The recent notification from the central government regarding the reduction of PF contributions has had significant impact to employers and employees. The initiative, which is part of the recently announced Aatma Nirbhar Bharat Abhiyan intends to provide relief to over 4 crore employees.
What the amendment offers
Vide notification No. 1513 released on 18th May 2020, the Central government revised the PF rates from 12 percent to 10 percent. This computation is calculated on the basic wages and dearness allowance. The amendment has been effected keeping in mind the current situation and the lack of liquidity for employees and employers. It is applicable only for the months of May, June and July 2020.
How this finds application
While the amount has been reduced from 12 to 10 percent, there is a lot of flexibility that it offers. The minimum amount required to be remitted by both employer and employee is 10%. However, they may decide to contribute up to as much as 12% towards the PF fund. This allows employees a greater take-home in terms of salary, and a relief of 2% per employee for employers.
Who this applies to
The amendment covers all establishments under the EPF & MP Act. It is also extended to all exempted establishments. Those who are NOT covered under this are:
- Classes which received an extension on 10 percent contribution through the 1997 amendment including:
1. Establishments with under 20 employees
2. Sick industrial units
3. Establishments whose losses at the end of the financial year equals or exceeds its total net worth
4. Establishments in jute, beedi, brick, coir and guar gum industries
- Central and state public sector enterprises
- Establishments obtaining relief from the Pradhan Mantri Garib Kalyan Yojana
Other significant aspects
There are several other important aspects involved. Here are some pointers that may guide you better:
· Administrative charges for EPF and EDLI contributions remain the same, and applicable
· The remittances must be made through the ECR as usual
· Pension contributions and benefits will continue to remain the same
· Regardless of date of payment, the reduced rates of contributions for the said months will remain effective
· Establishments under PMRPY can also avail reduced rates for contribution
The official gazetted notification may be viewed at https://comply4hr.com/noti/2016/EPFS2020May18.pdf