Social security cover for firms with at least 10 workers

Social security cover for firms with at least 10 workers
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First Published: Thu, Jun 11 2009. 12 30 AM IST
Updated: Thu, Jun 11 2009. 12 07 PM IST
New Delhi: The ministry of labour and employment will shortly move a proposal to bring firms that employ at least 10 workers under the social security cover offered by the Employees’ Provident Fund. Currently, only employees in firms with at least a staff of 20 are covered.
“It is under active consideration and we have to take a decision soon (on extending coverage),” Harish Rawat, minister of state of labour and employment, said in a Tuesday interview with Mint.
About 4.2 million workers employed in 320,000 establishments will be eligible for coverage if the proposed amendment comes into effect. The proposal has to be approved by the cabinet before it can introduced in Parliament for a vote.
The small and medium enterprise sector, including those that employ at least 20 people, account for 45% of the country’s manufacturing output.
The ministry of micro, small and medium enterprises, which had been opposing the move, has now internally agreed to get establishments employing at least 15 persons under the Employees’ Provident Fund Act, an official from the ministry said on condition of anonymity.
“About 99.6% of small (and) medium enterprises employ between 10 and 19 employees, and any additional burden will increase cost as well as inspection by the labour department,” the official said.
The official added that small entrepreneurs are likely to face harassment “as no provisions have been made to lodge complaint against high-handedness” by labour inspectors. Officers should be appointed to review such petitions, he said.
Rawat said fears that the amendment will increase labour inspection and lead to abuse were unfounded. “There is no logic to it,” he said.
The ministry of finance had also raised concerns about the administrative expenses and the capacity of the Employees’ Provident Fund Organization’s (EPFO) to handle additional accounts. EPFO is the government agency that monitors the provident funds.
The finance ministry had also questioned if EPFO would be able to pay future pensioners. For every Rs100 a worker earns, Rs13.50 is taken out as equal contribution from the employer and employee and put into the provident fund account, which this year has an 8.5% return.
Industry representatives say bringing small entrepreneurs under the coverage is bad news for both small industry and workers.
“While the contribution costs of micro industries will go up and make them unviable, workers are reluctant to see part of their salary deducted,” said Gandhi Kumar, president of the Tamil Nadu Small and Tiny Industries Association, which has at least 100,000 member units, each employing between 10 and 20 workers. Tamil Nadu has the country’s third largest concentration of small establishments after Maharashtra and Gujarat.
Small units have a huge floating employee population that constantly changes jobs, said Kumar. “Many of them are unable to get their refund money from the provident fund trust after quitting their jobs because of cumbersome procedures,” he said.
At least Rs4,000 crore with the EPFO is currently unclaimed, The Economic Times said in a 5 January report, citing an unnamed EPFO official.
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First Published: Thu, Jun 11 2009. 12 30 AM IST