Labour Ministry to amend act to give employees choice of investing in NPS or EPFO

NEW DELHI: The Bandaru Dattatreya-led labour ministry will soon amend the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, to give employees the choice of investing in the New Pension Scheme or in the existing retirement fund body, EPFO, following an announcement made by finance minister Arun Jaitley in the budget speech on February 28.

"We have taken the views of the trade unions. The final bill will be taken up for Cabinet’s approval, soon after which it will be laid in the Parliament when it reconvenes on April 20," Labour Minister Dattatreya told media after a tripartite consultation with stakeholders.

Other key changes include reducing or waiving the compulsory 12% employee contribution to the EPFO for a certain period, widening the scope of the law to cover every establishment employing 10 or more people, down from 20 or more now, setting up an appellate committee and establishing a multi-member tribunal to address grievances of EPFO subscribers.

Besides, the fresh changes proposed include framing up of a voluntary scheme to provide social security for unorganised workers, who are already covered by the Unorganised Workers’ Social Security Act, 2008.

The government is going ahead with the changes amid stiff opposition from trade unions, which feel that NPS is not a substitute for EPFO and the proposed amendments will deal a severe blow to the organisation. The EPFO has a subscriber base of 5 crore and a corpus of over Rs 6 lakh crore, excluding the Rs 2 lakh crore from exempted establishments.

"NPS is not a substitute to the EPF and the proposed changes will only kill EPFO," Ashok Singhal of the Indian National Trade Union Congress said, urging the government to clarify the motive and the benefits from amending the law.

AD Nagpal of the Hind Mazdoor Sabha said the move would be in contravention of the EPF Act. "EPS is a social security system while NPS is a financial tool which has a lock-in period of 60 years and where premature withdrawal is not possible," he said.