Govt order issued for reduced EPF contribution for 3 months

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Published: May 20, 2020 12:30:31 AM

Government-owned entities and their employees, both at the Centre and the states will continue to contribute 12% each towards EPF.

It estimated that around 6.5 lakh establishments and their 4.3 crore employees, now covered under EPFO, will benefit from the facility.It estimated that around 6.5 lakh establishments and their 4.3 crore employees, now covered under EPFO, will benefit from the facility.

The government has issued a notification to put into effect the decision to reduce monthly statutory contribution for both the employees and their employers towards employees’ provident fund (EPF) to 10% each from 12% each, for three months till July. This will be applicable to all establishments except for those eligible for relief under Pradhan Mantri Garib Kalyan Yojana (PMGKY) and state-owned enterprises and organisations.

Under PMGKY, government is bearing the entire 24% contribution of both the employers and the employees towards EPF for six wage months till August for establishments having less than 100 employees and 90% of them earning less than Rs 15,000 a month. Government-owned entities and their employees, both at the Centre and the states will continue to contribute 12% each towards EPF.

Former Central Provident Fund commissioner K K Jalan, in an interview with FE, had earlier said, that the reduction in the rate of contribution would increase the carry-home salary by 4% for employees who are employed to an organisation in the cost-to-company (CTC) model, though their employers are not supposed to reap much benefit except that they will pay less on administrative charges. In case of pay-scale employees, the employer may also gain by 2% of an employee’s wage.

The government had, on May 13, announced the proposal to prune the rate of contribution with the intention of providing liquidity in the hands of both the employers and the employees.

As per government’s estimate, the move would provide Rs 6,750 crore liquidity relief to both the employers and the employees over three months. It estimated that around 6.5 lakh establishments and their 4.3 crore employees, now covered under EPFO, will benefit from the facility.

The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 makes it mandatory for factories and other establishments having 20 or more employees earning less than Rs 15,000 monthly basic wage and dearness allowance to join the EPF scheme.

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