Non-payment of Employers’ Provident Fund (EPF) contributions on time can attract penalties and higher interest payments to employers. According to a Supreme Court judgement, employers are liable to cover damages if there is a delay in payment of EPF contribution of the employee.
As per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, Section 7Q, the employer is liable to pay higher rate of interest on the amount due from him under the Act from the due date of actual payment. Under Section 14B of the same Act, delayed payment of EPFO by the employer will be considered as a cognizable offence. There is also a provision which authorizes the government to recover damages caused by non-payment from the employer.
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Recently, EPFO has notified the rate at which employers are levied for the loss due to delayed payment. Following are the rates of damages imposed on employers for delay in EPFO payment.
| Duration | Applicable Interest (per annum) |
| 0-2 months | 5% |
| 2-4 months | 10% |
| 4-6 months | 15% |
| more than 6 months | 25% |
According to EPFO, the compensation is restricted up to 100 per cent of the outstanding amount. It also states that 12 per cent annual interest is applicable on the amount due for the entire period of delay.
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“Employers in default of contribution are liable to pay damages and interest on the amount due,” EPFO tweeted on February 17.
Amount paid by employee and employer in EPF
As per section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the employer is liable to pay simple interest at the rate of 12 per cent per annum. It is mandatory that the employee and the employer contribute an amount equal to 12 per cent of the employee’s basic salary, dearness allowance and retention allowance, if applicable, to the EPF account.
Read also: In a jump of 16.5%, EPFO added 16.26 lakh subscribers in November 2022
What to do when the employer delays the EPFO contribution?
– Stay updated about the monthly deposit of your PF contribution on a monthly basis. EPFO sends SMS alerts. Employees can also check by logging into the EPFO portal.
Employees can file a complaint against the employer with the EPFO if there is a delay in payment by the employer.
Complaints against employers will initiate investigation by EPFO. Legal action can be taken against the employer if found guilty of delayed payment.
EPFO can also recover the damaged amount by charging interest on late deposits. There can also be a police complaint against the employer.
Before initiating punitive action, the employer shall be given a reasonable opportunity of being heard.
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