EPFO Guide: What happens if an employer doesn't deposit Provident Fund deductions into PF account?

Employee Provident Fund (EPF) is an important tool that ensures financial security for employees after retirement. This is facilitated by monthly contributions from both the employer and the employee, each of which contributes twelve per cent of the employee's basic salary and dearness allowance. The contribution from the employer is divided between the Employees' Pension Scheme (EPS) (8.33 per cent) and the PF account (3.67 per cent).

However, problems may arise if an employer doesn't deposit these deductions into the PF account. It is mandatory by law for employers to deposit the deducted EPF contributions into the employees' PF accounts within 15 days of the previous month's salary payment. Any non-compliance by the employer can result in severe penalties under the EPF Act.

If an employer fails to deposit the required contributions, there can be several punitive measures that can be implemented. The EPFO can impose interest for late deposit of EPF deductions and initiate recovery actions. Non-deposit of the deducted amount towards the provident fund can lead to penalties. A police complaint can also be lodged against the employer under Sections 406 and 409 of the Indian Penal Code (IPC) for criminal breach of trust. The EPFO is also empowered under Section 14-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, to recover damages in case of an employer's default in PF contribution payments.

Employers cannot claim tax relief for EPF contributions if there aren’t timely deposits into the PF account. The Union Budget 2021 reinforced this by disallowing employers from deducting the employee's PF contribution as an expense if it is not deposited on time.

In case of non-deposit by employers, employees have several options. Employees can file a complaint with the EPFO against the employer for non-deposit of PF contributions. This can trigger an inquiry by the retirement fund regulatory body. Employees can initiate a criminal case with the police, or approach the chief vigilance officer appointed by the labor ministry. Employees can request a copy of Form 12, which details the money deducted from their salary. If denied, they can file a Right to Information application with the regional EPFO. Employees can also lodge complaints with the police under IPC sections 406/409 by the EPFO for necessary action against such employers.

These actions can lead to severe consequences for the employer, including imprisonment for up to three years, a fine, or both. In severe cases, the offence may also fall under Section 409, which carries a punishment of imprisonment for life or up to ten years, along with a fine.

The EPFO keeps subscribers informed about monthly deposits through SMS alerts, and employees can also check their PF account deposits by logging into the EPFO portal. Some companies continue to deduct PF contributions from employees' salaries but fail to deposit them either with their trust or with the EPFO. The EPFO publishes a list of the top fifty defaulters on their website, and it's worth checking to see if your employer is included.