No change in EPF interest rate

The Central Board of Trustees of the Employees Provident Fund at its 186th meeting on Sunday recommended to retain the rate of interest to last year’s 8.5 percent for the fiscal year 2008-09.

This would be the third consecutive year of retaining similar rate of interest at 8.5% if it is implemented in the recommended form in this fiscal, though employees unions had opposed the decision of the board as they were asking a higher interest rate of 9.

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5%.

The decision was taken by the newly constituted board in its fourth regular meeting under the chairmanship of Oscar Fernandes, Minister of State for Labour and Employment and Chairman, CBT (EPF) in New Delhi.

The board members debated on the statutory item to recommend rate of interest for the year 2008-09 for crediting to the subscribers account as 8.5 %, while the representatives of major trade unions — the Centre of Indian Trade Union (CITU), All India Trade Union Congress (AITUC), Bhartiya Mazdoor Sangh (BMS), Hind Mazdoor Sabha (HMS) and All India United Trade Union Centre (AIUTUC) — raised their voice against it.

The representatives argued, ‘even banks are paying higher rate of interest this year, why is government not in favour of paying higher interest rate when EPF is considered as the social security of the employees’.

However, this decision may be vital for the UPA government, as it will affect over 40-million employees. RBI is likely to cut rates in its fourth quarter review or even before to clutch the inflation.

Besides, the board also considered the coverage of contract employees under the EPF Act and better extension of social security cover to existing employees. The final decision would, however, be taken in the subsequent meetings after receiving suggestions from the members.

Earlier, the standing committee on labour had asked to raise Centre’s contribution from the currently 1.16% to at least 4.0% of the worker’s salary in the employees’ pension scheme as the chairman of the standing committee on labour S S Reddy had said that government should contribute at least half of the rate of contribution made by the employer or the employee as the employer’s share is 8.33% of the salary for the pensions scheme.

The provident fund of an employee is 24% the salary comprising 12% contribution of each, employer and employee while pensions are entirely funded from an employer’s contribution to a worker’s provident fund and a central government subsidy.