Byju's, the renowned ed-tech startup based in Bengaluru, has recently been making headlines for unfavorable reasons. The company faced severe criticism for terminating a large number of employees and failing to make timely provident fund (PF) payments. After an investigation by the Employees' Provident Fund Organization (EPFO), Byju's has now cleared 97% (Rs123.1 crore) of its dues. However, it is crucial to understand the consequences if a company fails to fulfill its PF obligations.

 

EPFO guidelines stipulate that employers must credit PF payments to employees' accounts by the 15th of the following month. Any delay in EPF contributions can lead to penalties and interest charges for employers. According to a Supreme Court ruling in February 2022, employers are required to bear damages if an employee's EPF contribution is delayed.

 

The EPFO clarified that employers failing to make timely contributions are liable to pay damages and interest on the outstanding amount. The rate of damages depends on the duration of the delay:

 

EPFO further explained that damages are limited to a maximum of 100% of the arrears, with an additional 12% annual interest applied to the overdue amount throughout the entire period of delay. In case of delayed payments by employers, employees have the option to file a complaint with the EPFO, triggering an inquiry against the employer.

 

The EPFO has the authority to recover the damages by charging interest on the late deposit. Section 7Q of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952, mandates that an employer must pay a simple interest rate of 12% per annum.

 

To ensure transparency, employees can verify whether their employers have deposited their PF contributions by logging into the EPFO portal. Additionally, the EPFO sends SMS alerts to employees regarding the payments made to their PF accounts.

 

Understanding the EPFO guidelines and monitoring PF contributions can empower employees to safeguard their rights and financial well-being. It is essential for both employers and employees to adhere to these regulations to ensure a fair and secure work environment.