EPFO: Revision to rate of damages payable by employers

On 14 June 2024, the Employees’ Provident Fund Organization (“EPFO”), Ministry of Labour and Employment introduced certain amendments (collectively referred to as “Amendment”) to the Employees’ Provident Funds Scheme, 1952 (“EPF Scheme”), Employees’ Pension Scheme, 1995 (“EPS Scheme”) and Employees’ Deposit Linked Insurance Scheme, 1976 (“EDLI Scheme”).

The Amendment has revised the rate of damages applicable to employers in case of delay in – (i) contribution to the following funds or (ii) transfer of accumulations required to be transferred by such employer:

1. Employees’ Provident Fund under the EPF Scheme
2. Employees’ Pension Fund under the EPS Scheme
3. Insurance Funds under the EDLI Scheme

As per the Amendment, the rate of damages stands revised to 1% per month from the earlier range of 5% to 25% per annum depending on the period of default. The erstwhile range of damages was such that:

1. In case of delay for up to 2 (two) months, the rate was 5% of arrears per annum
2. In case of delay from 2 (two) months up to 4 (four) months, the rate was 10% of arrears per annum
3. In case of delay from 4 (four) months up to 6 (six) months, the rate was 15% of arrears per annum and
4. In case of delay of more than 6 (six) months, the rate was 25% of arrears per annum.

Applicability

Previously, while the rate of damages was capped at 25% for a delay of over 6 (six) months and could not be imposed beyond 25%, the Amendment has now removed this upper limit. With effect from 14 June 2024, the rate of damages is 1% per month. Accordingly, in case the period of default exceeds 25 months, damages imposed may also go beyond 25% (1% per month = 12% per annum).

It must be noted that the rate of damages on default made up to 13 June 2024 will be levied in accordance with prevailing provisions during that period i.e., the Amendment will not operate retrospectively.

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