Under Section 8F, EPFO can order post offices, banks, etc, to withhold payments due to the defaulting employers and remit the amount to the EPFO.
Some former employees of ed-tech giant Byju’s have alleged that the company hadn’t deposited their dues to the Employees’ Provident Fund Organisation (EPFO) for months. Against this backdrop, Saikat Neogi explains how one can check for EPF default by the employer and what recourse is available
Read More: EPFO likely to extend deadline to apply for higher pension: Report
What happens on default?
Employers defaulting on either their or the employees’ share must pay damages under section 14B of the EPF & Miscellaneous Provisions Act, 1952—5% of the arrears if the default period is less than two months, 10% for 2-4 months, 15% for 4-6 months and 25% for >6 months. The damages are restricted to 100% of the arrears. An annual interest of 12% on the dues is charged for the period of delay.
Under Section 8F, EPFO can order post offices, banks, etc, to withhold payments due to the defaulting employers and remit the amount to the EPFO. Complaints can be lodged under Section 406/409 of Indian Penal Code against defaulting employers who deducted the amount from employees’ salaries. The EPFO has set up a directorate of recovery to monitor the performance of field functionaries. Recovery actions, such as attachment/sale of movable or immovable property, arrest of directors of defaulting company, are provided for in the statute.
Read More: EPFO Higher Pension Calculator Download Link: Calculate Dues for Bigger EPS Pension on Excel
If the employer goes bankrupt…
One of objectives of the Insolvency and Bankruptcy Code is to balance the interests of all stakeholders, including employees. Provident fund, gratuity & pension are specifically included in workmen dues. Under Section 36 (4)(a)(iii), sums owed to workers pertaining to their provident fund, pension, and gratuity, shall not be included in the liquidation estate. This means that such sums due as a result of employer contributions cannot be utilised to pay off the firm’s debts and must be paid to workers in full. This was confirmed by NCLAT in the Assam Tea EPFO case.
The Supreme Court, in February 2023, ruled in Jet Airways that workers are entitled to the entire amount of gratuity and provident fund dues. The successful Resolution Applicant must pay the unpaid balance of provident fund and gratuity to employees; failing to do so would be a violation of Section 30(2)(e) of IBC, which could result in the plan being deemed non-viable.
Read More: EPFO Extends Deadline to Apply for Higher Pension for Members till July 11
Non-payment of PF dues by employer
The EPFO will pay the PF amount due to the member only to the extent of the amount realised from the employer. However, in case of late deposit of dues by the employer, after realising the dues, the members will get the full interest for each due month and it will not affect the interest due to the members on the contributions paid. A member can demand for a contribution card in form 3-A/ECR from the employer which shows the recovery contribution to the EPF.
On March 31, 2022 (per the latest available data), Rs 14,202 crore was outstanding from defaulting employers, including Rs 4,102 crore of penal damages and interest.
About 70% of the amount falls under Non Immediately Realisable category for reasons such as amount in dispute in courts or tribunals, establishments having entered into liquidation, grant of installments and establishments in respect of which rehabilitation scheme had been sanctioned by the Board for Industrial and Financial Reconstruction. Of the total Rs 12,742 crore due from the unexempted sector, Rs 10,479 crore will have to be recovered from the private sector, Rs 1,843 crore from the public sector and Rs 420 crore from the co-operative sector.
