CITU opposes govt's move to lower penal charges on defaulting employers

The Centre of Indian Trade Unions (CITU) has opposed the central government's move to lower the penal charges on employers who default on depositing the provident fund, pension, and insurance contributions of their employees with the Employees Provident Fund Organisation (EPFO).

“This has been done apparently in the name of promoting ease of doing business at the cost of ease of living of our working people who have already been losing their hard-earned wages,” said CITU in a statement.

Earlier on Saturday, the ministry of labour and employment issued a notification that significantly lowered the penal charges applicable on employers and made them uniformly applicable irrespective of the duration of default.

If an employer makes any default in the payment of an employee's contribution to the Employees Provident Fund, 1952; Employees Deposit Linked Insurance Scheme, 1976 or Employee Provident Scheme, 1995, the retirement fund body used to recover the same money from the employer by levying penalty damages at different rates for different durations of default periods.

According to the latest notification, the defaulters will now be liable to pay only 1 per cent of the contributing amount per month as penal charges for these three schemes. This translates into 12 per cent of the contributions per annum.

Previously, a penal charge of 5 per cent per annum was levied for less than two months of default, while a charge of 10 per cent per annum was imposed for defaults for a period of two to four months. Later, the penalty was increased to 15 per cent per annum for defaults for four to six months and could go as high as 25 per cent per annum if the default continued for more than six months.

“Of the nearly 500 million workers in the country, only around 118 million workers are covered under EPF, exposing the pro-employer violation of the EPF Act promoted by the government’s enforcement machinery. Over and above, those under coverage under the EPF scheme are going to be further squeezed by promoting default by the employers and thereby allowing the employers to make unauthorised use of workers' own lifetime savings in EPF by drastically lowering the penalty for deliberate default,” said Tapan Sen, general secretary, CITU.

Currently, employers are mandated to file returns with EPFO on or before the 15th of every month for the previous month, and any delay beyond that is considered as default. Out of the 12 per cent of the employers’ share, 8.33 per cent goes to the pension account of the employee under EPS, 3.67 per cent goes to the provident fund account under the EPF scheme, and an additional 0.5 per cent goes to the insurance kitty under the EDLI scheme. However, employees’ total contribution of 12 per cent goes to the PF account.