Since the imposition of lockdown on March 25 by the government to contain the COVID-19 spread, businesses have been facing liquidity or cash crunch, leading to difficulties in paying their mandatory provident fund dues.
Retirement fund body EPFO has decided not to impose any penalty for delay in payment of employees’ provident fund contributions by firms during the nationwide lockdown.
Since the imposition of lockdown on March 25 by the government to contain the COVID-19 spread, businesses have been facing liquidity or cash crunch, leading to difficulties in paying their mandatory provident fund dues.
“During the lockdown period we are not going to impose any damages (penalty). This is our pro stakeholder/businesses/employers attitude which we are following,” Employees’ Provident Fund Organisations (EPFO) Central Provident Fund Commissioner Sunil Barthwal said during a webinar organised by industry body PHDCCI on Friday.
The EPFO has a provision of charging damages or penalty from the employers who are unable to deposit PF contributions as mandated under the EPF Scheme 1952.
Employers are required to deposit dues on a month’s salary by 15th of the next month.
However, they get 10 days grace for payment after that.
“Due to prolonged lockdown announced by the government to control the spread of COVID-19 and other disruptions due to pandemic, establishments covered under EPF & MP Act, 1952 are distressed and unable to function normally and pay the statutory contributions in time,” a labour ministry statement said later in the day.
The ministry stated, “Considering the difficulty faced by the establishments in timely deposit of contributions or administrative charges due for any period during lockdown, the EPFO has decided that such delays due to operational or economic reasons shall not be treated as default and penal damages should not be levied for such delay.”
It also said that a circular has been issued on May 15, 2020, to field offices of the EPFO provided that no proceeding shall be initiated for levy of penal damages in such cases.
This step shall ease the compliance norms for 6.5 lakh EPF covered establishments and save them from liability on account of penal damages, it added.
Earlier on April 30, the EPFO allowed employers to file monthly EPF returns without making simultaneous payment of dues, which gave a relief to about 6 lakh firms amid the lockdown.
Under the scheme, employers are required to file employees provident fund returns and make payment of dues simultaneously.
EPF returns have details about employees’ and employers’ contributions towards the social security scheme run by the EPFO.
During the ongoing coronavirus-induced lockdown, businesses are not able to function normally and are facing liquidity issues or cash crunch to pay their statutory dues even though they are retaining the employees on their rolls, labour ministry had said in a statement on the decision.
Barthwal also told the industry representatives during the webinar that the government’s decision to cut employers and employees’ PF contributions to 10 per cent each from the existing 12 per cent would be implemented in May month’s salaries.
“Soon notification is going to be out…May month salaries would be due in June. So we will apply it on the May month salaries,” he said.
Earlier this week, Finance Minister Nirmala Sitharaman had announced reduction of statutory provident fund contribution by both employers and employees to 10 per cent of basic wages from the existing 12 per cent for the next three months.
The decision was taken to facilitate more take-home salary for employees and give relief to employers in payment of PF dues, resulting in a liquidity ease of Rs 6,750 crore.
The decision is expected to benefit 4.3 crore employees and 6.5 lakh employers reeling under liquidity crunch due to COVID-19 lockdown.
Without divulging details about type of claims and time period, Barthwal said as many as 23 lakh claims were settled with disbursal of Rs 8,000 crore.
Earlier on March 28, the EPFO had allowed formal sector workers under its ambit to withdraw a non-refundable advance from their retirement savings to deal with hardships due to lockdown.
Under this provision, non-refundable withdrawal to the extent of the basic wages and dearness allowances for three months or up to 75 per cent of the amount standing to member’s credit in the EPF account, whichever is less, is provided.
