EPF contributions for smaller units to continue for 3 more months

Employee can take away more cash while employer will have more liquidity as the government relaxed norms for contribution in the Employee Provident Fund Scheme (EPF). However, Central and State Public Sector Undertakings employer will continue to contribute based on the existing norm.

As a part of ‘Atamnirbhar Bharat’ package, Finance Minister Nirmala Sitharaman announced two measures --support under Pradhan Mantri Garib Kalyan Package (PMGKP) for payment of 12 per cent of employer and 12 per cent of employee contributions will continue for three more months i.e. June, July and August.

The other proposal states that statutory PF contribution of both employer and employee will be reduced to 10 per cent each from existing 12 per cent each for all establishments covered by EPFO for next three months. CPSEs and State PSUs will, however, continue to contribute 12 per cent as employer contribution.

According to the Finance Minister the first proposal will provide liquidity relief of ₹ 2,500 cr to 3.67 lakh establishments and for 72.22 lakh employees. The second proposal will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees, she said while adding that this will provide liquidity of ₹ 6,750 crore to employers and employees over 3 months.

Simply put, the government will continue to provide 24 per cent of amount comprising basic plus dearness allowance for employees and employers for a unit employing up to 100 persons and 90 per cent of those employees earning less than ₹ 15,000 a month. Earlier, this proposal was for the month of March, April and May.

Lohit Bhatia, President of Indian Staffing Federation (ISF) said that the Federation has been talking to the government regarding various non-cash/non-subsidy based announcements, among them reduction of employer and employee contribution was suggested as well for this financial year, thus reducing employment cost as well as increasing net take home salary for employees.

“While the government did announce the same its time bound for only three months , we would recommend this to be extended up to March 31, 2021 , as this is liquidity enhancing measure and has no bearing on Government finances directly,” he said.