The Employees’ Provident Fund Organisation (EPFO) has announced a significant reduction in penal charges for employers who default on depositing their employees’ provident fund, pension, and insurance contributions. This move, detailed in a notification by the Ministry of Labour on Employment issued Saturday, is intended to alleviate financial pressure on businesses and make compliance more manageable.
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Previously, the penal charges varied based on the duration of the default. Employers faced penalties ranging from 5% per annum for defaults under two months to a steep 25% per annum for defaults exceeding six months. Under the new rules, these have been replaced by a uniform rate of 1% per month, or 12% per annum, applicable across the Employees’ Pension Scheme (EPS), the Employees’ Provident Fund (EPF) Scheme, and the Employees’ Deposit Linked Insurance Scheme (EDLI) under EPFO.
Significant Relief for Long-Term Defaulters
The revised penal charges represent a substantial reduction, especially for long-term defaulters. Employers who have defaulted for over six months will see their penal liability drop from 25% per annum to just 12% per annum. However, for those defaulting for less than four months, the change in rates will not be as impactful.
Despite the reduction in penal charges, employers are still required to file returns with the EPFO by the 15th of every month for the previous month. Any delay beyond this deadline is considered a default, subject to the new penal charges.
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Breakdown of Employer Contributions
Currently, employers contribute a total of 12% of an employee’s salary to various EPFO schemes. This is distributed as follows: 8.33% to the employee’s pension account under EPS, 3.67% to the provident fund account under EPF, and an additional 0.5% to the insurance fund under the EDLI scheme. The employees’ contribution of 12% goes entirely to their provident fund account.
The new provisions have come into effect from the date of the notification, offering immediate financial relief to employers across the country. This change is part of a broader effort by the EPFO to streamline processes and support businesses in maintaining compliance with employee benefit schemes.
