The government will continue to pay the Employees’ Provident Fund (EPF) contributions of both employers and employees (12% employees share and 12% employers share) for another three months, i.e., until August 2020. This decision was taken as part of a cabinet meeting held on July 8, 2020.
“Cabinet approves extension of EPF contribution 24% for another 3 months from June to August 2020 under PMGKY/Aatmanirbhar Bharat; with a total estimated expenditure of Rs.4,860 crore, the move will benefit over 72 lakh employees,” stated the PIB’s official Twitter handle.
The decision will give further relief to small businesses that are facing a cash crunch due to ongoing novel coronavirus pandemic.
The decision to pay both employer and employee contribution was announced back in March under the Pradhan Mantri Garib Kalyan Yojana. As announced, the payment will be made for the organizations having up to 100 employees and up to 90 percent of the employees are drawing wages up to Rs 15,000 per month. The decision was done to ensure that nobody suffers due to loss of continuity in the EPFO contribution.
As per the current laws, an employee having a monthly salary of up to Rs 15,000 is mandatorily required to join the EPF scheme. The employee every month contributes 12 percent of his basic plus dearness allowance (if any) to the EPF account. The employer is required to make a matching contribution. Out of the total EPF contribution (12% plus 12%), the employee’s share plus the employer’s share of 3.67% goes to the EPF account. The balance of 8.33% of the employer contribution goes to the Employees Pension Scheme (EPS).
Apart from depositing money into the EPF accounts, the government has also amended the rules wherein EPF subscribers can withdraw money from accounts to meet financial emergencies caused due to COVID-19.