EPFO ordered to compensate employee after pension payout error

The District Consumer Disputes Redressal Commission in Kangra, Himachal Pradesh, has held the Employees’ Provident Fund Organisation (EPFO) liable for deficiency in service after it incorrectly reduced an employee’s pensionable service while calculating his pension withdrawal benefit, resulting in a lower payout, according to a LiveLaw report.

As per the report, the case was filed by Abhinay Katoch, who worked as a clerk at DAV Public School through an outsourcing agency from April 4, 2024, to March 15, 2025. During this period, provident fund and pension contributions were regularly deducted from his salary and deposited with the EPFO.

Katoch’s EPF passbook reflected pension contributions of ₹14,230. However, when he applied for pension withdrawal benefits, the EPFO credited only ₹12,750 to his bank account. Alleging that the shortfall remained unresolved despite repeated representations, he approached the Consumer Commission seeking the balance amount along with interest, compensation and litigation costs.

According to the LiveLaw report, the EPFO argued that the withdrawal benefit had been calculated in accordance with the Employees’ Pension Scheme, 1995. It contended that, after excluding a 16-day non-contributory period, the complainant’s pensionable service was reduced to 10 months, and the benefit was computed accordingly.

The Commission, however, found that the EPFO had failed to produce evidence supporting the alleged 16-day non-contributory period. It held that the complainant had completed 11 months and 12 days of service, making the decision to round down the service period to 10 months arbitrary and legally unsustainable.

The Commission also clarified that pension withdrawal benefits under Table D of the Employees’ Pension Scheme are calculated using prescribed factors rather than by simply refunding the pension contributions reflected in the EPF passbook. While it accepted that the EPFO had correctly used the statutory wage ceiling of ₹15,000 per month, it held that the organisation applied the wrong factor. Instead of using the factor of 0.94 applicable to 11 months and 12 days of service, it used the factor of 0.85 meant for 10 months, resulting in a short payment, the report said.

The Commission directed the EPFO to pay the complainant the outstanding ₹1,350 with 9% annual interest from the date of the short payment until its realisation. It also awarded ₹1,000 as compensation for mental harassment and ₹2,500 towards litigation expenses, according to the LiveLaw report.