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Monday, 17 June 2019

Amendment in ESI Contribution for Employer and Employee

Effective 1st July, 2019 the Government of India along with the ESI Corporation has amended the rates of contribution for both employers and employees. Following a change made to rule 51 of the ESI Rules, employer and employee contribution has been reduced from 6.5% to 4%. Employers will now be required to contribute 3.25 percent(earlier rates were 4.75%), and employees rates are reduced from 1.75 to 0.75 percent.

The move is an attempt to increase the base of both employers and employees who contribute toward the fund. Officials anticipate a rise of about 20 percent in the contributions that are currently being received.

Saturday, 2 March 2019

The Supreme Court, PF Contributions and Basic Wages

The most recent Supreme Court judgement has spiralled a series of concerns, remarks, doubts, and plenty of scepticism. There is much to be understood in what has been declared, and the implications include measures that are both in favour of and against the move.

Basic Wages
The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 defines ‘basic wages’ as emoluments paid to an employee on duty, holiday or leave in accordance with the terms of employment. The emoluments excluded from this definition are:
-        -  Cash value of food concessions;
-        -  All dearness allowances (payments in any form attributed to rise in cost of living, house rent allowance, overtime allowance bonus and/or commissions

In the current scenario, the requirement has been for employees to furnish 12 percent (depending on industry and establishment) of basic wages towards the provident fund.

Supreme Court Judgement
The judgement of the Supreme Court primarily addresses components outside the basic wage which continue to contribute to gross salary, and the consequent cost-to-company. These include
-        - Dearness allowance
-         -Retaining allowances
-         -Cash value of food concessions

All the above allowances, and any contributors which are uniformly, necessarily and ordinarily common, or allowances that are without purpose and camouflaged can also feature as the basic components upto a cap of Rs. 15,000.
Being a judgement, the effect of this judgement can go back to as many years as the organisation has or has not adhered to the guidelines.

The Supreme Court further clarified that CCA, travel reimbursements, incentives and allowances which are distinctive to employees based on class or individual performance will not be considered a part of Basic wages.

The impact of this judgement can be felt in two major forms:
-         - Increased burden on PF contribution for employees resulting in lower take-home
-         - Improved retirement options through increased contribution

Wednesday, 6 February 2019

Pradhan Mantri Shram-Yogi Maandhan (PM-SYM)

The Finance Minister announced a new Scheme called the Pradhan Mantri Shram-Yogi Maandhan in the recent budget. The initiative is aimed at providing assistance to workers in the unorganised sector. This offering, which in some ways also ties to the PMRPY, is aimed at uplifting and providing better means for those to whom benefits are few. The main objective of this scheme is to ensure old age protection for these workers. Here is what the scheme intends.

  • The Scheme has been introduced under Unorganised Workers’ Social Security Act (UWSS) Act, under Section 3(1)(C)
  • This scheme is available to unorganised working sector which includes street vendors, rickshaw drivers and pullers, domestic workers, rag pickers, beedi workers, washermen, leather workers, handloom workers, agricultural workers etc
  • It is a voluntary Scheme
  • It is applicable to those who have a monthly earning of below Rs. 15,000
  • Those between the ages of 18 and 40 are eligible
  •  LIC of India has been chosen as implementing agency
  •  Facilitation desks/centres/counters to be set up by all district offices to ensure maximum reach and optimal implementation
  • Aadhar card and Savings bank or Jan Dhan number to be provided during registration
  • Consent forms and paperwork to be submitted at respective bank for remittances
  •  Principal Secretaries and Labour Commissioners to mobilise movement and use social networks and NGO’s to encourage maximum participation
  • LIC branches and agents, field offices of EPFO and ESIC offices, as well as district labour offices will be centres for enrollment of workers

  • A sum between Rs. 55 and Rs. 200 to be paid by worker as monthly subscription. The amount will be fixed based on age of entrant
  • An equal sum will be paid toward the same account, funded completely by the government of India
  • Upon attaining the age of 60, the member will receive an assured monthly pension of Rs. 3000
  • Upon death of the member, the surviving will continue to receive 50% of the benefit
  • If member dies before attaining the age of 60, the spouse is eligible to join the same scheme and continue paying toward the fund and avail subsequent benefit
  • After demise of member and spouse, the corpus will be diverted into the fund

A document detailing the Scheme along with eligibility and benefit clauses, as well as age-wise contribution slabs can be found at