PF Statutory Rate Reduction – An Overall Perspective

The recent notification from the central government regarding the reduction of PF contributions has had significant impact to employers and employees. The initiative, which is part of the recently announced Aatma Nirbhar Bharat Abhiyan intends to provide relief to over 4 crore employees.

What the amendment offers

Vide notification No. 1513 released on 18^th May 2020, the Central government revised the PF rates from 12 percent to 10 percent. This computation is calculated on the basic wages and dearness allowance. The amendment has been effected keeping in mind the current situation and the lack of liquidity for employees and employers. It is applicable only for the months of May, June and July 2020.

How this finds application

While the amount has been reduced from 12 to 10 percent, there is a lot of flexibility that it offers. The minimum amount required to be remitted by both employer and employee is 10%. However, they may decide to contribute up to as much as 12% towards the PF fund. This allows employees a greater take-home in terms of salary, and a relief of 2% per employee for employers.

Who this applies to

The amendment covers all establishments under the EPF & MP Act. It is also extended to all exempted establishments. Those who are NOT covered under this are:

•      Classes which received an extension on 10 percent contribution through the 1997 amendment including:

1.       Establishments with under 20 employees

2.       Sick industrial units

3.       Establishments whose losses at the end of the financial year equals or exceeds its total net worth

4.       Establishments in jute, beedi, brick, coir and guar gum industries

•      Central and state public sector enterprises
•      Establishments obtaining relief from the Pradhan Mantri Garib Kalyan Yojana

Other significant aspects

There are several other important aspects involved. Here are some pointers that may guide you better:

·         Administrative charges for EPF and EDLI contributions remain the same, and applicable

·         The remittances must be made through the ECR as usual

·         Pension contributions and benefits will continue to remain the same

·         Regardless of date of payment, the reduced rates of contributions for the said months will remain effective

·         Establishments under PMRPY can also avail reduced rates for contribution

The official gazetted notification may be viewed at https://comply4hr.com/noti/2016/EPFS2020May18.pdf

State Governments Order Changes in Labour Laws – What Stands to be Gained and Lost

The world is dealing with a pandemic of unimaginable proportions. While countries are struggling with curbing its spread, they are also battling to ensure the healthy have a chance at life. However, governments are trying to set in place measures to ensure human welfare is the greatest priority.

Our government mandated the payment of wages for every employee. They also laid down guidelines to ensure employees retained their jobs and were not penalised in any way even while working from home. As the duration of the lockdown continued and employers lobbied heavily against the directive, the Supreme Court has now ruled that employers can face no prosecution for non-payment of wages. The matter is still waiting for a final authorisation from the central government.  

The dilemma between protecting the employee and safeguarding industries is getting more serious. As companies are facing the growing realities of bankruptcy, economic slowdown and absence of immediate relief, times are getting more desperate.

Several states have taken on the onus of instituting reforms in order to protect their industries and bring about a revival of some sorts. Many states have made relatively small changes to the number of working hours, intervals of rest and payment of overtime. Some significantly larger changes have been instrumented in the states of Gujarat, Uttar Pradesh and Madhya Pradesh.

Many opine that these changes are backed by a clear political agenda. Others view it as an opportunity of diverting business from China to India. Whether as an incentive to bring about economic resurgence or simply a measure to save the industry from impending doom, the question of intent cannot be ignored. Are these really measures that will give the economy impetus? Is this the right time to clip the wings of employees? Are we creating more opportunity or just taking away existing ones?

Here are some of the most major changes witnessed in the country so far.

Gujarat

• All new establishments need only adhere to the following laws – Minimum Wages Act, Industrial Safety Rules and Employees Compensation Act.
• The government has also facilitated the process of setting up industries and new businesses. Over 30,000 hectares of land have been set aside, and will be available within 7 days of application.
• All approvals will be sanctioned online within 15 days. Special benefits will be made available for 1,200 days

Madhya Pradesh

Following a host of exemptions, the most important revisions include:

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•       Hiring for establishments with up to 100 employees according to their needs. Registration for contractors with below 50 labourers has been withdrawn
•           Inspections have been mandated once in three months, with inspections waived off for factories with under 50 workers. Third party inspections have been sanctioned
•      Registrations and licenses will be available within a day. Factory licence renewals need to be made once in 10 years. There will only be a one-time legislation with no renewals for start-ups
•      Shift durations have been raised from 8 to 12 hours. Overtime permissible for up to 72 hours. Shops have permission to remain open from 6am to midnight 

-       Uttar Pradesh

The state has revoked all labour laws through the Temporary Exemption from Certain Labour Laws Ordinance 2020. This will apply for the next three years. The only acts that continue to be relevant include:

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•      Building and Other Construction Workers Act, 1996
•         Workmen Compensation Act, 1923 
•      Bonded Labour System (Abolition Act), 1976
•      Section 5 of Payment of Wages Act, which deals with timely disbursement of wages for various employees including cases of termination

-        

-       Government perspective

Along with giving added incentives to set up new industries and boost the economy, there is optimism in the government that the flexibility is warranted. They also seem to feel that a state of healthy competition will be promoted among states allowing for better standards and greater reform.

Business Perspective

Those setting up businesses are truly beginning from a position of power. The current scenario allows employers to hire and fire at will. Intervention from the government and inspections is reduced to being almost non-existent. The role of unions has been made redundant.

The Employee Angle

What is perhaps most impacting is the human angle. Here are some things employees across these states stand to lose:

•           Neglect of health and safety: Amendments do not make it necessary for companies to conform to norms on working conditions. This includes waste disposal, drinking water, canteens, urinals, cleanliness, ventilation, lighting, crèches, restrooms,  or the reporting of employees with occupational diseases
•       Compromised working hours and wages during leave period. Denial of simple entitlements like leave and overtime
•       Disguised unemployment: There is little job security. Although the move is aimed heavily at creating more jobs and generating employment, they have also created avenues for employers to fire people and hire them for significantly less pay. This is a far cry from the appeal of the government to companies to pay employees wages in full. Social security of employees has also reduced significantly as most employees will be converted into casual labour
•       Absence of redressal mechanisms: Labour stands to lose the power to form unions. They have no machinery to voice grievances, and have no opportunity to voice their case in the event of dismissal for misconduct. Welfare facilities have been abolished and there is no scope to raise industrial disputes. There is no protection from layoff, lockout, retrenchment or strikes