The labour ministry has notified the new rules for employees’ provident fund or EPF contribution.
In an announcement last week, Finance Minister Nirmala Sitharama stated that the statutory provident fund contribution by the employers as well as employees will see a reduction from 12% to 10% for the next three months.
This decision directly impacts the in-hand salary of the employees and also gives relief to companies in payment of provident fund dues.
This move will also introduce liquidity of ₹6,750 crores to employers and employees over the course of next three months.
On May 18, the Ministry of Labour said, "Whereas due to COVID-19 pandemic, lockdown is in force across the country and the Central Government after making the 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,"
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Five things to know about the new EPF rules-
1) The new rules will be applicable for the months of May, June and July
2) All establishments covered by the Employees' Provident Fund Organisation or EPFO, with the inclusion of exempted PF trust, will see this EPF contribution cut.
3) Around 4.3 crore employees and more than 6.5 lakh employers will benefit from this decision, who were suffering high pressures under liquidity crunch in the current pandemic situation.
4) Central public sector enterprises and state PSUs will, however, continue to contribute 12% as employer's contribution towards EPF.
5) However, it will not be applicable for workers eligible for 24% EPF support under PM Garib Kalyan Package.
The government supports the payment of 12% of employer and 12% employee contributions into the EPF accounts under the Pradhan Mantri Garib Kalyan Package or PMGKP. This has also seen an extension for three months – June, July and August.
Under this package, the wage earners earning below Rs 15,000 per month, who are employed in establishments having up to one hundred employees, with 90% or more of such employees earning monthly wages less than Rs 15000, have their EPF covered by the government. the government pays 24% of the monthly wages into EPF accounts.This extension will provide a liquidity relief benefit of Rs 2,500 crore to more than 3.67 lakh establishments and for over 72.22 lakh employees.