In a move that will benefit about 43 million employees and about 6,50,000 organisations covered under the Employees’ Provident Fund Office (EPFO), the Centre has directed that instead of the usual 12 per cent contribution, the statutory deductions towards employees’ provident fund (EPF) will now be 10 per cent for the employers and employees of the formal sector. For the months of May, June and July, employers and employees will now pay only 10 per cent as statutory PF payments.
As per law, every month, employees and employers have to mandatorily deposit 12 per cent each (24 per cent of the basic salary, plus housing allowance) as EPF deductions. By reducing this monthly contribution, not only will employee costs be reduced for private organisations, but the take-home pay for employees will also go up by two per cent.
This move has been taken considering the fact that businesses require support to boost production over the next quarter. The employees, on the other hand, need more take-home salary. This reduction in statutory deductions will bring much-needed relief to both employers and employees in the next three months. This move will also ensure liquidity of Rs 6,750 crore to employers and employees over the May-July time period.
The benefit is applicable only to workers who are not eligible for 24% EPF support under the PM Garib Kalyan Package.
For the central public-sector enterprises and state PSUs, the employers’ share will remain 12 per cent, but the employees will contribute 10 per cent.
In case of organisations with less than 100 members in the workforce, with 90 per cent of the staff earning less than Rs 15,000 per month, the Government will be paying the EPF contribution of 12 per cent on behalf of the employer and the employee.