Women Employees can get benefited from the employees share
New women Employees take home pay to go up as EPF contribution capped at 8%
The Budget 2018 announced that to incentivize employment of more women in the formal sector and to enable higher take-home wages, amendments in the Employees Provident Fund and Miscellaneous Provisions Act, 1952 will be made to reduce women employees’ contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.
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 the sectors including existing beneficiaries for their remaining period of three years.
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.
Employee whose ‘pay’ is more than Rs. 15,000 per month at the time of joining, is not eligible and is called non-eligible employee. Employees drawing less than Rs 15000 per month have to mandatorily become members of the EPF.
The contribution paid by the employer is 12% of basic 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 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.
However, be noted that not all of the employer’s share moves into the EPF. Out of employer’s contribution, 8.33% 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.