Centre to contribute 12% of wages to new employees under EPF

Finance minister Arun Jaitley. The move is aimed at encouraging firms to hire more women and would also aid women employees in getting a higher take-home pay

The decision of the govt.to contribute 12 percent of wages of new employees in employee provident fund for all sectors for the next three years will help in bringing more employees in the formal sector to some extent and increase job creation.

Besides, the EPFO Act will be amended to reduce contribution of women to 8% from 12% with no change in employers' contribution.

Furthermore, Jaitley stated that the government has identified 372 specific business reform actions to improve the Ease of Doing Business, adding that the evaluation of performance under this programme will be based on user feedback. "Also the facility for fixed-term employment will be extended to all sectors", he said. The government, however, disappointed income tax payers.


Jaitley announced that the government will contribute 12 per cent of the wages as EPF in all sectors for the next three years.

The move is likely to encourage employers hire more people in the formal sector thereby pushing the overall share of country's workforce in the organised sector.

He further said that the government had earlier chose to make provident fund contributions optional for employees in apparel and made-ups sector under a policy but it could not be implemented because the Act was not amended for the goal. With the existing contribution of 1.16% towards EPFO subscribers' basic wages, the government bears an annual burden of around Rs 6,750 crore. Of the employer's contribution, 8.33% goes into the Employees' Pension Scheme (EPS), which offers pension from the age of 58 years.

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