Since the reduced Employees’ Provident Fund (EPF) contribution amount was for three months (till July), from August onwards the EPF contribution will get deducted at 24 per cent again (i.e., 12 per cent each by the employee and the employer).
How much is contributed to EPF kitty every month
According to the EPF scheme rules, the employee contributes 12 per cent of basic wages plus dearness allowance from his salary every month towards his EPF account, and the employer matches the contribution of 12 per cent. So, in total, 24 per cent of the employee’s pay goes towards his/her EPF account.
Out of the total 24 per cent contribution, the employee’s share (i.e., 12 per cent) and employer’s 3.67 per cent goes to the EPF account, while the remaining 8.33 per cent of the employer’s share is diverted to the Employees’ Pension Scheme (EPS) account.
Why the EPF contribution amount was reduced
The EPF contribution rate was lowered to help both employers and employees tide over financial troubles caused by the pandemic. The reduced contribution amount meant that the take home pays of employees’ increased and employers could also make some savings. The move was aimed to benefit 4.3 crore employees/members and employers of 6.5 lakh establishments, according to the labour ministry.
The labour ministry later clarified that both the employer and employee could continue to contribute at the higher rate of 12 per cent each as well.
According to FAQs released by the labour ministry, if the EPF contribution is part of the employee’s CTC (cost-to-company), then the employer will have to pay 4 per cent as part of their salary. “In Cost to Company (CTC) model, if Rs 10,000 is monthly EPF wages in CTC Model, the employee gets Rs 200 more directly from employer as employer’s EPF/EPS contribution is reduced and Rs 200 less is deducted from his/her wages,” it stated.
What about those who opted for VPF?
Those employees who opted for Voluntary Provident Fund (VPF) to reduce the impact of the lower EPF contributions, need to keep one thing in mind. If you have opted for VPF, then the VPF deduction as well as the restored higher EPF deduction will be made from your salary from next month onwards unless you stop your VPF contributions. If VPF contributions are not stopped the restoration of the EPF deduction to the previous higher level will reduce your take-home pay vis-à-vis salary received by you in the month of April, 2020.