Govt to contribute to EPF only for new employees registered till Mar 31, 2019

Govt to contribute to EPF only for new employees registered till Mar 31, 2019.

Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer.If you are working and have been out of the ambit of the Employees' Provident Fund Organisation (EPFO), your employer will start taking initiatives to get you into the provident fund body. This is because in an office memorandum, dated April 12, the ministry of labour and employment has amended the guidelines of the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY).

The memo states - "Government of lndia will pay the full employer's contribution (EPF and EPS both) w.e.f. 01.04.2018 for a period of three years to the new employees and existing beneficiaries for their remaining period of three years through EPFO. The terminal date of registration of beneficiary though an establishment is 31st March 2019."

What this means is that for a new employee to gain out of the scheme, the last date to get registered with an establishment covered under EPFO will be March 31, 2019. The memorandum has asked field officers to make this effective immediately.

The Government of India will now contribute the employer's full admissible contribution for the first three years from the date of registration of the new employee for all sectors. Further, the government will pay the EPF contribution for existing beneficiaries for their remaining period of three years. Employees who have joined on or after 1st April 2016, having a new Universal Account Number (UAN) with salary up to Rs 15,000 per month, are covered under this scheme.

The finance minister, in his Budget 2018 speech, had announced this move that the government will now meet the entire 12 percent employer contribution to EPF.

In the last week of March 2018, the Cabinet Committee on Economic Affairs had given its approval for enhancing the scope of PMRPY by agreeing to pay the entire 12 percent of employer's contribution for first three years for new members.

What is Pradhan Mantri Rojgar Protsahan Yojana

PMRPY has been in operation since August, 2016. In this scheme, Government is pay the 8.33 percent employer contribution to the Employees' Pension Scheme (EPS) in respect of new employees (who have joined on or after April 1, 2016) having a new Universal Account Number (UAN), with salary up to Rs 15,000 per month.

Who will benefit from this move?

Employees under this scheme, who are already reaping the benefit of the 8.33 per cent pension contribution, will be updated to the 12 per cent bracket for the remaining period of their first three years.This move may help those in the informal sector. The scheme has a dual benefit the employers are incentivised for increasing the employment base of workers in their establishments, and a large number of workers will find easier to move from the informal to formal sector.

The EPF-EPS model

Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer. The employee gets a lump sum amount including self and employer's contribution with interest on both, on retirement.

As per the rules, in EPF, an employee whose 'pay' is more than Rs 15,000 per month at the time of joining, are not mandatorily required to join. However, an employee who is drawing 'pay' above the prescribed limit (at present Rs 15,000) can become a member with permission of Assistant PF Commissioner, if he and his employer agree. Employees drawing less than Rs 15,000 per month have to mandatorily become members of the EPF.The contribution paid by the employer is 12 percent of basic wages plus dearness allowance plus retaining allowance. An equal contribution is payable by the employee also. In the case of establishments which employ less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is limited to 10 percent.

For most employees of the private sector, it's the basic salary on which the contribution is calculated. For example, if the monthly basic salary is Rs 30,000, the employee contribution towards his or her EPF would be Rs 3,600 a month ( 12 percent of basic pay) while the equal amount is contributed by the employer each month.It should, however, be noted that not all of the employer's share moves into the EPF kitty. Out of employer's contribution, 8.33 percent will be diverted to Employees' Pension Scheme, but it is calculated on Rs 15,000. So, for every employee with basic pay equal to Rs 15,000 or more, the diversion is Rs 1,250 each month into EPS. If the basic pay is less than Rs 15000 then 8.33% of that full amount will go into EPS. The balance will be retained in the EPF scheme. On retirement, the employee will get his full share plus the balance of Employer's share retained to his credit in EPF account.

By Sunil Dhawan, ET Online | May 04, 2018, 04.22 PM IST
Collected By  - Nsp
Source from Economic times: https://m.economictimes.com/wealth/earn/govt-to-contribute-to-epf-only-for-new-employees-registered-till-mar-31-2019/amp_articleshow/64029197.cms