The Ministry of Labour & Employment has implemented the decision to cut employees' provident fund (EPF) contributions to 10 per cent from the existing 12 per cent for three months till July.
This would increase 4.3 crore organised sector employees' take home pay and reduce the liability of 6.5 lakh employees reeling under liquidity crunch under lockdown to contain COVID-19.
The decision is 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.
Giving reason for the move it stated "whereas due to COVID-19 pandemic, lockdown is in force across the country and the Central Government after making necessary inquiry is satisfied that to provide liquidity in the hands of employers and employees, there arises a need to amend the notification of April 9, 1997."