PF Contribution rate 2020: There is good news for salaried individuals. The take-home pay of employees in these times, when many of them are facing a cash crunch, will not be hit by this recent decision of the government. The Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval for extending the contribution — both 12 per cent employees’ share and 12 per cent employers’ share — under the Employees Provident Fund, totalling 24 per cent for another 3 months from June to August 2020.
However, the relief is not applicable to all employees and all organisations. This PF benefit will be applicable to all those establishments which have up to 100 employees and out of those, 90 per cent are earning less than Rs 15,000 a month. Only employees in such establishments will be eligible for this benefit.
The beneficiaries entitled for 12% employers’ contribution for the months of June to August, 2020 under Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) will be excluded to prevent overlapping benefit.
Earlier in March, it was announced that in the employee provident fund (EPF) account, the employee’s contribution of 12 per cent plus 12 per cent of the employer’s contribution will be paid by the government for the next 3 months. But, after today’s announcement, this approval is in addition to the existing scheme for the wage months of March to May, 2020 approved on 15.04.2020.
Effectively, from March till August, i.e for 6 months, the employee and the employer need not contribute towards EPF and instead, the government puts the contribution into the employee’s PF account.
Based on the basic salary of the employee, 12 per cent is equally contributed by the employee and the employer. The interest rate is paid on such monthly running balance that keeps accumulating in the employee’s PF account. As pension contribution, 8.33 per cent of the employer’s contribution goes into the employee’s pension scheme (EPS) every month.
The relief is a part of the package announced by the Government under Pradhan Mantri Garib Kalyan Yojana (PMGKY)/ Aatmanirbhar Bharat in the light of COVID-19, a Pandemic.
About 72.22 lakh workers working in 3.67 lakh establishments will be benefited and would likely to continue on their payrolls despite disruptions.