Since the time lockdown is imposed due to COVID-19 breakdown in India, the government has been working out every possible way to put more cash in the hands of individuals and businesses. The latest in the line is the announcement of the Ministry of Labour & Employment regarding the updates in norms confining Employees’ Provident Fund (EPF) contributions.
In an announcement last week, Finance Minister Nirmala Sitharaman has declared that the employees’ and employers’ statutory provident fund contribution will be reduced from 12% to 10% for the next three months, i.e. May, June, and July 2020. This move excites the salaried class as more money will be available at hand as well as give relief to the companies and establishments in paying the EPF dues. Liquidity equivalent to Rs.6,750 crore is expected to benefit both employees and employers over the period.
Since the reduction in EPF contributions has been ruled out, the Ministry of Labour has proclaimed to amend the notification published by the ministry in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) vide number S.O. 320(E), dated 9 April 1997.
On 18 May 2020, a list of consequences of the new rules has been decoded it for you:
- The reduction in EPF contributions can benefit 4.3 crore employees and 6.5 lakh employers who are facing hardship during the lockdown.
- The new norm applies to the next three months—May, June, and July 2020.
- The norm applies to all establishments covered under EPFO, including the exempted PF trusts.
- As an exception, central public sector enterprises and state PSUs will continue to contribute 12% for employers’ contribution. However, the employees’ contribution remains at 10%.
- The reduced contribution does not apply to workers who qualify for 24% EPF support under Pradhan Mantri Garib Kalyan Package. This is because the government has promised to cover the employee and employer contributions for these workers with a monthly salary of up to Rs.15,000. The same has been extended for the period—June, July, and August.
On the parallel side, there have been a lot of questions and queries in the minds of employees regarding the suspended employers’ contribution. Breaking new norm down from a different perspective, the 2% of employees’ contribution will land in your take-home salary. On the other hand, the 2% of employers’ contribution may not reach the employees though it is part of the CTC breakup. In this case, this 2% has to be reduced from your CTC for three months. It is also argued that the benefit must be passed on to the employee in the way of the cash allowance.
Apart from the EPF contribution reduction, the government has announced several other measures to ease the lives of different classes of the society, such as loan moratoriums, EPF advance, and relief packages in terms of cash and food kits have been announced and distributed to individuals. Similarly, businesses have also welcomed policy relaxations and due date extensions for EPF deposits and electricity bill payment.
For any clarifications/feedback on the topic, please contact the writer at email@example.com
I’m a financial and technology writer. Apart from writing, I like sketching optical illusion patterns. I love trying different cuisines. Music and nature are my all-time interests.