In New Employees’ Pension Scheme, government to bear employers’ contribution of 8.33% under Pradhan Mantri Rojgar Protsahan Yojana

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The new employee is defined as one who had not worked in any EPFO-registered establishment or had a universal account number in the past, i.e. prior to April 1, 2006.

The government will now bear employers’ contribution of 8.33% of basic pay to the Employees’ Pension Scheme (EPS) for new employees under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) even if new posts are not created by the firm.

Under the scheme — launched in Budget 2016-17, disbursement of funds under it commenced in August last year — only “new employees” of salaries up to `15,000 per month added to a defined reference base have hitherto been eligible for the benefit. In other words, the benefit has been available only for new posts created. “The condition that the eligible employer must have added new employees to the reference base of workers in order to avail benefits under the scheme has been removed,” said a senior EPFO official.

The new employee is defined as one who had not worked in any EPFO-registered establishment or had a universal account number in the past, i.e. prior to April 1, 2006. The reference base used thus far has been the number of employees against whom the employer has deposited the 12% (3.67% EPF + 8.33% EPS) of basic salary with EPFO as on March 31, 2016.

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The incentive, the government feels, will incentivise the employers to recruit unemployed persons and also add informal workers on their payrolls. Under the current plan, PMRPY, aimed at encouraging regular employment of
unskilled and semi skilled workers, will exist for three years, i.e. till 2019-20. The annual outlay for the scheme is `1,000 crore.

Giving an illustration of the change in rules, the official said, “suppose, one entity has 100 employees as on April 1, 2016 and as on April 1, 2017, it has 110 people, even as 10 have resigned or retired, it would have got benefit for 10 people only as per the earlier order and not for the 20 new recruits. Now, the firm can avail benefits for all those 20 people it has inducted.”

The PMRPY scheme has not yielded the desired result.

— employers have claimed benefits for only around 40,000 employees as yet. The EPFO hopes that “lakhs of” new employees will come into its fold as many employers will avail the opportunity.

Under a special package for the textile and garment sector unveiled by the Modi government in June 2016, the government will bear the entire 12% employer’s contribution to the retirement fund for the first three years against 8.33% for other sectors under the PMRPY.