Private sector can't afford higher PF payout

NEW DELHI: The government's nod for a 9.5% rate on 5.87 crore provident fund accounts may be a 'just-in-time' poll sop, ahead of five state elections. But the decision would leave a 1,000-odd crore dent on the bottom-line of India Inc's best employers who manage workers' provident fund savings inhouse.

The Employers' Federation of India secretary general Sharad Patil forwarded the findings of a quick survey of 42 provident fund trusts to the labour ministry — just 2 of them could afford the 9.5% payout. The Employees' Provident Fund Organisation ( EPFO) board had cleared a 9.5% PF rate for 2010-11 in September 2010 after finding a surplus.

The private trusts have to match this rate and if the funds do not have the necessary surplus then employers have to bring the necessary funds.

Employers have already pointed out that they neither had a surplus like EPFO nor had reserves left to fund the gap between their expected earnings of 8.5% and the 9.5% rate.

The EPFO had conducted its own study of a dozen-odd company-run trusts to show that they could match the 9.5% PF rate, but those trusts may have been 'cherry-picked.'

Patil, who is on the EPFO board, said the finance ministry's nod for a higher PF rate is conditional upon EPFO managing to update 4.71 crore accounts within six months. "It is totally unfair to penalise companies that maintain PF trusts to provide efficient services to workers. They have no pending accounts," he said.