Budget 2018: 12 percent of EPF contribution for new employees in all sectors

In Budget 2018, government proposes to fund 12% of wages for new employees of Employees' Provident Fund in all sectors. Take home salary of new women employees to go up in the formal sector.

To promote employment, the government will contribute 12 per cent of wages of new employees in employee provident fund for all sectors for the next three years, Finance Minister Arun Jaitley said in this Budget 2018 speech. This will help in promoting job creation, he said.

Contributions from women employees will be brought down from 12 per cent to 8 per cent, the finance minister said. The move is expected to help ease the employer's burden to some extent. According to the Employees' Provident Fund Organisation (EPFO), 36.8 lakh new members in the age group of 18-25 years were added as of November 2017.

Under the current rules, it is mandatory for units employing 20 or more people to provide EPF benefits to workers. While employees contribute 12% of the basic pay to EPF, the employer contributes 8.33% of the pay (up to Rs 15,000) towards EPS and 3.67% of the pay to EPF.

Employers also pay 0.5% towards employee deposit linked scheme (EDLI), 0.65% as EPF administrative charges and 0.01% as EDLI handling fee. Though the threshold exists for mandatory cover, employers and workers can opt for the scheme even if the salary levels are higher. The government provides a grant to the tune of Rs 3,000 crore per annum towards payment of minimum pensions of Rs 1,000 per month.