EPFO Reduced Contribution to 10% for 3 months

Reference to attached notification mentioned below is S.O.320(E) which is the extension referred to in attached notification by stating that the notification above (320E) shall be extended to the months of May, June & July 2020.

S.O. 320(E), dated April 9, 1997.-In exercise of the powers conferred by the first proviso to Section 6 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) and in supersession of the notifications specified in Schedule I to this notification except as respects things done or omitted to be done before such supersession, the Central Government after making necessary inquiry into the matter hereby specifies with effect from the first day of May, 1997 every establishment and class of establishments other than those specified in Schedule II, to which the said proviso shall apply, the words “eight and one-third per cent at both the places where they occur, the words “ten per cent” shall be substituted.

Mentioning below the excerpt of Section 6 to help answer some questions you may have

6. Contributions and matters which may be provided for in Schemes. – The contribution which shall be paid by the employer to the Fund shall be ten percent. Of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employee’s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section: Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten percent”, at both the places where they occur, the words “12 percent” shall be substituted: Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.

  1. Is this change mandatory – There is no mention of the change being mandatory or optional. The intent is only to ensure adequate liquidity is provided in the hands of people. Hence it is better to be compliant as we do not know the effects of non-compliance
  2. What will be calculation where the contribution limited to 1800/- pm – Clarity on the breakup of the contribution has not been provided. However, in 1997 when S.O.320E was applicable, the 10% was contributed as 8.33% EPS & 1.67% to PF. Since S.O.320E has been extended to May20, June20 & July20, the contribution may be assumed this way
  3. Where member contribution is 12% of PF salary and employer contribution is limited to 1800/- pm. – We should assume that the employee will contribute to 10% only unless there is a desire from the employee to contribute more than 10%. As per the red highlight above, employer is not obligated to payment more than the employee’s contribution. There is no restriction, but only “no obligation”.
  4. Both the contribution deducted @ 12% of PF salary. – The employee will need to concur to the increased deduction (like VPF) and the employer can pay at 12%.

Summarizing the above

  1. Employees contribute 10% only. If the employer intends to contribute more than 10%, employee’s intent to be collected
  2. Employer can contribution to greater than 10% is possible. Law doesn’t mandate equal contribution; it only mentions that there is no obligation.
  3. Break-up of 10% is 8.33% EPS & 1.67% EPF

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