The Labour Ministry has issued a clarification regarding reports suggesting changes to EPF rules under India’s new labour laws, addressing concerns among employees and employers. In a written reply to a question raised by Rajya Sabha MP Sandosh Kumar P, Minister of State for Labour and Employment Shobha Karandlaje clarified the government’s position on possible changes to EPFO provisions and the interest rate on provident fund deposits.
The question raised in the Rajya Sabha asked whether the EPFO is considering an enhancement in the interest rate paid on provident fund deposits.
The government is not currently planning any specific changes to the Employees’ Provident Fund Organisation (EPFO) scheme as part of the new labour codes, according to the Labour Ministry’s response in the Rajya Sabha.
The response also sheds light on how the upcoming labour reforms under the Code on Social Security, 2020, will treat existing EPFO schemes once the new framework is implemented.
The Labour Ministry explained that the interest rate for EPF deposits is determined as per the provisions of the Employees’ Provident Funds Scheme, 1952.
The Central Board of Trustees is the apex decision-making body of EPFO and includes representatives from the government, employers, and employees.
Under paragraph 60(1) of the EPF Scheme, the EPFO credits interest to members’ accounts at a rate determined by the Central Government in consultation with the Central Board of Trustees (CBT) of the EPFO.
According to paragraph 60(4) of the scheme, the government should ensure that there is no overdrawal from the interest account while crediting interest to EPF members. This means the interest rate is determined after considering the EPFO’s earnings from its investments and overall financial sustainability.
The new social security code retains the core structure of the EPF system but also introduces certain enabling provisions. Some key provisions include:
Continuation of EPF benefits
The government’s power to frame schemes
Universalisation of social security
Coverage of gig and platform workers
Retirement benefits for organised sector workers
Section 164(2)(b) of the Code on Social Security states that the current EPFO schemes will remain in force for up to one year from the date the Code comes into effect, as long as they are not inconsistent with the provisions of the new law.
The Code on Social Security, 2020 is one of the four labour codes passed by Parliament to consolidate and simplify India’s labour laws. The four labour codes are: Code on Wages, 2019; Industrial Relations Code, 2020; Occupational Safety, Health and Working Conditions Code, 2020; and Code on Social Security, 2020.
The objective of the code is to streamline social security provisions and expand coverage to more workers. The Labour Ministry’s response indicates that the existing EPF scheme will continue initially, and any modifications under the new social security code will be implemented gradually once the rules are finalised and the code comes into force.