Reduction In Statutory Rate Of EPF Contribution; All FAQs Answered

Bhubaneswar: The Employees’ Provident Fund Organisation has announced 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 by the Central Govt. as part of Atma-Nirbhar Bharat package has already been notified.

The above reduction of rate of contribution, however, 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 government or State governments. These establishments shall continue to contribute 12% of basic wages and dearness allowances.

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.

In Cost to Company (CTC) model, if Rs.10000/- 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.

Under the EPF Scheme, 1952 any member has the option to contribute at a rate higher than statutory rate (10%) and employer can restrict his contributions @ 10% (statutory rate) in respect of such employees.

Frequently Asked Questions

1. What is revised rate of EPF contribution announced by the Central Govt. under Atmanirbhar Bharat package?

-Under this package the statutory rate of EPF contribution of both employer and employee has been reduced to 10 percent of basic wages and dearness allowances from existing rate of 12 percent for all class of establishments covered under the EPF & MP Act, 1952.

2. What is the period for which reduced rate of contribution is applicable?
- The statutory rate of contribution will be 10% for wage months- May, 2020, June, 2020 and July, 2020.

3. Is the 10% rate of contribution applicable to establishments which get
registered with EPFO during wage months May, 2020, June 2020 and July, 2020?

- Yes. Establishments covered during wage months of May-July, 2020 will be eligible for reduced rate for eligible remaining period from date of coverage.

4. What will be rate of contribution for administrative charges and insurance?
- There is no change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages) both payable by employers.

5. Can the employer or employee pay at higher rate or the contribution rate of 10% is mandatory?
- The reduced rate of contribution (10%) is minimum rate of contribution during period of the package. The employer, employee or both can contribute at higher rate also.

6. How the reduced rate of contribution will impact amount of pension in longer run?

- The EPS contributions 8.33% of wages (subject to ceiling of Rs.15000/-) is diverted from employer’s share of EPF contributions. The reduced rate of EPF contributions to 10% will not reduce the pension contributions or benefits.