33% of their real salaries against 8.33% of the pensionable salary capped at Rs 15,000 a month towards pension. Previously, the pensionable salary was computed as the average of the salary drawn during the 12 months before exiting the Pension Fund. The amendments raised this to an average of 60 months before exiting the Pension Fund’s membership. The court deemed the amendment requiring members to contribute an additional 1.16% of their salary exceeding Rs 15,000 a month as beyond the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Implications of the Decision
This landmark judgement means that EPF subscribers can now receive a pension based on their full salary, removing the Rs. 15,000 cap. However, employees and employers contributing to the EPF without approval from the Assistant Provident Commissioner may not benefit from this judgment. The 2014 amendments may continue to apply to those companies managing their EPF corpus through trusts.
Finally, the article concludes with previous question related to casual workers’ rights in India from UPSC Civil Services Examination, giving readers a perspective on how such social security issues are addressed in official examinations.
