Supreme Court recalls 2019 order on Employee Pension

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The Supreme Court has recalled its 2019 order which had paved way for higher pension for employees by removing the current salary ceiling of ₹15,000.

An SC bench, headed by Justice Uday U Lalit, allowed the review petitions filed by the Employees Provident Fund Organisation (EPFO) and decided to reconsider the previous order that permitted grant of Provident Fund pension proportionate to the salary.

The bench, which also included Justices Hemant Gupta and S Ravindra Bhat, jointly heard the EPFO’s review petition and the appeal filed by the Central government on Friday last week. The court order was released a day ago.

Starting February 25, the bench will now re-examine the 2018 Kerala high court judgement, which had 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 ₹15,000 per month.

The HC had then noted that some workers made more contribution voluntarily towards EPFO but their pension calculation was on the ₹15,000 salary ceiling, which was not fair on workers post their retirement.

The top court, however, withdrew its approval to the HC judgment after hearing Attorney General KK Venugopal and senior advocate CA Sundaram, on behalf of the Union government and the EPFO, and agreed to review the correctness of the HC judgment. The bench further took note of an argument that the Kerala HC’s judgment would lead to benefit upon employees retrospectively which, in turn, would create great imbalance.

Venugopal and Sundaram further pointed out that another bench in the Kerala HC has expressed doubts over its 2018 judgment in the pension matter and the case there had also been referred to a larger bench for a re-look.

On April 1, 2019, by a brief order, the Supreme Court had dismissed the EPFO’s appeal against the Kerala HC’s judgment, compelling the retirement fund body to file a review petition. At the same time, the union labour ministry also decided to file a separate appeal against the HC’s judgment to highlight that such an order will make the organisation financially unviable since there will be shortage of several thousand crores every year.

Citing the pendency of the case in the Supreme Court, the Kerala HC judgment was not implemented while the labour ministry pleaded for a stay of the HC ruling.

At present, an organised sector employee pays 12 per cent of his basic salary as mandatory Employee Provident Fund (EPF) contribution every month and a matching amount is contributed by the employer. Of the employer’s contribution, 8.33 per cent goes towards pension contribution but this amount is capped at ₹1,250 a month. The remaining 3.67 per cent goes to the provident fund corpus.

While the EPFO gets an EPS contribution of around ₹36,000 crore per annum from over 60 million subscribers, it has over 2.3 million pensioners, who receive a pension of ₹1,000 every month. Their contribution to PF is, however, less than a quarter of it.

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