Ministry’s Notification on Penalty Reduction

The Ministry of Labor and Employment recently issued a notification, dated June 14, 2024, announcing a reduction in penalty charges for delays in employer contributions to the Employee Provident Fund (EPF), Pension Scheme (EPS), and Insurance Scheme (EDLI).

Labor unions, however, have expressed strong objections to this decision, arguing that it undermines the interests of employees.

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Labor Unions’ Concerns

The All India Trade Union Congress (AITUC) has criticized the Ministry’s amendments to the EPF, Pension, and EDLI schemes.

AITUC General Secretary Amarjit Kaur highlighted that the amendments, which reduce penalties for employer defaults, were implemented without consulting the Central Board of Trustees of EPFO, which includes representation from labor unions.

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AITUC has urged the government to withdraw these notifications, emphasizing the importance of respecting tri-partism in policy decisions.

Changes in Penalty Structure

Prior to the recent notification, penalties for late contributions varied based on the duration of the default. For defaults less than two months, a penalty of 25% per annum was charged.

The penalty reduced to 10% for defaults between two to four months, and further adjustments were made for longer delays.

Under the new rules effective from June 14, 2024, employers will face a standardized penalty structure of 1% per month (12% annually) for delays in contributions to all three schemes.

This change aims to simplify the penalty system, offering some relief to employers for longer default periods while maintaining penalties unchanged for shorter delays.

This notification reflects the Ministry’s efforts to ease compliance burdens on businesses, but it has sparked significant dissent among labor unions concerned about its impact on worker welfare.

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