NEW DELHI: Your take home salary could go up leaving you more to spend — though it could be at the cost of your savings — as the government is mulling lowering the social security contribution. A labour ministry committee working on the contributory ceiling by the government towards universal social security for all workers is likely to recommend a lower contribution, a government official told ET. The committee is expected to finalise its recommendation by the end of August, the person said. Initial estimate suggests that total contribution towards social security cover could be lower by at least 2 percentage points, with employers also contributing less. The labour ministry will hold consultation with stakeholders once the committee finalises its recommendations, following which they would be incorporated in the social security code, the official said.

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Currently, social security contribution is 24% of an employee’s basic salary. This include 12% employee contribution, which entirely goes to provident fund account. Employer also contributes 12%, which is split among pension account, provident fund account and deposit linked insurance scheme. This contribution could fall to 10% for both, yielding a higher take-home salary for workers. The 10% contribution is already applicable to establishments with less than 20 workers. This could be made uniform for every establishment. “We are enhancing the scale of coverage by five-fold,” the official said. “Hence, we think that going forward the contribution by and for each worker eligible for a social security cover will come down, benefitting both employee and the employer.” The government expects to increase those covered under the social security scheme to 50 crore from the current base of about 10 crore people. In majority of cases, employer’s contribution to PF and insurance is factored in workers’ cost to company pay. In such cases, reduction in employer’s contribution might also become available to the employee under some other head, boosting their take home salary further. The higher salary will be available for spending or can be saved by the worker in other instruments. Employee unions have in general not favoured reduction in the social security contribution rate, reasoning it would reduce social security cover available to workers.