In the wake of the coronavirus outbreak impacting business activities, resulting in salary cuts and unanticipated layoffs, the Government of India will contribute towards EPF payments of both employer and employee (12 percent each), putting together 24 percent for employers with more than 100 staffers on board. The outgo cost of covering EPF of companies for the next 3 months is around Rs. 5,000 crores, according to the EPF India release.
This COVID-19 relief measure is announced by the center to be implemented for the next 3 months, ahead of the economic stimulus package due to be announced soon.
Earlier last month, finance minister Nirmala Sitharaman had announced an Rs.1.7 lakh crore package - a conditional provision to pay the entire provident fund of employees who earn less than Rs 15,000 per month in companies that employ up to 100 workers, wherein 90 percent of the employees' salaries are less than Rs 15,000 per month.
How will this EPF contribution help employers?
This move will incentivize about 4 lakh establishments and benefit about 80 lakh employees to be able to continue to be on their payrolls despite the disruption caused by the COVID-19 pandemic.
The government plans to widen the net and increase the cap from 100 employees altogether, to cover more and more EPFO subscribers under this scheme for the next 3 months, considering many businesses have faced heavy losses, some on the verge of closure, and operations halted due to nationwide lockdown imposed for close to a month, an emergency move in the wake of raging coronavirus outbreak.
As per the scheme, the Government will pay PF only for those employers employing staffers with a salary lower than Rs. 15,000, however, there are few calculation possibilities currently under exploration by the government.
Meanwhile, the government is also working out an additional financial implication under two scenarios - a) doing away with the cap altogether or b) raising the cap substantially, based on which a decision can be taken. The EPFO has more than 6-crore subscribers.
Other relief schemes by EPFO for employees and employers
In another move to incentivize employers of about 6 lakh establishments for payment of wages during the lockdown period, the Government has provided a one-month more extension for the filing of Electronic Challan Cum Return (ECR) for wage month March 2020 up to 15 May 2020, for employers who have paid wages to their employees for March 2020. The ordinarily due date for March 2020 is April 15, 2020.
This extension is provided to establishments covered under the EPF & MP Act, 1952 to remit the contributions and administrative charges due for March 2020. This move will likely benefit about 5-crore employees and is decided to align in sync with the objective of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) that helps prevent disruption in employment by ensuring employee earnings in their fight against the COVID-19 pandemic.
Further, those employers who disburse wages for March 2020 not only get relief of extension of due date for payment of EPF dues for March 2020 but also avoid liability of interest and penalty, if they remit on or before May 15, 2020.
Besides offering relief to MSMEs who were hardest hit by the ongoing lockdown from March 24, the Government of India is also offering EPF withdrawal up to 75 percent for nearly 4.8 crore employees. Also as per the provisions notified on March 28, the EPFO has processed 3.31 lakh claims disbursing an amount of Rs. 946.49 crores in a span of 15 days. Additionally, Rs.284 crore has been distributed by the exempted PF Trusts under this scheme, notable among them being TCS.
Under this provision, non-refundable withdrawal to the extent of the basic wages and dearness allowances for three months or up to 75% of the amount standing to member's credit in the EPF account, whichever is less, is admissible, the press release states. The member can apply for a lesser amount also. Considering this is an advance provided by the Government as an emergency fund to EPFO subscribers in times of crisis, it does not attract income tax deductions.
The Ministry of Labour had urged EPFO and ESIC to carry out a ground-level assessment to prepare a report on the job losses, salary cuts, and layoffs as a result of the coronavirus outbreak.