In what we believe is a way to increase consumer spending (which has plunged in the last few quarters), the Government is looking into an option to reduce the provident fund contribution (PF) of an employee. This, is authorized, would increase an employee’s take away amount.
The PF on the basic salary is currently 12 per cent. This provision is part of the Social Security Code Bill, 2019 that has been approved by the Cabinet and is expected to be tabled in the Parliament this week.
As per Hindustan Times, the decrease in PF contribution will allow more money in the hands of an employee, and in some way or the other, will help the ailing economy.
However, the bill suggests that an employer’s PF contribution will remain the same.
Payment of Gratuity Act Amendment
In addition to revising the PF contribution, the bill also seeks to amend the Payment of Gratuity Act, 1972. The bill seeks to make fixed-term contract workers eligible for gratuity. Currently, employees who have completed five years in the organization are only eligible for gratuity.
Not Coporatising EPFO And ESIC
Additionally, the labour ministry has rejected the proposal to corporatise the Employees’ Provident Fund Organisation (EPFO) and Employees’ State Insurance Corporation (ESIC).
Establishment Of Security Funds
The bill also emphasizes on the establishment of social security funds under corporate social responsibility. This fund will be set aside by an organzaition for benefits such as pension or medical cover of the workers.
Any company employing more than 10 workers would have to provide multiple benefits to employees under ESIC and it would be mandatory for all workers employed in hazardous sectors.