Reforms in Employee Welfare: Key Amendments in India's EPF Schemes

author Apoorv Shishodia

calender June 21, 2024

Reforms in Employee Welfare: Key Amendments in India's EPF Schemes

The Ministry of Labour and Employment of the Government of India (“Labour Department”) has issued 5 (five) notifications on June 14 and June 15, 2024, as published in the Official Gazette, to introduce amendments to the Employee Provident Fund Scheme, 1952 (“EPF Scheme”), Employee Pension Scheme, 1995 (“EP Scheme”), and Employee Deposit Linked Insurance Scheme, 1976 (“EDL Scheme”) (collectively referred to as “EPF Notifications”). These EPF Notifications primarily address adjustments to penalties on overdue contributions under the Employees' Provident Fund Miscellaneous Provisions Act, 1952 (“EPF Act”), modifications to the withdrawal benefits for members who have not fulfilled the required service tenure for pension eligibility, and the computation of past service pension. This news post highlights the changes proposed by the EPF Notifications.

Revised Penalties on Arrears

In accordance with notifications issued by the Labour Department, specifically G.S.R. 329 (E), G.S.R. 327 (E), and G.S.R. 330 (E), amendments have been made concerning the penalties applicable to delayed contributions under the EPF Act. Previously, under the EPF Scheme, EP Scheme and the EDL Scheme, penalties ranged from 5% (five percent) to 25% (twenty-five percent) annually, depending on the duration of the default. However, the aforementioned notifications have standardized these penalties to a flat rate of 1% (one percent) per month on arrears, effective from June 15, 2024.

Withdrawal Benefit under the EP Scheme

In line with notification number G.S.R. 326 (E), ‘Table D’ of the EP Scheme has been amended to adjust the factors according to months of service rather than years, effective from June 14, 2024, the date of publication of the notification in the Official Gazette. Previously, entitlements were computed by multiplying the last salary by a factor specified in ‘Table D’ of the EP Scheme, which varied depending on the completed years of service.

Calculation of Previous Service Pension

In accordance with Notification No. G.S.R. 325 (E), amendments have been made to ‘Table B’ of the Schedule of the EP Scheme. The purpose of ‘Table B’ is to calculate past service benefits under the discontinued family pension scheme for current members upon cessation of employment. Previously, ‘Table B’ included factors corresponding to service durations of less than 34 (thirty-four) years. However, the above-mentioned notification has now introduced additional rows to ‘Table B’ to include factors corresponding to service durations of less than 42 (forty-two) years.

Conclusion

EPF Notifications issued by the Labour Department mark considerable changes to EPF Scheme, EP Scheme, and EDL schemes, aimed at streamlining penalties for overdue contributions, enhancing withdrawal benefits, and refining pension calculations. These reforms reflect the government's commitment to modernizing and improving the efficiency of employee welfare schemes, ensuring they remain equitable and responsive to the evolving needs of the workforce. 

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