Finance capital is spreading its tentacles over hard earned savings and pension of workers
Important amendments to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 have been proposed by the Labour Ministry of the NDA government. The Ministry has sought the views of those whom it considers "stakeholders" in the Act — those associations of the employers and those central trade unions of workers which the government offers "recognition" to. The working class of our country, which constitutes nearly half the population, is not considered a stake holder. The amendments will become law if and when they are placed before parliament and approved. While it was the UPA government which first mooted these amendments over 2 years ago, it appears that the present NDA government is keen to push through these amendments as law either in the budget session or in the monsoon session of parliament.
What is Employees’ Provident Fund (EPF)?
The EPF Act was enacted in 1952 in conditions when the working class and communist movement of our country was waging powerful struggles for the rights of workers in all the major cities of our country and in the different branches of industry. Internationally, the prestige of socialism and the Soviet Union was extremely great. According to the EPF Act, workers in the organised sector of the economy would put aside a portion of their salaries as savings for the future, from which they could draw in case of emergencies such as marriages or ill health, or when they retired from work. The employer was bound by the act to put aside an equal contribution towards the workers social security net. The Provident Fund was to be managed by the government, with the funds invested safely so as to ensure that the workers and their families’ future were not jeopardized.
The EPF act ensures that the fund of the EPF is divided into three portions. One portion goes into the Provident Fund, a second portion towards the Employees’ Pension scheme, and a third portion towards Employees Deposit Linked Insurance Scheme, which is a life insurance scheme. The contribution of the workman goes towards the Provident Fund only, while the monies collected under the Act from the employer is divided and invested into Provident Fund, Pension as well as the Life Insurance Schemes according to the central government’s decision, announced and implemented through various notifications. The Central government also makes a contribution towards the pension scheme. The management of the Funds under the EPFO is entrusted to the Central Board of an Employees Provident Fund Organization which is constituted by the government according to rules framed in the act.
Even though a very small proportion of India's workers are enrolled in the EPF scheme, the monies under the control of the EPFO are enormous. The following figures indicate the reach of EPFO. Just in the year 2012-2013, 32.2 lakh new members were enrolled taking total EPFO members to 8.88 million as of 31 March 2013. 3 lakh new pensioners were added during that year taking the total pensioners covered to 44 lakh. (It must be noted that the Pension scheme called the New Pension Scheme under the EPFO dates to 1995) A cumulative total of 7.43 lakh establishments were covered under the EPF as of 31 March 2013.
In 2012-2013, Rs 77,000.94 crores was collected as contributions under the EPFO. Of this, Rs 60,257 crores was collected towards the Provident Fund, Rs 16,124 crores towards the Pension Fund, and Rs 620 crores towards the Life Insurance Fund. During the year, Rs 35,119 crores was paid out as benefits to claimants. 1.11 million Claims were settled during the year. The total investment corpus of the EPFO at the end of 2013 was over 6.32 lakh crore rupees!
Social Security and the working class
The working class has been waging a consistent and long standing struggle for universal social security. All those who have no other source of livelihood, other than selling their labour power to the owners of capital in return for wages, must be ensured adequate social security in the form of old age pension, disability pension, as well as ensuring that their dependents can survive in case of their death. They also need to be able to take care of unforeseen emergencies.
The coverage of social security for working people in India has remained very limited. Working people have been expected to fend for themselves, with the family the ultimate security. Only government employees, and regular workers in large scale industry, particularly in the public sector, have had the benefit of some form of social security.
With the development of capitalism in our country, with the breaking up of large joint families, and with over half the population of town and country becoming wage workers, a situation is developing wherein there is a danger of hurling large sections of our working population into destitution, if the state does not ensure adequate social security.
However, the Indian state, which is a state of the bourgeoisie, has only paid lip service to this issue of vital importance for our society. It is only concerned with the interests of capitalist class, of the moneybags, of the vultures of finance capital. It looks at the question of social security of workers from the narrow point of how to enrich the finance capitalists by speculating on the life savings of workers. This is seen by the proposed changes to the EPF & MP Act, 1952, as well as the earlier notifications issued by the Central Government related to the EPFO scheme.
