The contribution of the EPF will be reduced for companies, workers for 3 months to 10% from 12%, it remains at 12% for state companies

For state-owned companies, the employer contribution will remain 12%.

To provide more net salary to employees and give relief to employers, the contribution of the EPF (Employee Provident Fund) is being reduced for companies and workers for three months, the government said today. This will amount to a liquidity support of Rs. Rs 6.75 billion, the government said, in the first of many stretches of the economic package announced yesterday by Prime Minister Narendra Modi to address the economic impact of the coronavirus and the weeks of closure.

It was necessary to provide more wages to take employees home and also to give employers relief in paying the pension fund contributions, said Finance Minister Nirmala Sitharaman.

“Therefore, the legal PF contribution from both employer and employee will decrease to 10% each from the existing 12% for all establishments covered by EPFO ​​over the next three months,” said the minister.

However, state-owned companies will continue to pay 12 percent as an employer contribution.

This, according to the government, will provide relief to around 6.5 lakh of establishments covered by EPFO ​​and around 4.3 million employees.

The government also said it would pay the EPF contribution to company employees to help them recover from the virus crisis.

To ease financial stress as companies return to work, the government will continue to support EPFs for companies and workers for an additional three months, providing liquidity relief of Rs 2.5 billion. This will benefit 72.22 lakh employees.

“The government will pay the two-quarter EPF for companies with up to 100 employees and where 90 percent of the staff receives up to Rs 15,000 per month,” said Nirmala Sitharaman.

This would help companies facing financial stress as they return to work, the government said. It would also increase the disposable income of employees.

The government had made payments of 12 percent from the employer and 12 percent of employee contributions to EPF accounts in March, April, and May.

This will extend for another three months to wages in June, July and August.

The purpose of a provident fund is to help employees save a percentage of their monthly salary. Under an employee provident fund scheme, an employee pays a certain contribution to the scheme and the employer pays an equal contribution. The employee receives a lump sum upon retirement.