If this change is implemented, the monthly salary, savings and retirement planning of crores of employees in the private and organized sector will be directly affected.
Why is change considered necessary?
According to experts, the salary limit of ₹15,000 was fixed many years ago. This limit is now becoming irrelevant in view of rising inflation, cost of living and changes in salary structure. The government believes that by increasing the salary limit, more employees will be brought under the ambit of social security.
What do the current rules say?
Under the current system, PF is mandatory for employees whose basic salary and dearness allowance are ₹ 15,000 or less. Both the employee and the employer contribute 12-12 percent. Whereas for employees earning more than this, PF is voluntary.
What will change when the new rule comes into effect
If the salary limit is increased to ₹25,000 or ₹30,000, then PF deduction will become mandatory for all employees falling within this range. This will significantly increase the amount deposited in PF accounts every month.
Benefits to employees
Retirement fund will be stronger: Higher contribution will result in bigger amount at the time of retirement.
Safe Investment: PF is considered a risk-free investment.
Possibility of improvement in pension: You can get better pension in future under EPS.
Long-term financial security: There will be less financial dependence in old age.
Disadvantages and challenges
Reduction in in-hand salary: There will be a direct reduction in monthly salary.
Employers' expenses will increase: Companies will also have to contribute the same percentage.
Pressure on MSME sector: This can become an economic burden for small and medium companies.
Impact on job market: Some companies may avoid new recruitments.
expert opinion
Economic experts believe that this decision will be in the interest of the employees in the long run, but the government should implement it in a phased manner so that salaries are not suddenly affected. Some experts are also suggesting that employees be given partial relaxation or options.
Response of employee organizations
Many employee organizations are supporting this proposal, while some say that reducing in-hand salary is not practical in this era of inflation. More confusion is being seen regarding this among the young employees of the private sector.
Government preparedness and position
The government and the Employees Provident Fund Organization are studying the financial, social and practical aspects of this proposal. At present no official notification has been issued in this regard, but a major decision can be taken on this in the coming time.
The proposal to increase the salary limit of PF is being considered a big step towards retirement security. However, this will have a direct impact on the monthly salaries of employees and the costs of employers. The government's final decision will depend on how it strikes a balance between saving and spending.