The Employees’ Provident Fund Organisation (EPFO) has said pension contributions to provident fund accounts of its subscribers will remain intact even if the statutory contribution is lowered by 2 per cent to place more cash at the hands of both employees and employers.

According to the existing rule, an employee contributes 12 per cent of the basic wages and dearness allowance to his/her PF account. The employer makes a matching contribution.

Of the employer’s contribution of 12 per cent, 8.33 per cent goes towards the Employees’ Pension Scheme, subject to a wage ceiling of Rs 15,000 per month (Rs 1,250). The remaining amount is accrued in the provident fund account.

The government through a gazette notification on May 18, 2020, has lowered the statutory contribution to 10 per cent for three months 1 May, June and July 2020 — on account of Covid-19. The contribution rate will be valid, irrespective of the date of payment of wages to the employee.

Clarifying further, the provident fund body has said that contributions to EPS will remain intact even if the statutory limit goes down.

“The EPS contribution of 8.33 per cent of wages (subject to ceiling of Rs 15,000) is diverted from the employer’s share of EPF contributions. The reduced rate of EPF contributions to 10 per cent will not reduce the pension contributions or benefits,” the EPFO has said.

The pension fund body has also clarified that the reduced rate of contribution of 10 per cent is the minimum rate during the three months and the employer, employee or both can contribute at a higher rate as well.

This gains importance as employees have to weigh in the benefit of immediate cash at hand in comparison to losing high interest rate under the scheme.

The labour ministry has also said that under EPF Scheme, 1952, any member has the option to contribute at a rate higher than the statutory rate and the employer can restrict his contributions to the statutory rate in respect of such employees.