In what may come as a major relief for formal sector companies, the Employees’ Provident Fund Organisation (EPFO) has decided to not penalise employers for a delay in depositing provident fund dues during the lockdown period.

“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,” a press statement issued by the labour and employment ministry said.

The official statement noted firms are distressed and unable to function normally and pay the statutory contributions in time due to a “prolonged lockdown announced by the government to control the spread of COVID-19.”

The government said that the move will ease the compliance norms for around 650,000 establishments that make EPF contribution of its workers “and save them from liability on account of penal damages.”

The move will give full flexibility to companies to delay EPF contribution of its workers as they face a liquidity crunch.

On April 30, the EPFO had said in a press statement that the filing of monthly electronic challan-cum-return (ECR) is separated from the payment of the statutory contribution reported in the ECR. This means that the Companies only need to inform EPFO about number of employees for whom they are going to make EPF contribution without actually making it by the due date.

Right now, as soon as the companies have filed their returns, known as ECR, they also have to subsequently submit the EPF payments of those many employees at one go. Not doing so attracts a penalty.

This was the first step by the EPFO towards giving some sort of relief to firms on depositing EPF contribution of workers. There are 48 million employees whose contribution is deposited with the EPFO on a regular basis.

“If you feel that you do not have full money, you can file the ECR (electronic-cum-challan) and make payments later on. No damages will be imposed on you. You can also make part payment, say, 30 per cent on one day and 30 per cent on another. Installment facility will be available according to your convenience and liquidity position,” the EPFO chief executive officer Sunil Barthwal had told the Confederation of Indian Industry in a meeting on April 30.

At present, companies hiring at least 20 workers are required to make EPF contribution for its workers. While 12 per cent of wages goes as employee's share, 12 per cent is deposited as the employee's share.