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Business News/ Money / Personal Finance/  What happens when employer delays EPF contribution? What should you do?

What happens when employer delays EPF contribution? What should you do?

An employer is liable of penalties and high interest rates on payments if there is delay in EPF contributions. Know about EPF account's interest and what should employees do in such situations

Non payment of EPF contributions can lead to penalties to employersPremium
Non payment of EPF contributions can lead to penalties to employers

Non-payment of Employers Provident Fund (EPF) contributions on time might attract penalties and higher interest payment to employers. According to a Supreme Court ruling, employers are liable to cover damages if there is a delay in the payment of an employee's EPF contribution.

As per the Employee's Provident Funds and Miscellaneous Provisions Act, 1952, Section 7Q, the employer is liable to pay higher interest rate on amount due from him under the Act from the due date of actual payment. Under Section 14B of the same act, Employer's delayed payment of EPFO will be a cognisable offence. There is also a provision which authorises the government to recover the damage caused due to non-payment from the employer.

Also Read: Do you qualify for higher pension under employees’ provident fund?

Recently, EPFO notified the rate at which damage due to delayed payment is levied on employers. Following are the rates of the damage imposed on the employers for delayed EPFO payment.

DurationApplied interest (per annum)
0-2 months5%
2-4 months10%
4-6 months15%
More than 6 months25%

According to the EPFO, damages are restricted up to 100 per cent of the amount in arrears. It also added that 12 per cent annual interest is applied on the amount due for the entire period of delay.

Also Read: Can a gap in career affect PF withdrawal?

“Employers defaulting on contributions are liable to pay Damages & Interest on the amount due,"tweeted EPFO on February 17.

Amount paid by the employee & employer in EPF

According to section 7Q of Employee's Provident Funds and Miscellaneous Provisions Act, 1952, employer is liable to pay a simple interest at the rate of 12 per cent per annum. It is mandatory that employee and employer should contribute equal amount to the EPF account of 12 per cent of the employee's basic salary, dearness, allowance, and retention allowance, if applied.

Also Read: In 16.5% jump, EPFO adds 16.26 lakh subscribers in November 2022

What to do when employer delays EPFO contribution?

-Stay updated about the monthly deposit of your PF contributions on a monthly basis. EPFO sends SMS alerts. Employees can also check by logging in to the EPFO portal.

-On finding delay in payments by employers, employees can file a complaint with the EPFO against the employer.

-The complaint will initiate an inquiry by the EPFO against the employers. If found guilty of delayed payment, there can be legal action against the employer.

-EPFO can recover the damaged amount by charging interest on the late deposit as well. There can also be a police complaint against the empoyer.

-Before beginning the penal action, employer will be given reasonable opportunity to present their point.



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Published: 19 Feb 2023, 10:58 AM IST
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