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 the spread of COVID-19 and other disruptions due to pandemic.
In Cost to Company (“CTC”) model, the benefit of a 2% reduction of the employer’s contribution under the Employees Provident Fund and Miscellaneous Provision Act will be passed on to the employee, going by the press release issued by the Government of India on May 19, 2020.
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 Finance Minister Nirmala Sitharaman as part of Atma-Nirbhar Bharat package has been notified vide SO 1513 (E) dated May 18, 2020 published in the Gazette of India . The notification is available under the TAB- COVID-19 on the home page of EPFO website.
The above reduction of the rate of contribution is not applicable to the following establishments:
• The 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.
• Beneficiaries of Pradhan Mantri Garib Kalyan Yojana (“PMGKY”), 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
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.
As a result of the reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take-home pay due to less 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 the employer pays Rs.1000/- instead of Rs.1200/- towards EPF contributions.
In Cost to Company (CTC) model, if Rs.10000/- is monthly EPF wages, in CTC Model the employee gets Rs.200/- more directly from the employer as employer’s EPF/EPS contribution is reduced and Rs.200/- less is deducted from his/her wages.
Under the EPF Scheme, 1952, any member has the option to contribute at a rate higher than the statutory rate (10%) and employer can restrict his contributions 10% (statutory rate) in respect of such an employee. Taking into consideration the above model, employees will get more to take home, which would result in aid to deal with the present situation. Most of the affected class will be able to overcome this smoothly and life for them will become easier for them to cope with the current circumstances.