In line with Finance Minister Nirmala Sitharaman’s announcement made last week, the labour ministry has notified that the employees’ provident fund (EPF) will see a reduction from existing 12 per cent to 10 per cent or the period of next three months till July.

This decision directly impacts 4.3 crore organised sector employees’ in-hand salary and will also reduce the liability of 6.5 lakh employees reeling under liquidity crunch under lockdown to contain COVID-19.

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This move will also estimated to infuse liquidity of Rs 6,750 crore in next three months.

The labour ministry in a notification issued on Monday stated that the reduction in EPF contributions shall be applicable “in respect of wages payable by it for the months of May, June and July, 2020″. Therefore the take home pay due in June, July and August would increase, while the employers’ contributions due in June, July and August would reduce.

“Whereas due to COVID-19 pandemic, lockdown is in force across the country and the Central Government after making the necessary inquiry is satisfied that to provide liquidity in the hands of employers and employees, there arises a need to amend the notification of the Government of India in the Ministry of Labour published in the Gazette of India, Extraordinary, Part II, section 3, sub-section(ii) vide number S.O. 320(E), dated 9th April 1997,” the labour ministry said on Monday.

Last week, Finance minister Nirmala Sitharaman had announced reduction of statutory provident fund contribution by both employers and employees for next three months.

The Central Public Sector Enterprises (CPSEs) and public sector undertakings (PSUs) will however continue to contribute 12 per cent as employer contribution to the Employees’ Provident Fund Organisation (EPFO).

This reduction of the EPF contributions will be applicable for workers who are not eligible for 24 per cent EPF support under PM Garib Kalyan Package and its extension.

The government is contributing employers and employees contributions of 24 per cent of basic wages for those establishments that have up to 100 employee and 90 per cent of whom earn under Rs 15,000 monthly wage since March.

Last week, Sitharaman had also announced the extension of the benefit under Pradhan Mantri Garib Kalyan Yojana (PMGKY) for three months, where the government would contribute entire 24 per cent of EPF contributions till August, giving relief to 3.67 lakh employers and 72.22 lakh employees.