As per the most recent notification, defaulters will now only be required to pay 1% of their monthly contributions as penalties for these three plans.
The national government’s decision to reduce the penalties for businesses who fail to deposit their workers’ insurance, pension, and provident fund contributions with the Employees Provident Fund Organisation (EPFO) has been met with opposition by the Centre of Indian Trade Unions (CITU).
“This has been done apparently in the name of promoting ease of doing business at the cost of ease of living of our working people who have already been losing their hard-earned wages,” said CITU in a statement.
The Ministry of Labour and Employment released a notification earlier on Saturday that uniformly applied penalties to businesses regardless of the length of default, drastically reducing the penalties that previously applied.
Employers who fail to pay employee contributions to the Employees Provident Fund (1952), Employees Deposit Linked Insurance Scheme (1976), or Employee Provident Scheme (1995) will be held liable by the retirement fund body for the full amount owed. Penalties will be assessed at varying rates for the length of the default period.
As per the most recent notification, defaulters will now only be required to pay 1% of their monthly contributions as penalties for these three plans. This corresponds to 12% of the annual donations.
In the past, defaults lasting less than two months were subject to a penalty of 5% of the total annual charge, while defaults lasting two to four months were subject to a 10% annual charge. Subsequently, the penalty was raised to 15% annually for defaults lasting between four and six months, with the possibility of up to 25% annually if the default lasted more than six months.
“Of the nearly 500 million workers in the country, only around 118 million workers are covered under EPF, exposing the pro-employer violation of the EPF Act promoted by the government’s enforcement machinery. Over and above, those under coverage under the EPF scheme are going to be further squeezed by promoting default by the employers and thereby allowing the employers to make unauthorised use of workers’ own lifetime savings in EPF by drastically lowering the penalty for deliberate default,” said Tapan Sen, general secretary, CITU.
Employers are currently required to submit their returns to EPFO by the 15th of the previous month, at the latest; any submissions received after that date will be regarded as default. Among the twelve percent employers’ contribution, eighteen thirty-three percent go to the employee’s pension account under the Employee Provident Fund (EPS) scheme, thirty-seven percent go to the EPF scheme’s provident fund account, and the remaining five percent go to the EDLI scheme’s insurance kitty. Nonetheless, a total of 12% of the employees’ contributions are made to the PF account.