The central question is this. Does the government accept responsibility for ensuring that those who have toiled their whole lives and created surplus value through their labour, are assured a secure and dignified life for themselves and their families in old age, or in the case of accidents. Or does it declare that it does not have the monies to do so, and leaves it to working people and their families to fend for themselves?
A government that follows a human centered approach to this question will not look at the question of providing social security for workers as a problem, as a cost. It will invest in the workers and their family, and ensure that a portion of the social surplus is allocated towards fulfilling their needs in the case of retirement or disabilities.
However a government that follows a capital centered approach to this question will put only the interests of the bourgeoisie and finance capital in first place. It will not approach the question of social security of workers and their families from the enlightened perspective that it is the duty of the state to ensure prosperity and security to all.
The government’s approach
The UPA government had rejected the demand of workers and their unions that social security, including pension and health care must cover all wage workers, and pension must be inflation indexed, related to last drawn wages and be adequate to ensure a comfortable life in old age.
The UPA government argued that the funds raised from the workers and employers as contribution towards EPF were too small to ensure anything more than a minimum pension of Rs 1000. The NDA government has followed suit. It has announced in October 2014 that the minimum pension will be Rs 1000. Earlier, the minimum pension was Rs 250. In other words, the NDA government has implemented what the UPA government offered. That this government expects workers to live on Rs 1000 a month, after retirement, or on Rs 30 a day, reveals the thoroughly anti people character of the ruling class. In other words, after toiling one’s whole life, a worker today after retirement is supposed to survive on one tenths of what an unskilled, daily wage worker earns today!
In October 2014, the government, through an executive order, increased the limit for compulsory EPF deduction from Rs 6,500 salary to Rs 15,000 salary. In other words, all workers who earn between these two figures and are working in establishments having more than 20 workers are now eligible to enroll as members in the EPF Scheme and furthermore, must enroll themselves. It is estimated that this order of the government has increased the potential number of EPF members by about 50 lakhs. Given that the contributions to the EPF accounts on behalf of these members would be much more than that of those earning below Rs 6,500 per month, the coffers of the EPF Organisation are going to increase enormously.
Already, in the past few years, the government has clearly indicated that the pension funds, provident fund, etc. of workers must be put at the disposal of private fund managers who would invest these funds to maximize their profits. The justification for handing over these funds to private players is that workers would get higher provident fund or pension. What is covered up is that finance capital has a history of speculating with peoples hard earned savings and losing it, as has happened with the pension funds of workers in US and other advanced capitalist countries during the recent crisis. This is precisely one of the reasons that the working class has been opposing the new pension scheme, which has been forcibly thrust down the throat of workers in the past few years.
Key amendments proposed
The key amendments that are being proposed are the following:
The reach of the EPF will be expanded to include all workers working in establishments having over 10 workmen. (The Act presently is applicable to the establishments employing 20 or more workmen.) If this were to be actually implemented, then the number of workers covered by the EPF Scheme would increase substantially. There is a grave doubt over whether this will be implemented. The reason is that the Modi government has gone out of its way to declare that obstacles to capitalists running businesses should be removed. If the government has its way, then factories and workplaces employing even 50 workmen will not have to register under the factories act! The question arises, how does the government propose to get employers of such establishments employing more than 10 workers to become members of the EPF Scheme?
The EPF Act is proposed to be amended to ensure that the government could declare workers in a certain category of industries exempt from contribution to the EPF. In other words, only the employers would have to contribute in such cases, and the workers would not have to contribute an equal share. This amendment is being held as a carrot to create illusions amongst workers working in the most exploitative conditions with little or no rights, that they too would get Provident Fund. This too is unlikely to be implemented.
The definition of salary of the workmen has been changed to include all emoluments, including DA, House Rent Allowance, etc. This will result in a substantial increase in PF contributions both from the workmen and the employers.
The Standard EPF deduction has been increased from 10% to 12 % for both employers and employees. This too will result in increase in the EPF fund. At the same time, in special cases, the government can reduce the contribution of both employers and employees to 10%. While the government retains the right to exclude a defined class of establishments from the purview of the EPF Act by notification, the general indication is that the government is that the ruling class is intent on expanding the coverage of EPF.
The powers of the EPF Organisation’s top body have been increased to vest it in the power to decide how and where to invest the funds of the organization.
Thus taken together, the amendments to the EPF Act will bring even more of the hard earned wages of workmen under the control of finance capital.