Penalty For Default In Contribution To 3 EPFO Schemes
The Employees’ Provident Fund Organisation on June 15, 2024, reduced the penal charges on employers who defaulted or delayed making contributions to the employees’ Employees’ Provident Fund account, Employees’ Pension Fund and Employees’ Deposit Linked Insurance Scheme. In an official release, the Ministry of Labour and Employment stated that the new penalty stands at 1 per cent interest per month on the arrear of the contributing amount. The one per cent penal charge stands uniform and separately for three schemes namely, Employees’ Provident Fund account, Employees’ Pension Fund and Employees’ Deposit Linked Insurance Scheme. As much as one per cent interest per month will amount to 12 per cent interest per annum on the arrears, significantly lower than the maximum penalty of 25 per cent interest earlier charged on arrears.
“Where an employer makes default in the payment of any contribution to the Employees’ Pension Fund, or the payment of any charges payable under any other provisions of the Act or the Scheme, the Central Provident Fund Commissioner may recover damages from the employer at the rate of one per cent of the arrear of contribution per month or part thereof,” said the release said.
Before this notification, penalties were levied at 5 per cent per annum for a default period of up to two months, 10 per cent interest per annum for defaults between two to four months, 15 per cent interest on defaults between four to six months, and 25 per cent for defaults over six months.
EPF, EPS & EDLI
EPF: Currently, companies with over 20 employees must enroll in the Employees’ Provident Fund (EPF) scheme and deduct provident fund contributions of up to 12 per cent from employee salaries, with an equal contribution by employers. The EPF scheme provides 8.25 per cent interest on the contributions. Premature withdrawal is allowed for specific purposes. Employees can receive a pension after serving for a minimum period of 10 years and reaching the age of 50.
EPS: Though EPF contribution is matched equally by the employer, 8.33 per cent of the employer’s contribution goes to the Employees Pension Scheme (EPS). Using the contribution of this fund, employees receive a pension after serving for a minimum period of 10 years or once they reach the age of 50.
EDLI: Employees contribute 0.5 per cent of the basic pay or a maximum of Rs 75 per employee into the Employee Deposit Linked Insurance Scheme (EDLI). The EDLI scheme offers life insurance coverage to employees and is available to all employers who provide EPF provision to their employees. The claim amount under the Employee Deposit Linked Insurance (EDLI) is 35 times the average monthly salary of the past 12 months, with a maximum limit of Rs 7 lakh.
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