ESIS and EPF "EMPOWER IAS"

In news:

• The article highlights the issues in the Employee State Insurance Scheme and Employee Provident Fund and suggests possible solution to their problems.

 

The idea of welfare state

• Covid reminds us that a modern state is a welfare state as governments worldwide launched 1,600 plus new social protection programmes in 2020.
• Sustainable social security lies in raising India’s 138th ranking in country per-capita GDP.
• However, on the social security schemes, there is a case for three reforms to our biggest health insurance and pension schemes:
• These schemes are the Employee State Insurance Scheme (ESIS) and Employee Provident Fund (EPF).

 

​​​​​​​Issues with ESIS

• The Employee State Insurance Scheme (ESIS) is India’s richest and biggest health insurance scheme with 13 crore people covered and Rs 80,000 crore in cash.
• Employers with more than 10 employees make a mandatory 4 per cent payroll deduction for employees earning up to Rs 21,000 per month.
• Despite covering roughly 10 per cent of India’s population, a recent working paper from Dvara Research suggests high dissatisfaction.
• The constraint is hardly resources: ESIC’s unspent reserves are larger than the Central government’s healthcare budgetary allocation.

 

About the Employees’ Provident Fund (EPF) Scheme:

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• The Employee Provident Fund is open for employees of both the Public and Private Sectors. Additionally, any organisation that employs at least 20 individuals is mandatorily liable to extend benefits of EPF to its employees.
• Both employer and employee contribute 12% of an employee's monthly salary (basic wages plus dearness allowance) to the Employees’ Provident Fund (EPF) scheme.
• Of the employer's share of 12%, 8.33% is diverted towards the Employees Pension Scheme (EPS).
• EPF scheme is mandatory for employees who draw a basic wage of Rs. 15,000 per month.
• The EPF interest rate is declared every year by the EPFO.
• EPFO implements the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
• The EPF Act, 1952 provides for the institution of provident funds for employees in factories and other establishments.
• This savings scheme offers tax exemption under Section 80C of the Income Tax Act.

 

Issues with EPF

• EPF is India’s biggest pension scheme with a Rs 12 lakh crore corpus and 6.5 crore contributors.
• Employers with more than 20 employees make mandatory 24 per cent payroll deductions for employees earning up to Rs 15,000 per month.
• It only covers 10 per cent of India’s labour force and 60 per cent of accounts and 50 per cent of registered employers are inactive.
• EPF offers poor service and pathetic technology despite employer-funded administrative costs that make it the world’s most expensive government securities mutual fund.