SC ensures higher pensions for private sector staff

SC ensures higher pensions for private sector staff


The Supreme Court has ensured higher pension for all private sector employees. The apex court dismissed the special leave petition filed by Employees Provident Fund Organisation (EPFO) against Kerala HC judgement which asked EPFO to provide pension to all retiring employees.

The SC dismissed EPFO's plea against the HC ruling which asked the organisation to pay full pension to retiring employees on the basis of their total salary instead of capping the amount on which the contribution of a pensioner is calculated at a maximum of Rs 15,000 per month.

The court said, 'We find no merit in the special leave petition. The same is, accordingly dismissed.' With this judgement, while the pension will increase, the PF corpus will be reduced since the extra contribution will go to EPS and not PF. It may be noted that the government's Employees Pension Scheme was introduced in 1995 for the organised sector employees. The scheme is applicable to all employees covered under the EPF scheme. People who are covered under EPS receive a pension on a permanent basis. Every employee with a monthly salary combined with DA of Rs 15,000 or lesser must enroll into this scheme.

Under this scheme employer was intially supposed to contibute 8.33% of their employee's salary. However, this contribution was then capped at 8.33% of Rs 6,500. The government later amended the act and allowed a contribution to any percentage of the actually salary in case both employee and employer has no objection.

The EPFO amended the act again in 2014 and increased the contribution to 8.33% of a maximum amount of Rs 15,000. The amendment also included that the pension on fully salary will be calculated as average of last five years' monthly income and not just on past one year's salary. This amendment therefore lowered the pension of many employees.

The Karnataka HC set aside the 2014 amendment and reinstated the old pension calculation procedure. Following HC's order, the Supreme Court asked EPFO to accept employees' request to contribute the scheme on basis if their complete salary with back date.

Despite, SC's judgement EPFO did not accept contributions from employees of several exempt companies whose PF's are managed by trusts. After EPFO's refusal to accept the contributions, several high courts including Kerala, Rajasthan, Andhra Pradesh, Madras etc. asked the EPFO to comply to the order and Supreme Court on Monday settled this issue once and for all asking EPFO to follow through.