June 23, 2024

CITU Condemns Central Govt for Reducing Penalty Charges on EPF Defaults

THE Centre of Indian Trade Unions (CITU), in a statement issued on June 16, has strongly criticised the newly sworn-in NDA government for drastically reducing the penalty charges on defaults by employers in depositing Employees' Provident Fund (EPF), Employees' Pension Scheme (EPS), and Employees' Deposit-Linked Insurance (EDLI) contributions. CITU apprehends that this move promotes the private corporate employers towards non-compliance with statutory obligations and jeopardizes workers' financial security.

On June 14, 2024, the labour minister of the Modi cabinet issued an atrocious gazette notification significantly lowering penal charges on employers who default on timely deposits to the EPFO. According to CITU, this reduction is almost one-fifth of the previous charges. Under the new regulation, the penalty for defaults is now a flat rate of 1 per cent per month (12 per cent per annum), compared to the previous tiered system of 5 per cent to 25 per cent per annum depending on the duration of the default.

Previously, penal charges were set at 5 per cent per annum for defaults of less than two months, 10 per cent for two to four months, 15 per cent for four to six months, and 25 per cent for over six months. CITU highlights that the new uniform rate undermines the deterrent effect of higher penalties for prolonged defaults, thereby encouraging employers to delay contributions.

This policy shift is a move to promote ease of doing business for the employers. It comes at the expense of workers' financial well-being, affecting the approximately 118 million employees covered under the EPF scheme out of India's 487.9 million-strong workforce, who though are entitled for EPF/pension, are not covered for the same. CITU warns that this move will allow employers to misuse workers' lifetime savings and increase non-compliance with EPF regulations.

CITU highlights that the only effective deterrents against such defaults—paragraph 5 of the Employees' Pension Scheme, 1995, and paragraph 8A of the EDLI Scheme, 1976—are now effectively weakened by these amendments. CITU demands the central government to rescind this anti-labour and default-promoting pro-employer notification immediately and calls upon the working people to go for militant protest actions across the country against these amendments.