Exemption of more than 10 percent contribution to provident fund to employee, not necessary for employers to increase

By Shivani Reddy On May 20, 2020

You can contribute more than 10 percent of your basic salary to the provident fund for the next three months. However, employers are not required to contribute at an equal rate to employees. The ministry said in a statement, “Under the EPF Scheme, 1952, any member has the option to contribute at a rate higher than the statutory rate (10 percent).” But in respect of the employee, the employer can limit his contribution to 10 percent (statutory rate). The statement clearly stated that employers will contribute 10 percent to the Social Security Scheme in the salary of June, July and August, respectively in May, June and July.

Objective to increase cash volume with employees

The ministry on Monday notified the contribution at the 10 per cent lower rate of contribution to the provident fund. With this decision, 43 million employees of the organized sector will be able to take home more salary and some relief will also be provided to the employers facing the cash crisis due to Corona virus epidemic. Last week, Finance Minister Nirmala Sitharaman had announced to reduce the contribution of both employers and employees from 10 percent to 10 percent in provident fund for three months. The aim is to increase the amount of cash held by employers and employees.

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The reduction in the rate of contribution is not applicable to Central and State Government Public Sector Undertakings or any other establishment owned or controlled by the Central Government or the State Government. These establishments will continue to contribute 12 percent of the basic salary and dearness allowance as before. The reduced rate is also not applicable for PMGKY (Pradhan Mantri Garib Kalyan Yojana) beneficiaries, as full employee EPF contribution (12 percent of salary) and employers’ EPF and EPS contribution (12 percent of salary), total 24 percent of monthly salary. The contribution of the State is being borne by the Central Government.