Centre to soon merge social security contributions by small firms: Report
The Centre may soon do away with separate contributions towards provident funds, pensions and insurance for small enterprises, allowing them to make a single payment towards the social security of their employees, as reported by Economic Times (ET). This is expected to boost compliance among small firms.
Currently, companies have to make separate payments towards the Employees' Provident Fund Organisation (EPFO) and Employees' State Insurance Corporation (ESIC).
An expert committee will finalise the plan. The contribution may be kept at 10-12 per cent of the wages. This will be applicable to an organisation with 10-20 employees, ET report added.
"An expert committee will be set up to arrive at the final unified rate...the labour ministry will notify it subsequently," an official was quoted as saying in the report.
Currently, organisations with 10 or more employees need to make contributions under the ESIC. In organisations with over 20 employees, contributions are made under EPFO. The Centre may also reduce the threshold for contribution to EPFO from 20 to 10 employees.
Under ESIC, the criteria are expected to stay the same. The employers contribute 3.25 per cent of the wages while employees contribute 0.75 per cent of the wages to the ESIC. It provides employees with insurance cover.
Also, the government is considering a universal security scheme to protect small companies in case of financial troubles. It would, in such a situation, get difficult for them to contribute to several schemes. This is also expected to boost compliance.