Speed Post News Network
New Delhi : Various measures have been announced from time to time to provide relief to the employers and employees of the establishments covered under the EPF & MP Act, 1952, distressed by lockdown to prevent spread of COVID-19 and other disruptions due to the pandemic.
The reduction in statutory rate of contributions from 12% to 10% for wage months May, 2020, June, 2020, and July, 2020, for all class of establishments covered under the EPF & MP Act, 1952, announced on May 13, 2020, by the Central Govt. as part of Atma-Nirbhar Bharat package, was notified on May 18, 2020, published in the Gazette of India.
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 to PMGKY beneficiaries 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, according to a PIB release.
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 1,000 instead of Rs 1,200 is deducted from employee’s wages and employer pays Rs.1,000 instead of Rs 1,200 towards EPF contributions.
In Cost to Company (CTC) model, if Rs 10,000 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.