The Ministry of Labour and Employment issued a notification on May 3rd, 2023 to give effect to the Judgement delivered by the Supreme Court of India on November 14th, 2022, wherein the Contribution payable by the Employer towards Employees’ Pension Scheme EPS’ 95 has been increased from 8.33% to 9.49% for the wage ceiling of Rs 15000 per month.
Contribution for EPF and EPS through Joint Option (Employer and Employees):
The Contribution payable by Employer under EPF Act towards EPF and EPS is 12% of Basic Wages, Dearness Allowance and Retaining Allowance payable to an Employee.
Further, the Contribution of the Employer for 8.33% on the basic wage cap i.e. Rs. 15000 (current wage cap for EPS) towards the Employees’ Pension Scheme (EPS) and 3.67% towards the Employees’ Provident Fund (EPF), of the total contribution payable i.e. 12% towards the EPF and EPS.
Increase of Wage Ceiling from Rs. 6500 to Rs. 15000:
Initially, the Wage ceiling on which EPS contribution is calculated on Rs. 6500 before August 22nd, 2014.
After the Amendment of August 22nd, 2014, the wage ceiling increased from Rs. 6500 to Rs. 15000.
Supreme Court Judgement dated November 4th, 2022
In the Supreme Court case, Employees Provident Fund Organisation & Anr. etc. Vs. Sunil Kumar B. and Ors. Etc on November 4th, 2022, the Apex Court gave direction for filing online applications for validation of joint options by the pensioner, for which EPFO issued a circular by giving Options / Joint Options to the eligible pensioner which was to be availed before March 3rd, 2023.
The Apex Court held that all members who were in service before September 01, 2014, and continued to be in service on or after September 01st, 2014, but could not exercise the joint option earlier, but were entitled to do so and ought to be given a further chance to exercise their option and the time for giving options was to be further extended. Now, the date has been extended to June 26th, 2023.
The Apex Court also held that requirement of the Employer to contribute at the rate of an additional 1.16% of their basic wages, dearness allowance and retaining allowance to the extent such exceeds Rs. 15000/- per month as an additional contribution. Now, the total contribution payable by the Employer is 9.49% towards EPS under the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act,1952 (EPF & MP Act).
- The members who had not availed Joint option before September 1st 2014, now they can avail this option till June 26th, 2023. This will give a retrospective effect for the eligible members covered under the EPS’ 95 whose basic wage, dearness allowance and retaining allowance exceed Rs 15000 per month.
- At present, in respect of the members who have exercised a joint option under the Employees’ Pension Scheme, 1995 (EPS’ 95), the employer’s contribution has been increased from 8.33% of the basic wages, dearness allowance and retaining allowance of each member to 9.49% by addition of 1.16% on an overall 12% of the contribution for members drawing salaries above Rs. 15000 per month. All the Employers who have contributed 8.33% will have to adjust the excess amount i.e. 1.16%, contributed towards Employees’ Provident Fund, for the eligible employees under erstwhile provisions of EPS’ 95.
- The Code of Social Security will give effect to the said notification dated May 3rd, 2023, by repealing a few corresponding provisions for Employers’ Contribution towards EPS’ 95.
- Recently, EPFO has extended the last date to file the higher pension application or the joint option to June 26th, 2023.
- The Employees who were a part of the Employees Pension Scheme, 1995 or joined before 1st, September 2014 could contribute 8.33% to EPS on the actual salary against the cap of Rs. 15,000 if they filed a new joint option with the EPFO within six months i.e., February 28th, 2015.
- Employees who were in service before September 01st, 2014, and continued to be in service on or after September 01, 2014, but could not exercise the joint option shall be eligible.
Application by EPF Members eligible for Joint Option
Procedure to apply for higher pension amount for employees retired before 2014/ Joint Option. The Employee shall apply online for a higher pension amount through Member Home (epfindia.gov.in) portal.
The Code on Social Security, 2020, while giving effect to the said notification and Employee Pension Scheme, increased the employer’s contribution by 1.16% for the eligible members of the EPS Scheme. All the adjustments after receiving the applications, have to be adjusted towards EPS Fund which is already contributed by the employer for EPF Fund. Hence, this will be a retrospective effect for employees of all the members who had not availed of this option earlier.
The Ministry of Labour and Employment is yet to declare whether the employer’s contribution is payable according to the recent notification or when the rest of the provisions from the Code on Social Security, 2020 will come into force. Further, it is to be seen whether the new contribution of 9.49% out of 12% will be effective from retrospect or from a prospect when Code on Social Security, 2020 shall come into force.