Home >politics >policy >EPFO set to reduce administrative charges

In a move that will cheer corporate employers, the Employees’ Provident Fund Organisation (EPFO) is set to reduce administrative charges that will save around 2,000 crore annually for companies covered by the retirement savings manager.

Industry chambers and individual companies have written to the labour ministry and the EPFO to lower administrative charges, central provident fund commissioner K.K. Jalan said on Tuesday.

“Though earlier this year, EPFO had reduced administrative charges, we are making efforts to cut it further from 0.85% to 0.65%. This will not impact the operation of EPFO, but will certainly help our subscribers and their employers," Jalan said.

EPFO has reduced its annual expense ratio—the percentage of assets used for expenses—to 3.4% from 4.4% over time and wants to lower it further to “hopefully 2.6%", said Jalan. The issue may be taken up in the next central board of trustees meeting.

“The world over, pension fund expense is around 2% and we are above it. If we want to be competitive... We have to get lean in our expenditure," Jalan said.

Industry lobby group Assocham has written to the labour minister on the subject.

In a letter dated 7 September, G.P. Srivastava, chief advisor of Assocham, wrote that a reduction in the administrative charge “will not bring any adverse impact to the social security benefits of employees, (but) it will be a big relief to the employers which is very important in the present competitive environment".

An EPFO official, who requested anonymity, said EPFO keeps aside a little over 5,100 crore for administrative charges and other expenses like the salaries of its employees. But the organization is considering reducing this by 3,000 crore as it does not spend so much money.

“When we can manage in less than 1,800 crore, there is no point keeping over 5,000 crore aside for the purpose. This can be invested, which will automatically benefit the organization as well as its subscribers," said the official.

A high expense ratio is a burden on small and medium companies as well as start-ups, said Rituparna Chakraborthy, senior vice-president at staffing company Teamlease Service Pvt. Ltd.

“When you are now relying a lot on technology and human intervention has come down in EPFO functioning, there is no logic of keeping a high expense ratio. They had reduced it once and may be need to slash it again," Chakraborthy said.

Some 861,000 firms and other establishments are covered under the EPFO, which manages a corpus of around 8.5 trillion. The EPFO corpus grew by over 15% in 2014-15 compared with the previous fiscal year.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout