The Employees’ Provident Fund Organisation has cut the penal charges on defaults by employers who delay or fail to deposit contributions in the Employees’ Provident Fund, Employees’ Pension Fund and Employees’ Deposit Linked Insurance Scheme.
According to notifications by the ministry of labour, defaulters will be liable to pay 1% of the contributing amount per month as penal charges for these three schemes. This translates into 12% of the contributions per annum. The move will mean a lower burden for defaulting employers.
“Where an employer makes default in the payment of any contribution to the Employees’ Pension Fund, or in the payment of any charges payable under any other provisions of the Act or the Scheme, the Central Provident Fund Commissioner or such officer as may be authorised by the Central Government by notification in the Official Gazette in this behalf, may recover damages from the employer at the rate of 1% of the arrear of contribution per month or part thereof,” said three separate notifications by the ministry of labour with regard to the EPF, the EPS and the EDLI.
The charges have now been significantly reduced from the previous rules under which damages were levied based on the period of default. A penal charge of 5% per annum was levied for less than two months of default while a charge of 10% per annum was imposed for defaults for a period of two to four months. The penalty was increased to 15% per annum for defaults for four to six months and could go as high as 25% per annum in case the default continued for more than six months.
Employers and employees are mandated to contribute 12% each of an employee’s basic pay into the EPFO. Of the employer’s contribution, 8.33% is diverted into the EPS. The employer ahs to contribute 0.5% of the basic pay or a maximum of Rs 75 per employee into the EDLI. Contributions for the previous month have to be submitted by the 15th of the next month.
Employers defaulting on contributions are liable to pay damages under Section 14B and interest under Section 7Q of the defaulting amount under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
KE Raghunathan, National President, National Chairman, Association of Indian Entrepreneurs and former Member (Employers Representative) of the Central Board of Trustees however, opposed the move and noted that if there is a delay or default by an employer, the affected person is the member. Any such levy of damage must be payable to the member as a compensation, he said.
He also called for a three month grace period before implementation of the move and said that if there is a genuine reason for the delay, adequate cover must be given to an employer, rather than branding him as a wilful defaulter.