To tide over the current liquidity crisis due to the Coronavirus pandemic, the Central Government of India under Atmanirbhar Bharat Package has revised the rate of EPF contribution for both employers and employees for the wage months May 2020, June 2020 and July 2020.
Finance Minister, Smt.Nirmala Sitharaman, announced the reduction in EPF contribution to 10 per cent to provide some relief to employers and employees in the present COVID-19 pandemic. The reduction in statutory rate of contribution from 12% to 10% of basic wages and dearness allowances aims to benefit both 4.3 crore employees and employers of 6.5 lakh establishments covered under the EPF & MP Act, 1952, all over the country.
This has been notified vide SO 1513(E) dated 18.0.2020 published in Gazette of India. The notification is available under the TAB-COVID-19 on the homepage of EPFO website.
Ans: Under this package the statutory rate of EPF contribution of both employer and employee has been reduced to 10 percent of basic wages and dearness allowances from existing rate of 12 percent for all class of establishments covered under the EPF & MP Act, 1952.
Ans: 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 during Pandemic situation.
Ans: The reduction in statutory rate of contributions from 12% to 10% for wage months May, 2020, June, 2020 and July, 2020 has been notified vide SO 1513 (E) dated 18.05.2020 published in the Gazette of India. The notification is available under the TAB- COVID-19 on the home page of EPFO website.
Ans: The statutory rate of contribution will be 10% for wage months- May, 2020, June, 2020 and July, 2020.
Ans. It is applicable to all class of establishments covered under the EPF & MP Act, 1952, except the 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.The reduced rate is also not applicable to establishments eligible for PMGKY benefits, since the entire employees EPF contributions (12% of wages) and employers’ EPF & EPS contribution (12% of wages); totaling 24% of the monthly wages is being contributed by the Central Govt.
Ans: Yes. The reduced rate is applicable to exempted establishments also.
Ans: 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.
Ans: 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.
Ans: Yes. Establishments covered during wage months of May-July, 2020 will be eligible for reduced rate for eligible remaining period from date of coverage.
Ans: There is no change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages) both payable by employers.
Ans: Establishment has to remit dues at reduced rate through the Electronic-Challan cum Return (ECR) itself.
Ans: The reduced rate of contribution (10%) is minimum rate of contribution during period of the package. The employer, employee or both can contribute at higher rate also.
Ans: The EPS contributions 8.33% of wages (subject to ceiling of Rs.15000/-) is diverted from employer’s share of EPF contributions. The reduced rate of EPF contributions to 10% will not reduce the pension contributions or benefits.
Ans: Yes, the rate of contributions is 10% for the three wage months- May, 2020, June, 2020 and July, 2020 irrespective of date of payment.
Ans: Yes. The establishment availing PMRPY benefits can remit contribution at reduced rate.
Ans: The establishments, which were already entitled to reduced rate of contribution (10%) through the SO 320 (E) dated 09.04.1997 are not eligible for any further reduction in rate of contribution.