Employees Provident Fund Organisation reduces employers contributions from 12% to 10%

Employees Provident Fund Organisation reduces employers contributions from 12% to 10%

The sop is given for wage months May, June and July 2020

Staff ReporterUpdated: Thursday, May 21, 2020, 12:51 AM IST
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Employees Provident Fund Organisation | Image source: UPHINDIA/Twitter

By offering the another relief to employers, the Employees Provident Fund Organisation (EPFO) has made a reduction in statutory rate of employers contributions from 12% to 10% for wage months May, June and July, 2020.

The above reduction in rate of contribution is not applicable to establishments like Central and State Public Sector enterprises or any other establishment owned or controlled by or under control of the Central Govt. or State Govt. These establishments shall continue to contribute @ 12% of basic wages and dearness allowances.

The reduced rate is also not applicable for PMGKY beneficiaries, since the entire employees EPF contributions (12% of wages) and employers’ EPF & EPS contribution (12% of wages), totalling 24% of the monthly wages is being contributed by the Central Govt.

Reduction in rate of EPF contributions from 12% to 10% of basic wages and Dearness allowances is intended to benefit both 4.3 Crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent.

As a result of reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees. If Rs.10000/- is monthly EPF wages, only Rs.1000/- instead of Rs.1200/- is deducted from employee’s wages and employer pays Rs.1000/- instead of Rs.1200/- towards EPF contributions.

In Cost to Company (CTC) model, if Rs.10000/- is monthly EPF wages, in CTC Model the employee gets Rs.200/- more directly from employer as employer’s EPF/EPS contribution is reduced and Rs.200/- less is deducted from his/her wages.

Under the EPF Scheme, 1952 any member has the option to contribute at a rate higher than statutory rate (10%) and employer can restrict his contributions @ 10% (statutory rate) in respect of such employee.

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