EPFO, Take Home Salary: If the suggestions of the Ministry of Labor (Labor Ministry) are accepted, the Take Home Salary of the employed people may increase, but the pension of the pensioners may decrease.
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Actually, after the new Wage Code, it is being said that the take home salary of the employees will decrease, but the gratuity and pension will increase. In such a situation, this news can give relief to those employees who do not want to cut their Take Home Salary. The new pay scale rules may come into force from April 2021.
Recommendation to reduce EPF contribution
In fact, the Ministry of Labor has suggested to the Parliamentary Committee to reduce the contribution of both employees and employees in the Employees Provident Fund (EPF) from 12% to 10%. This will increase the salary of the employees. But due to less contribution to PF, pension amount will be reduced.
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Pension, gratuity will increase in new pay scale rule
Usually, most companies now keep less than 50% of the non-allowance part of an employee’s salary, so that they have to contribute less to EPF and gratuity and reduce their burden. But after the new pay code is implemented, companies will have to increase the basic salary. This will reduce the take-home salary of the employees, but will increase the PF contribution and gratuity contribution. Also, the tax liability of the employee will also decrease, because the company will add its PF contribution for the employee to its CTC (Cost-To-Company).
Salary will be reduced in the new pay scale rule
Actually, the take-home salary of employees working in private companies may decrease from April 2021 next year, as companies will have to change the salary structure of employees according to the new wage rules. . According to the new wage rules, allowances of an employee cannot exceed 50% of the total compensation. That means from April 2021, the basic salary of the employee will be 50 percent or more of the total salary.
The more PF contribution, the more pension
But the Labor Ministry has made another suggestion to the Parliamentary Committee, the Labor Ministry says that the existing structure will have to be changed to keep pension funds like EPFO going forward and more practical. Instead of ‘Defined benefits’, a system of ‘Defined contributions’ should be implemented. Right now the minimum limit for EPFO pension is fixed, it is a ‘defined benefits’ model in a way. By adopting the Defined Contribution System, the PF members will get the benefit according to their contribution ie, the more the benefit the more contribution.
Suggestions are yet to be decided
If you see this new suggestion in the light of the new pay scale rules, then there is news of relief for those employees who want their take home salary more. However, no decision has been taken on this yet.
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