EPFO is Likely to Reduce Provident Fund Contributions to 10%
Presently Employer and Employee contributes 12% of basic salary towards EPF (Employee provident Fund). This fund is invested in EPF (Employee provident Fund), EPS (Employee Pension Scheme) and EDLI (Employee Deposit Linked Insurance Scheme).
Now the EPFO is planning to reduce the mandatory contribution towards EPF by 2% and make it 10% of basic salary for both employer and employee. It is still not being finalized and is on the meeting agenda of EPFO.
This reduction in mandatory contribution will leave the employees with more cash in hand salary and help them in increasing their expenditure capability. It will also reduce financial burden on employer and as a result it will perk up economy.
Trade unions are however not ready to accept the reduction. According to them it will reduce the social security funds for them. They will oppose the proposal as it is against the workers interest. This reduction in contribution towards EPF will reduce the benefits for employees by 4%. As a result of this reduction the EPF contribution will be 20% as compared to present 24%.
Presently the employee’s contribution that is 12 percent is completely deposited in PF account. The 12 percent contributed by employer is distributed in all 3 schemes. 3.67 percent of employer contribution is deposited in EPF. 8.33 percent of employer contribution is deposited in EPS account and 0.5 percent id deposited in EDLI. Therefore, the employer contributes actually 12.5 percent of basic salary.
