New Delhi: The Employees Provident Fund Organisation (EPFO) is preparing to appeal to the Supreme Court against the Kerala High Court’s decision on the pension given by the organisation. EPFO officials say that the monthly contribution to EPS is low, due to which it will not be able to bear the burden of more pension.
The sources said that, due to the shortage of cash, the EPFO had already postponed the plan to raise the minimum pension from Rs 1,000 to Rs 2,000. The Kerala High Court had ordered the EPFO to give every employee a pension according to their full salary when the employees retire. But the EPFO assesses the contribution of Rs 15,000 with the wage limit.
According to the rules of the EPFO, the monthly pension is paid on the basis of the last salary under the existing rules and it has fixed a monthly salary of Rs 15,000 for pension calculation. The Kerala High Court had directed the EPFO to abolish this limit and pay pension on the basis of the full salary of the employee.
Due to the cash shortage, the EPFO had already postponed the plan to raise the minimum pension from Rs 1,000 to Rs 2,000.
EPFO pension formula
The calculation of pension is done like this: The sum of the total years spent by the employee working for the given employer (n) and 2 multiplied by the final salary (s) divided by 70 = (n+2)s/70.
Say, the final salary of an employee who worked for 30 years is Rs 50,000. According to the Supreme Court order, his pension will be Rs 32 x 50,000 ÷ 70 = Rs 22,857 p 14. Under the old rule, this pension could not have been greater than Rs 32 x 15,000 ÷ 70 = Rs 6,857 p 14.
The older, pre-2014 rule was worse. The maximum basic salary for the calculation of pension was Rs 6,400. That meant, by the calculation above, the retired person would get a pension no more than Rs 2,925 p 71 per month.
In fact, it was even worse. Because, instead of considering the employee’s last salary, the authority would calculate his average salary in the final five years. In the cases of many employees, the final salary would be higher than this average, making him or her lose out on the post-retirement pecuniary benefit.
At present, a grant of 8.33% with a maximum allowance of Rs. 15,000 was approved. However, if an employee wants to take a pension on full salary, his pension will be fixed according to the salary of the last five years.
In the year 2016, the Supreme Court had told the EPFO that the benefit should be given to those who were already contributing to the pension scheme on the basis of their full salaries. This decision benefited many employees.