Why in news?
The reduction in statutory rate of contributions from 12% to 10% for wage months May, 2020, June, 2020 and July, 2020 for all class of establishments covered under the EPF & MP Act, 1952 was announced on 13th May 2020.
The above reduction of rate of contribution is not applicable to 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 for PMGKY beneficiaries.
How will this reduction help?
As a result of reduction in statutory rate of contributions from 12% to 10%, 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.
What is Employee Provident Fund (EPF)?
- If you are a salaried employee in India, you would know that every month a certain amount of money is deducted from your salary as PF (provident fund).
- Employee Provident Fund (EPF) is a retirement savings scheme that the government of India has mandated for all salaried employees.
- EPF is the main scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
- The funds deducted from your salary as PF goes to your PF account, which is maintained by the Employee Provident Fund Organization (EPFO).
- All organizations in India that have more than 20 employees, as per law, is mandated to register with EPFO.
- In simple words, it is a savings platform provided by the government to help the employees build a corpus for post-retirement life.
Employees Provident Fund Organisation (EPFO)
- EPFO is a Statutory Body, formed by the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
- EPFO is under Union Ministry of Labour & Employment.
- The EPFO has the dual role of being the enforcement agency to oversee the implementation of the EPF & MP Act and as a service provider for the covered beneficiaries throughout the country.
- EPFO assists the Central Board in administering a compulsory contributory Provident Fund Scheme, a Pension Scheme and an Insurance Scheme for the workforce engaged in the organized sector in India.
- It is also the nodal agency for implementing Bilateral Social Security Agreements with other countries on a reciprocal basis.
- The schemes cover Indian workers as well as International workers (for countries with which bilateral agreements have been signed.
- The EPFO’s apex decision making body is the Central Boad of Trustees (CBT).