In view of the growing impact of Novel Coronavirus on the economy, an important measure is taken by the Government to minimise financial burden on the employers. The Ministry of Labour and Employment vide notification No. S.O. 1513(E) dated 18.05.2020 inserted a clause enabling reduction in statutory rate of EPF contribution from 12% to 10% for the months of May, June and July, 2020. It is applicable to all class of establishments covered under the EPF & MP Act, 1952, except the establishments like Central and State Public Sector enterprises or any other establishment owned or controlled by or under control of the Central Govt. or State Govt. The reduced rate is also not applicable to establishments eligible for PMGKY.
It intended to benefit both employees and employers of lakhs of establishments to tide over the immediate liquidity crisis to some extent during pandemic situation. The employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees. The measure is also expected to benefit employees who dray salary on a Cost-to-Company (CTC) model.
The reduced rate of contribution is the minimum rate of contribution during period of the package. The employer, employee or both can contribute at higher rate also.