Over 500 employers have approached the ministry of labour to consider revamping of the laws governing salary payment and granting employees a choice as to how they want the payment of salaries. They have urged the Government to take a re-look at the laws governing salary payment of low-wage employees by allowing them to choose how their salary is paid and contributions invested. Besides that, the employers should be allowed either to pay their contribution to the Employee' Pension Scheme or an individual account of the beneficiary opened with the National pension Scheme.
The Employees' Provident Funds and Miscellaneous Provisions Act of 1952 (hereinafter referred to as EPF&MP Act) is a welfare scheme like most of the labour legislations. The Act applies in the first instance to factories engaged in any of scheduled industries in which twenty or more persons are employed. The Act is meant to make provisions for the future of a worker if he retires or for his dependents in case of his early death. Its purpose is also to inculcate the habit of saving something regularly.
However, when the EPF&MP Act is from the practical point of view, it appears that it has outlived its utility. The Employees' Provident Fund Scheme has been in focus during the last many years, when the tide of globalisation has started sweeping the world and in its wake the Berlin wall got collapsed, and the Soviet Union got disintegrated. In the present circumstances it has completely failed to serve the interest of employees particularly those who are in the lowest paid category when they feel the pinch when a major part of their meagre wages is deducted towards future payment. For instance, take the minimum wages on an average in different States Rs6,000 per month and an employee who gets such a low wages is required to contribute Rs720, then it hits him hard even though in future he may get more money.
In addition to above, a large number of employees, even though they have contributed for the fUnd for a short period, have not been able to withdraw their hard earned deductions since it is fit!! of hassles and many objections are raised by the appropriate authorities. Sometimes their addresses were not found to be correct or their signatures do not tally or that the employer has not attested for withdrawal form. They have to run from pillar to post and ultimately they give up and such unclaimed money is being set on towards higher rate of interest which is only notional but not realistic.
Take, for instance, the construction workers, particularly who come for a few days or months in order to help the workers for putting of lintel which requires a continuing process and they are paid daily wages and deductions for provident fund are made and after completing the job at different places, they migrate to their native place, situated in remote areas. They have hardly any information about deduction and contribution and, thus, they cannot make claim for their hard savings. Those who are in the lowest cadre are the worst sufferers and as such it has failed and the object is totally defeated. In ISDB Infrastructure (F) ltd vs. UOI, the Division Bench of Delhi High Court on 18.12.2014 observed "We are informed that a sum of Rs27,000 crore in lying unutilized (unclaimed)". The EPFO had also stated that Rs26,496.61 crore is kept in inoperative account as on 31.3.2013.
The recovery process of the EPF department is not found to be effective since the arrears of contributions are multiplying. Over Rs392927.29 lakhs are the arrears till 31.3.2014 yet to be recovered. The efficiency of tile Employees' Provident Fund Organisation can be illustrative that it has taken more than 13 years for enhancement the wage/salary cap for coverage of an employee from Rs6,500 to Rs15,000 per month. It has become a mismanaged a sick organization. It cannot manage 7,95,827 unexempted, 30,621 exempted establishments with membership 117813454 members (as on 3 1.3.2014).
That is why, quite a large number of people are advocating for abolishing this Act itself The social security arrangement may have been valid during the days of state-controlled economy when choices for savings were limited. That situation does not obtain in a market-driven, free economy which offers multiple choices for savings and easy access to personal loans. The Government is requested to move away from the current benefits confiscation regime because it harms the people it is trying to protect.
People do not have to depend on their provident fund for low interest loans (from their own savings) to build a house or meet other expenses; they can walk into a bank get a better deal. With sweeping changes in urban lifestyle, priorities have changed, too. It is doubtful whether workers in the lirganized sector would like to remain captives of a decrepit and outdated system which is no more than a relic of the socialistic. The beneficiaries of this Act are actually minuscule, who are in the Ilirganized sector. It would thus be appropriate that instead of confiscating the hard earned wages, the membership of the Scheme should be optional for the employees.