A sizable chunk of the salary of the people employed in the organized sector goes for social security. Currently, the social security contribution is fixed at 24 percent of which the employees and employer contribute an equal amount of 12 percent. While employee’s contribution directly goes to provident account, employer’s contribution is divided among provident fund account, pension account, and deposit linked insurance scheme. Now the government is planning to reduce the social security to 10 percent which will increase the takeaway salary of the employees. The Employees’ Provident Fund Organization (EPFO) is an organization which assists the central government in administering Provident Fund Scheme, a Pension Scheme and an Insurance Scheme for the workforce engaged in the organized sector in India. The body is under the administrative control of the Ministry of Labour and Employment, Government of India.
The 10 percent limit is currently applicable to an organization with less than 20 employees. Now, the flat limit will be applicable to all establishments. The increased takeaway salary is also expected to give a fillip to consumer spending which will lead to greater demand. The people will get more of their money and they could use it however they plan. If they are willing to save then there are many government and private destinations to make an investment. But someone wants to enjoy more of his/her earning in present phase then the person will be allowed to do so. The lesser contribution will also help in the expansion of the social security program because the people earning less are not able to contribute a higher amount. “We are enhancing the scale of coverage by five-fold. Hence, we think that going forward the contribution by and for each worker eligible for a social security cover will come down, benefitting both employee and the employer,” said an official.
The Modi government is planning to provide social security benefits to 50 crore workers in the country. The scheme for which a comprehensive plan has been prepared by the Labour Ministry aims to initially provide three programs – old age pension, life insurance, and maternity benefits while leaving out unemployment, child support, and other benefits – to most working citizens, government officials said. The drafted bill plans to extend social security benefits to all workers including those in informal employment by merging and simplifying 15 federal labor laws into one. The old age pension and life insurance schemes are expected to come under the recently launched APY and PMJJBY schemes by the Modi government. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a lucrative life insurance plan, wherein the insured receives Rs 2 Lakh cover against an annual premium of Rs 330, each year. The life risk cover will get terminated after 55 years. The scheme is applicable to all bank account holders in the age bracket of 18-50 years. Atal Pension Yojana (APY) is a pension scheme targeted at people in the unorganized sector. The scheme is applicable to subscribers aged 18 to 40 years, with valid bank accounts. The scheme aims to benefit people who do not have a social security or who do not fall under the income tax bracket.
The country spends less than two percent on social security while our counterparts like China spend more than 5 percent. The plan is to implement the scheme in three phases over 10 years, after which the government hopes to make it universal. The scheme will be implemented in four tiers with the government wholly financing the cost for people below the poverty line. The first phase of the scheme will cost Rs 18,500 crore, see all workers getting the bare minimum, which includes health security and retirement benefits. The second phase will see unemployment benefits being added to it while in the third phase, other welfare measures can be added. This is the perfect time for the Modi government to plan for the social security of people as the country is young and productive. The country will be an aging society like China in 22 years if it doesn’t start working on social security today, the country is enjoying a demographic dividend at present, and therefore, the time is ripe to invest in the social security of the people to ensure a higher standard of living even as they age.