EPF Amendment Scheme: Damages for Default in Contribution

The Ministry of Labour and Employment has notified an amendment to the Employees’ Provident Funds Scheme, 1952, setting a new rate at which damages may be recovered from employers for defaults in payment of any contribution.

Accordingly, paragraph 32A(1) of the Scheme has been modified which now states that in case of such a default, damages recoverable from the employer will be at the rate of 1% of the arrear of contribution per month or part thereof. Here, the defaults covered include those in the payment of any contribution to the fund, or in the transfer of accumulations required to be transferred by him under Section 15(2) or Section 17(5) of the Employees’ Provident Funds Act, 1952, or in the payment of any charges payable under any other provisions of the Act or Scheme or under any of the conditions specified under Section 17.

Two notable aspects of the amendment are:

  • The new rate will apply regardless of the period of default. Prior to the amendment, the rate of damages depended on the period of default. The rates of damages ranged from 5% to 25% of arrears per annum.
  • In calculating this rate, the arrear of contribution “per month or part thereof” is to be considered; earlier, the penalty was determined at the rate of applicable percentage of arrears “per annum”. So, the new rate of 1% of the arrear of contribution per month would equate to 12% of arrears per annum.

Similar amendments have been made to the Employees’ Pension Scheme, 1995, and the Employees’ Deposit Linked Insurance Scheme, 1976, vide notifications dated June 14, 2024.

Through separate notifications, further changes have been made to Tables B and D of the EP Scheme.