Employers to save Rs. 900cr annually with reduced EPFO administrative-charges
What's the story
The national retirement fund body Employees' Provident Fund Organization (EPFO) recently decided to cut its administrative charges from 0.65% to 0.50%.
The move will allow over 5 lakh employers across the country to collectively save as much as Rs. 900 crore annually.
The charge cut will be effective from June 1, this year.
Here are the details.
Do you know?
What are EPFO's administrative charges?
The administrative charges are levied by the EPFO as a proportion of an employee's total wages on which his/her employer pays a contribution to operate the social security scheme. During 2017-2018, the EPFO reportedly collected around Rs. 3,800 crore in administrative charges from employers nationwide.
Reasons
Why is EPFO slashing the administrative charges?
The EPFO has decided to cut the administrative charges by 15 basis points, keeping in mind the high recovery of such fees as well as the organization's growing business.
EPFO has said that it does not believe that it will get affected by the charge cut due to the enlarging subscribers' contribution base.
Effect on employees
How will the move affect Indian employees?
An employee's Provident Fund is composed of two components- the employee's contribution and his/her employer's contribution. The contribution is a proportion of the employee's total wages.
The EPFO deducts the administrative charges from the 12% monthly contribution of the employer.
Thus, with a reduction in the administrative charges, the employees would be able to take home an increased amount as salary.