As part of the Atmanirbhar Bharat stimulus package, the government announced last month a cut in the Jobs Provident Fund ( EPF) from 12 per cent to 10 per cent for both employers and workers. The move was intended to provide relief to employers and employees to increase the latter’s take-home salary. Here’s a list of Frequently asked questions of the recent EPFO reduction:
What is the Government’s reported revised contribution rate for EPF?
The Atmanirbhar package, for all groups of establishments covered by the EPF & MP Act of 1952, reduced the statutory rate of EPF payment of both employer and employee to 10 per cent of basic wages and dearness allowances from the current rate of 12 per cent.
What is the goal of reducing the contribution rate?
The aim of rising the rate of EPF contributions from 12% to 10% is to support all 4.3 crore workers, leaders and employers of 6.5 lakhs establishments to some degree during the pandemic over the immediate liquidity crisis.
What is the time during which the reduced contribution rate will apply?
Regarding wage months, the mandatory contribution limit will be 10 per cent-May and July this year.
Who applies for the reduced contribution rate?
It refers to all groups of establishments covered by the 1952 EPF & MP Act. Also, it except for establishments such as central and state-owned enterprises. It is in the public sector or any other establishment owned. Or operated by and under central or state government control. The reduced rate also does not apply to establishments eligible for PMGKY benefits. It is since the Central Govt contributes all of the employees’ EPF contributions (12 per cent of wages). Also, employers’ EPF & EPS contribution (12 per cent of wages), totalling 24 per cent of the monthly wages.
Were excluded institutions liable for reduced donation rates? Hey. The reduced rate also applies to exempt establishments.
How does the reduced EPF contribution rate help both the employees and the employer?
As a result of the decrease in the statutory rate of contributions. It is from 12% to 10%, the employee will have a higher take-home pay leads. It is to a decrease in the deduction from his salary due to EPF contributions. Also, the employer will also have a reduction in his liability by 2% of his employees ‘ salaries. If Rs.10000/- is a monthly EPFO wage, only Rs.1000/- is deducted. It is from employee wages instead of Rs.1200/- and the employer pays Rs.1000/- in lieu of Rs.1200/- to EPF contributions.
I receive a salary under the CTC model, will I still benefit from the reduced rate. It is of contributions from 12 to 10 per cent? In cost to enterprise (CTC) model, if Rs.10,000/- is monthly EPF wages. It is in the CTC Model the employee receives Rs.200/- more directly. It is from the employer as the EPF / EPS contribution. So, it is from the employer is reduced and Rs.200/- less is deducted from his / her wages.
Is the contribution rate of 10 per cent applicable to institutions registered?
It is EPFO during the wage months of May 2020, June 2020 and July 2020? Establishments covered during the May-July 2020 salary months will be eligible. It is for a reduced rate for the remaining eligible period from the date of coverage.
What will be the rate of administrative fees and insurance contributions?
EPFO administrative charges (0.5% of EPF wages subject to minimum prescribed). EDLI contributions (0.5% of wages) both payable by employers do not change.
What effect does the decreased EPF contribution rate have on the pension sum in the longer term?
The EPS contributions are derived from the employer’s share of EPF contributions. It is 8.33 per cent of salaries (subject to a cap of Rs.15000/-). The reduced rate of 10 per cent EPF contributions would not decrease pension contributions or benefits.