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EPF is a social security scheme where both employers and employees contribute 12% of basic pay and house rent allowance
EPF is a social security scheme where both employers and employees contribute 12% of basic pay and house rent allowance

EPF subsidy benefit retained for firms crossing cap on workforce

Companies past the 1,000-worker threshold during scheme period will keep getting 24% incentives

The government has decided that Employees’ Provident Fund (EPF)-registered companies, which have crossed or will cross the 1,000 workers threshold during the wage subsidy scheme, will continue to get the 24% incentives.

The decision expands the scope of and brings clarity to the scheme announced last November, and is expected to bring cheer to employers.


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“The central government will provide subsidy…for establishments employing up to and including 1,000 employees (contributing EPF members with universal account number, or UAN) in the wage month of September 2020, the employer share and employee share of contribution as per statutory rate applicable to establishments subject to maximum 24% of wages. These establishments will, however, continue to get subsidy of employers’ share even if the number of contributing EPF members with UAN exceeds 1,000 during the scheme period," the fresh scheme details released by the labour ministry said.

It asked employers to give an undertaking of the headcount as of end-September 2020 as the reference number.

The scheme will be for all new additions and those who lost jobs between March and September 2020 and are rejoining during the scheme period. Both have a salary cap of 15,000 per month. It, however, underlined that establishments “must continue to retain the number of employees taken as a reference base… for availing assistance under this scheme". This means that if a firm has 100 employees as its reference number, it must not reduce this headcount and then add new workers to enjoy the incentives. This, in a way, embeds job security for existing low-paid workers during the scheme period.

Firms that joined the subsidy scheme with more than 1,000 EPF members in its payroll by end September, will only get 12% subsidy on account of employees’ share.

The 22,810-crore scheme aims to boost low-paid yet formal employment in the country and will count employees added to the payroll between 1 October 2020, and 30 June 2021. This is part of the Atmanirbhar Bharat Rozgar Yojana and will subsidize wages through the Employees’ Provident Fund Organisation for 24 wage months after a worker joins with less than 15,000 monthly salary.

India is going through a tough phase of unemployment and millions of people have lost their jobs following the coronavirus outbreak and the subsequent lockdowns in the country.

The scheme also asks employers to not deduct the 12% EPF contribution of workers from their salaries and said violations of this shall invite legal action. This wage payment without deductions will increase the take-home pay of employees.

It has also clarified that staffing firms or establishments supplying manpower to principal employers shall not claim the 12% EPF share if the subsidy was received or claimed by the principal employer. Employers need to stake claim for EPF incentives within 60 days of a wage month.

The new guidelines also promise a robust monitoring mechanism and has entrusted EPFO to conduct weekly monitoring at its end and provide a monthly report to the directorate general of employment in the labour ministry. The body shall also create a technology backbone for facilitating scheme implementation and subsidy payment directly to Aadhaar seeded bank accounts.

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