EPFO lowers penal charges on employers defaulting on PF, pension and insurance deposits

The Employees’ Provident Fund Organisation has reduced penal charges on employers defaulting on deposit of their employees’ provident fund, pension and insurance contribution with the retirement fund body. It has also made the penal charges uniform irrespective of the duration of default.

As per a notification issued by the ministry of labour and employment on Saturday, damages from the employer will be recovered at the rate of 1% of the arrear of contribution per month or 12% per annum across three schemes vis the Employees’ Pension Scheme (EPS), the Employees’ Provident Fund (EPF) Scheme and the Employees’ Deposit Linked Insurance Scheme (EDLI) under EPFO.

Charges were, so far, at the highest rate of 25% per annum.


The new provisions will be effective from the date of notification.

Until now, the penal charges were calculated at the rate of 5% per annum for default period of less than two months, 10% for default period of two months and above but less than four months, 15% for four months and above but less than six months, and 25% for six months and above.

This will reduce the penal liability on employers if they default for a longer period, while there is no significant change in rates for employers who default for a period less than four months.

However, if payments are delayed beyond 25 months then the new rates will put a higher penalty on employers.

“The damages leviable under the provisions of the PF scheme have been rationalised and simplified. The rate of damage has been changed to 1% per month of default as against the graded manner of calculation prevalent till now. This would ensure that the employees are subject to damages in line with the period of default,” Saraswathi Kasturirangan, partner, Deloitte said.

Currently employers are mandated to file returns with EPFO on or before 15th of every month for the previous month and any delay beyond that is considered as default.

Out of the 12% of the employers’ share, 8.33% goes to the pension account of the employee under EPS, 3.67% to the provident fund account under EPF scheme and an additional 0.5% to the insurance kitty under the EDLI scheme. However, employees’ total contribution of 12% goes to the PF account.