EPFO's unfair pro-rata scheme and pensioners' bane

The Employees Provident Fund Organisation (EPFO) is the largest social security scheme for workers in India, implementing the Employment Security Pension Scheme. It has about five crore subscribers. EPFO was formed for the welfare of workers. Their recent actions prove that EPFO ​​is prioritising how to minimise benefits to workers but not otherwise.

EPFO should have implemented a higher pension in proportion to salary without waiting for any court order. However, they not only implemented it, but for many years steadfastly opposed this legitimate right of workers by filing petitions in the High Courts and the Supreme Court. Even after losing the case in the Supreme Court, they delayed it again by filing a review petition. Finally, they granted a higher pension when all doors of law closed on them. Even then, they resorted to the pro-rata system to grant the pension amount. A pro rata system was implemented to calculate pensions based on service periods before and after September 2014. However, labour organisations and others have pointed out that it is unfair to apply this to those who pay monthly contributions to get a higher pension in proportion to their actual salary.

When a pension is paid under the pro-rata system, the pension received is about 35 per cent less than the expected one. The EPFO ​​escaped the court action by increasing the pension again to three people who filed a petition in the Himachal Pradesh High Court against this system. The fact that the EPFO ​​paid a higher pension than the one determined under the pro-rata system is tantamount to admitting that the system is wrong. But they are not ready to implement this across the country.

With more pensioners finding out the sham, it would be wise for EPFO to get rid of the system and provide a reasonably higher pension. The Ministry of Labour has been hitherto complicit in the scheme, blindly accepting the suggestions put forward by EPFO. It takes only one circular to get rid of this unfair pro-rata system. If that does not happen, the higher court will eventually rule in favour of the pensioners.