New EPFO Rules: ALERT! EPF contribution cut to 10% for May, June, July. Key points to know
The Ministry of Labour & Employment has implemented new rules that allow for reduced employees' provident fund (EPF) contributions for three months till July. Last week, Finance Minister Nirmala Sitharaman had announced a reduction of statutory provident fund contribution by both employers and employees to 10% of basic wages from the existing 12% for the next three months (May, June and July).
This decision would increase 4.3 crore organised sector employees'' take home pay and reduce the liability of 6.5 lakh employees reeling under liquidity crunch under lockdown to contain COVID-19. It will inject liquidity of ₹6,750 crore to employers and employees over three months.
The labour ministry in a notification issued on Monday stated that the reduction in EPF contributions shall be applicable "in respect of wages payable by it for the months of May, June and July, 2020".
"Whereas due to Covid-19 pandemic, lockdown is in force across the country and the Central Government after making necessary inquiry is satisfied that to provide liquidity in the hands of employers and employees, there arises a need to amend the notification of the Government of India in the Ministry of Labour published in the Gazette of India, Extraordinary, Part II, section 3, sub-section(ii) vide number S.O. 320(E), dated 9th April, 1997," the Ministry of Labour said in a May 18 notification.
Here are 6 key points to know about new EPF rules:
- The decision of reduction of the EPF contributions is expected to benefit 4.3 crore employees and 6.5 lakh employers reeling under liquidity crunch due to COVID-19 lockdown.
- Reduction of the EPF contributions will be applicable for the three months - May, June and July.
- The cut in EPF contribution will be applicable to all establishments covered under the Employees' Provident Fund Organisation or EPFO, including the exempted PF trusts.
- The Central Public Sector Enterprises (CPSEs) and public sector undertakings (PSUs) will however continue to contribute 12 per cent as employer contribution to the Employees'' Provident Fund Organisation (EPFO).
- This reduction of the EPF contributions will be applicable for workers who are not eligible for 24 per cent EPF support under PM Garib Kalyan Package and its extension.
- The government is contributing employers and employees contributions of 24 per cent of basic wages for those establishments that have up to 100 employee and 90 per cent of whom earn under Rs 15,000 monthly wage since March.
