Government to review EPFO order clubbing salary and allowances for pension scheme
15 Dec 2012
The government is planning to review a circular issued by the Employees Provident Fund Organisation (EPFO) directing employers to deduct subscription to provident fund from gross salary of an employee instead of his basic salary as has been done so far.
There also seems to be confusion over the EPFO circular over the definition of allowances.
The EPFO circular, issued on 30 November, states that all allowances, which are ordinarily, necessarily and uniformly paid to the employees should be treated as basic wages.
Employers have since started deducting PF from gross salary, irrespective of the nature of allowances. Both employees and employers have sought clarification on the issue.
The decision, if implemented in its present form, could swell EPFO coffers and generate enough investible funds for a cash-strapped government.
The EPFO currently has over 50 million active members, whose contributions could more than double.
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