EPFO: What Happens If Employer Defaults On EPF Contributions?

The Employees' Provident Fund is aimed at providing employees with financial stability after retirement. The government-backed retirement benefit plan is managed by the Employees’ Provident Fund Organisation.

The scheme ensures building a corpus fund for the retirement of the employees in the private sector. A portion of the PF contribution is also directed to the Employees' Pension Scheme.

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, mandates an equal contribution by both the employer and the employee every month.

An employee contributes 12% of the basic salary and DA every month to the EPF account and an equal amount is also contributed by the employer. However, some employers fail to pay their EPF contributions, raising concerns about the employees' financial security.

In many cases, while the employers deduct the EPF amount from the employees' monthly salary, they don't deposit funds to the EPF account. Though it could be financially distressing for employees, there are several ways to take corrective measures against the defaults on EPF deposits by the employer.

Here's a detailed explanation on what to do if your employer has defaulted on EPF contributions.

Make sure your employer has indeed fallen behind on EPF contributions before proceeding.

• EPF Passbook: Check your EPF passbook on the EPFO portal to find any discrepancies in your contributions.

• Salary Slip Review: Verify the EPF deductions on your pay slip against the information in your passbook.

• Verify with EPFO: Check the EPFO portal or get in touch with your local EPFO office or use the EPFO website if there are any inconsistencies.

Employers often encounter financial challenges or clerical blunders that may be fixed with a simple reminder. Here's how to speak with your employer:

• Written Request: Send a formal letter or email outlining the months in question and mentioning legal requirements to request a resolution. Make reference to the EPF Act's legal requirements and save a copy for your records.

• Seek Clarity: Bring up the issue with the payroll or human resources department to find out if there are financial or administrative issues causing the contribution delay. Management issues or administrative delays could be valid reasons for the delay in the deposit of EPF contributions.

The next step is to take the matter to the EPFO if your employer does not respond or fails to pay the overdue EPF contributions.

• Grievance Redressal Portal: File a complaint and monitor the progress of your dispute through the EPFO member's portal. You can also file a complaint through EPFO's online grievance redressal system.

• EPFO Regional Office: You can visit the regional EPFO office where your employer has enrolled their EPF. Complete the required paperwork (Form 5, Form 10, etc.) to report the issue and ask that it be investigated.

Employees may pursue legal action if the employer defaults and does not pay EPF:

• Labour Court: File a non-compliance complaint under the Employees' Provident Funds and Miscellaneous Provisions Act.

• Consumer Court: You can also file a complaint with the Consumer Court as EPF defaults amount to a 'deficiency of service' under the Consumer Protection Act, 1986.

• Penalties for Employers: The EPF Act mandates penal provisions against employers for defaults on EPF deposits. Employers failing to deposit the deducted amount from an employee's salary are liable to penalties under Section 14B of the Act. Apart from this, a penalty of 1% per month, or 12% per annum, can also be charged on recovery of outstanding contributions under the EPS, EPF and Employees' Deposit Linked Insurance schemes.

Employees can use the following options to recoup unpaid debt if their employer has been behind on contributions for a long period:

• Interest on Delays: Currently, the EPF interest rate stands at 8.25% per annum. The interest rate is fixed by the government for each financial year. Despite delays, EPFO guarantees that this interest is paid on EPF deposits.

• Withdrawal Process: Make sure the outstanding balances are paid off before starting the process if you intend to take money out of your EPF account because of retirement, resignation or termination.

• EPF Account Transfer: Transferring the outstanding balances from your previous employer's EPF account to your new one is another option if you are switching jobs.

Upon quitting a job, track payments and get EPF contribution statements from employers by using the EPFO web or app. Gathering knowledge about the EPF rules can help you proactively handle any future problems with PF deposits.