for building a democratic labour movement in India
To be sure, employers will continue to deposit EPF contribution for each eligible employee on the rolls. It is only going to affect employee’s savings by increasing their take home now.
New Delhi: The Central government has finally taken away the mandatory status of the Employees’ Provident Fund Organization (EPFO), without amending the EPF Act.
Perhaps nobody noticed it, but the Union cabinet on Wednesday changed EPFO’s status and communicated it, not through the labour ministry, as one would expect, but through a cabinet release on textiles sector.
“The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to the reforms to boost employment generation and exports in the Made-ups Sector (a sub sector of textiles and apparel)… Simplification of labour laws: Making employees’ contribution to EPF optional for employees earning less than Rs15,000 per month,” the cabinet statement said.
This means, employees earning less than Rs15,000 per month in the ‘Made-ups’ sector are no more required to pay the mandatory EPF (Employees’ Provident Fund) contributions from their salary.
To be sure, employers will continue to have to do so for each eligible employee on the rolls.
Why is this important?
Thus far, EPF has been mandatory for organized sector employees earning up to Rs15,000. Making it optional strikes at the very root of EPFO, which was set up as a retirement fund body more than 60 years back primarily to manage the retirement savings of organized sector workers who earn low wages.
To be sure, the decision comes some 21 months after finance minister Arun Jaitley indicated a possible change in his 2015-16 budget speech. “…for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution,” Jaitley had said in his budget speech in February 2015. However, he had not specified what is the threshold or which are the sectors to benefit from this.
The labour ministry has been looking to amend the EPF Act and insert a provision to allow less than the mandatory 12% PF deductions each by employers and employees mainly in small- and medium-scale industries. But for the last two and half years, it has refrained from taking this to Parliament fearing political opposition.
The fresh cabinet decision changed the EPFO’s mandatory status through executive order and opens up the possibility of further changes, including reduced contributions for other sectors , a labour ministry official said, on the condition of anonymity.
The government believes that making EPF optional for employees with low salaries will enhance their take-home pay. That could encourage more employees to seek jobs in the formal sector. It also allows employees the right to decide what to do with their retirement savings (some say this is a step in the right direction, away from a nanny-state that believes people have to be protected from themselves).
But in practice in sectors including textiles and apparel, there is huge informality of the workforce largely on account of supply-demand mismatches. For example, in Tirupur, the heart of India’s apparel export industry, around 75% of the over 500,000 workers base are paid weekly in cash, Mint reported on 25 November. Weekly wage structure negates social security benefits to employees and underlines the informality in some of the formal sectors.
Every month, employees pay 12% of their basic salary to the EPFO as retirement savings and a matching contribution is made by the employer. But in many cases, both components are part of the workers salaries’ and they lose out 24% of the monthly wage for PF deductions. Making the employee contribution optional means 12% more take-home pay.
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Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”
What does labor want? We want more schoolhouses and less jails; more books and less arsenals; more learning and less vice; more leisure and less greed; more justice and less revenge; in fact, more of the opportunities to cultivate our better natures,”
Social progress depends not upon the ennoblement of the few but on the enrichment of democracy; universal brotherhood can be achieved only when there is an equality of opportunity - of opportunity in the social, political and individual life.
In the new global politico-economic regime with new international division of labour, informalization of labour, free mobility of capital, alarming expansion of reserve army of labour and creation of global reserve army of labour for capital, and a system of regulating at international level and deregulating at national level, the pre-globalization strategies of organizing and collective bargaining have largely become ineffective and irrelevant. Therefore the labour movements and the social, political movements in general need to develop and implement new strategies of organizing and collective bargaining effective in new global politico-economic regime.
Divide, isolate and rule is the most important aspect of the capitalism to control the labour by not letting the working class emerge as a unified force. Dividing the working class in different sectional interests, and intensifying social conflicts (caste, gender, religion, regionality and nationality conflicts etc) are important strategies of capitalism. On the other hand, by its various institutions and propaganda machinery, the capitalism blurs the link between various sectional problems and their linkage with the capitalist system and therefore the movements appear detached from each other and focused on their sectional issues rather than challenging the capitalist system that produces and reproduces these problems.
The fate of social, political movements in India depends on their attitude towards learning and building unity in diversity at various levels to defeat the capital’s attempts to divide, isolate and rule. The revival of the working class movement also depends on this factor.