The government is considering increasing the take-home salary of a salried employee by cutting on the mandatory social contribution percentage that is likely to boost consumer spending pattern. As per a leading business daily which cited a government official that the labour ministry committee that is working on the contributory limit by the government for universal social security is most likely to prescribe a limit that is at least lower by 2% in comparison to the current ceiling pegged at 24%.
In the current scenario, an employee contributes 12% of his basic pay towards the Employee Provident Fund scheme while the employer contributes the similar portion but in two different heads i.e. 3.67% of the basic pay of the employer is contributed to the employee's EPF account and remaining 8.33% towards employee's pension scheme or EPS.
Reason for the increase in take-home pay
As per the same report, it is suggested that the EPF contribution by both the employee and the employer towards the employees' EPF kitty can come down to 10% as against the mandate of 12% for both of them. It is to be noted that already for set-ups or firms wherein less than 20 people are employed, the contribution limit is already pegged at 10%. But the same as per the working by the committee can apply to all establishments.
Further the report said that once the recommendations to this effect are put in final shape by the committee , the consultation with the stakeholders will be called for, post which the directive will be put to work in the social security code of the government.
Also, the government is working to increase the total base under the social security scheme from the current count of 10 crore individuals to 50 crore.
In case of the employees working in the private sector, the cost to the company factors in the employer's contribution to EPF and EPS and the same in case of reduction will now be available in some other heads to the employees and as a result their take-home pay will increase.