Finance Minister Nirmala Sitharaman has announced changes to the Employees’ Provident Fund (EPF) scheme as part of the government’s efforts to combat the economic crisis arising out of the coronavirus pandemic.
But what are these changes, and how will they affect you? Will you be able to withdraw an advance from your PF account? Will the government be making your EPF contribution? How long will these measures last?
Here are the answers to all those doubts, and more.
“I heard something about being able to withdraw a part of my PF now. How much can I withdraw? And am I even eligible for this?”
Yep, the Finance Minister has announced that the Employees' Provident Fund Organisation (EPFO) Scheme regulations will be changed to allow you to do that. You will be allowed to withdraw a non-refundable advance of 75 per cent of the amount OR three months of wages, whichever is lower.
All the 48 million active PF account holders are eligible for this benefit.
“The government is going to pay the Employees’ Provident Fund (EPF) contributions for some people, right? Will this benefit me?”
Okay, that’s an important question. To understand that, let’s first look at what exactly the government has announced.
Under usual circumstances, employers and employees equally contribute 12 per cent of a worker’s salary towards their provident fund account. For the next three months however, the central government will pay for the contributions of both the employer and the employee (12 percent each).
“Is this for all companies and all workers?”
No, it’s not. This move is only for companies that have no more than 100 workers.
“But why not companies with more than 100 workers?”
According to the government, this classification was made because an overwhelming number of people who work in establishments with 100 workers or fewer, have salaries of less than Rs 15,000 per month.
They are extremely vulnerable to losing their jobs and their financial stability as the economic fallout of the coronavirus crisis worsens.
“Wage-earners below Rs 15,000 per month in businesses having less than 100 workers are at risk of losing their employment. This (move) would prevent disruption in their employment.”Statement by the Finance Ministry
“So, if it’s only establishments with 100 employees or fewer, how many people will benefit from this?”
Out of the 563,000 establishments linked to the EPFO, around 377,000 of them have 100 workers or less.
This move is set to benefit 7.9 million workers employed in those establishments. That’s only around 16 per cent of the total of 48 million active PF account holders.
To put that in further context, since more than 80% of India’s workforce is in the informal or unorganised sector, this particular PF benefit will only be availed by 1.6% of the total workforce of 471 million Indians.
“The unorganised sector is not covered under this move, right?”
No, the PF benefits are only for the organised sector. There have been some other benefits announced for the unorganised sector though. You can read about them here.
How will the Centre make these EPF contributions?
A senior official of the Employees’ Provident Fund Organisation (EPFO) told Business Standard that the Centre’s contributions would be implemented in the form of reimbursements to the employers.
The government will allocate Rs 5,000 crore towards this PF reimbursement scheme.
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