Govt Will Pay Provident Fund Of 72 Lakh Employees Till August; Employer Contribution Too
As per the decision taken as part of a cabinet meeting held on July 8, 2020, the government will continue to pay the Employees’ Provident Fund (EPF) contributions of both employers and employees for another three months.
Employees’ Provident Fund Relaxation Extension
On Wednesday, the Union Cabinet approved a slew of schemes to ease the woes of those hit due to the Covid-19 lockdown, from extending the scheme for distribution of free food grains to making EPF support for businesses to workers applicable till August.
The decision to extend EPF contribution comes in lieu of providing further relief to small businesses who are facing a cash crunch.
How Will This Help?
It is expected that the benefits will provide relief to more than 72 lakh employees.
According to the PIB’s official Twitter handle, “Cabinet approves extension of EPF contribution 24% (12% employees share and 12% employers share) for another 3 months from June to August 2020 under PMGKY/Aatmanirbhar Bharat; with total estimated expenditure of Rs.4,860 crore, the move will benefit over 72 lakh employees,”.
The decision is expected to provide further relief to small businesses who are facing a cash crunch due to ongoing novel coronavirus pandemic.
Prior to this back in March, the decision to pay both employer and employee contributions was announced under the Pradhan Mantri Garib Kalyan Yojana.
How Does It Work?
According to this announcement, the payment will be made for the industries having up to 100 employees and out of that, over 90 per cent of the employees are drawing wages up to Rs 15,000 per month.
The main goal behind this decision was to ensure that nobody suffers due to loss of continuity in the EPFO contribution.
As we all know that an employee having monthly salary of up to Rs 15,000 is mandatorily required to join the EPF scheme, as per the current laws.
Till now, the employee used to make a contribution of 12 percent of his basic plus dearness allowance (if any) to the EPF account every month and then the employer has to make an equal contribution.
Here, out of the total amount, the EPF contribution (12% plus 12%) which is the employee’s share plus employer’s share of 3.67% goes to the EPF account.
While the remaining balance, which is 8.33% of the employer contribution goes to the Employees Pension Scheme (EPS).
Apart from this scheme, the government has also amended the rules wherein EPF subscribers can withdraw money from accounts to meet financial emergencies caused due to COVID-19.