Employees Provident Fund or EPF is a kind of savings scheme, wherein a part of the employees’ salary is deducted and saved for retirement or any future emergency that may arise. It is a mandatory scheme for every salaried employee, also it is mandatory for every company to provide the benefit of Employee Provident Fund to their employees. A part of the salary which is deducted to be kept aside for this scheme is maintained and overseen by Employees Provident Fund Organization of India. Any company having more than 20 employees is mandated by law to register with the Employees Provident Fund Organization of India.
As per rules, any salaried employee having an income of less than Rs 15,000 must mandatorily be a part of the Provident fund Scheme, however an employee having an income more than Rs 15,000 can open a Provident Fund account with either the consent of the employer or the approval of the Assistant PF Commissioner.
The amount contributed to the Employees Provident Fund is divided into two categories-:
Contribution by the employee:
Every person must contribute some part of their income to the Provident Fund Scheme. The rate of amount is decided by the Employees Provident Fund Organization of India. The rate of interest differs from. For men the rate of interest is 12 percent of its basic salary. For women initially its 8 percent for first 3 years and later 12 percent.
Contribution by the employer:
The amount contributed by you must be contributed by the employer as well. That is the amount that is contributed the employee, the equal amount must be contributed by the employer. However, the amount paid by the employer is divided into various schemes such as Employee’s Pension Funds, Employee’s Pension Scheme, Employee’s Deposit Link Insurance Scheme, EPF Administration, EDLIS Administration charges.
Withdrawal of Funds from Employee Provident Fund:
A person can withdraw up to 50 percent of the amount collected, provided that he has deposited the amount for 7 years. But the reason for withdrawing the amount needs to be mentioned. For purposes such as marriage, education, construction or purchase of house, purchase of land, renovation of home, home loan repayment money can be withdrawn from the Provident Fund Account.
What is a company’s liability for non-payment of EPF?
The payment to the provident fund for a month must be made at the 15th of the next month. However, if the employer fails to make the payment to the provident fund account of an employee then he is liable to pay penalty. Penalty is given under two instances-:
EPF Interest for Late Payment under Section 7Q:
When an employer misses the deadline for the payment to the Provident Fund account, the employer must pay 12 percent for every single day, wherein the delay is caused.
Penal Damages for Late Payment under Section 14B:
After a certain period of time when the period of time increases of the non-payment of the provident fund amount the rate of interest also increases. The Employment Provident Fund Organization informs the employer of the amount of penalty that has accumulated on his part to be paid to the employee through notices.
The employer has to pay the Employees Provident Fund Interest and the penal damages for delayed payment of provident fund through the website of Employment Provident Fund Organization. Even after providing several notices to the employer to make the payment of the provident fund and the interest and penal damages if the employer refuses to do so then Either the Central Provident Fund Commissioner, or any Additional Central Provident Fund Commissioner, or any Deputy Provident Fund Commissioner, or any Regional Provident Fund Commissioner or any Assistant Provident Fund Commissioner may, by order, may decide the dispute and ascertain the amount due on part of the employer. The Officer in-charge has powers similar to the ones vested with the court under Code of Civil Procedure, 1908.
EPF Scheme is a social welfare scheme. Non-payment of EPF, is an extremely critical issue as it attracts heave penalties. Hence, it is advised, that a startup should register as soon as the number of employees reaches the required threshold and hire a payroll executive or outsource the EPF contribution to a third party payroll service provider to ensure that EPF compliance is done in a proper and timely manner.