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In CTC Model, Employee To Get Benefit Of Reduction Of Employer's PF Contribution : Govt Clarifies

LIVELAW NEWS NETWORK
19 May 2020 2:46 PM GMT
In CTC Model, Employee To Get Benefit Of Reduction Of Employers PF Contribution : Govt Clarifies
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In Cost to Company(CTC) model, the benefit of 2% reduction of the employer's contribution under the Employees Provident Fund and Miscellaneous Provisions Act will be passed on to the employee, going by the press release issued by the Government on Tuesday

A Press Release from the Ministry of Labour and Employment stated :

"In Cost to Company (CTC) model, if Rs.10000/- 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".

This may dispel the confusion as to whether the reduction of employer's contribution will result in the overall decrease of the employee's salary in CTC model.

The reduction in statutory rate of contributions from 12% to 10% for wage months May, 2020, June, 2020 and July, 2020 for all class of establishments covered under the EPF & MP Act, 1952 announced on May 13 by Finance Minister Nirmala Sitharaman as part of Atma-Nirbhar Bharat package. This has been notified vide SO 1513 (E) dated 18.05.2020 published in the Gazette of India.  

The above reduction of rate of contribution is not applicable to establishments like Central and State Public Sector enterprises or any other establishment owned or controlled by or under control of the Central Govt. or State Govt. These establishments shall continue to contribute 12% of basic wages and dearness allowances.

The reduced rate is also not applicable for PMGKY beneficiaries, since the entire employees EPF contributions (12% of wages) and employers' EPF & EPS contribution (12% of wages), totaling 24% of the monthly wages is being contributed by the Central Govt.

Reduction in rate of EPF contributions from 12% to 10% of basic wages and Dearness allowances is intended to benefit both 4.3 Crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent.

As a result of reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees.

If Rs.10000/- is monthly EPF wages, only Rs.1000/- instead of Rs.1200/- is deducted from employee's wages and employer pays Rs.1000/- instead of Rs.1200/- towards EPF contributions.

In Cost to Company (CTC) model, if Rs.10000/- 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.

(Source : PIB)

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