Accounting

Late EPF: Is the Employer or the Accountant Liable?

The employer stays liable for late EPF and ETF, even when an accountant runs the payroll. What the Acts say, and how a bureau agreement should read.

Updated September 24, 2026 Reviewed by Anudi Imesha, Customer Success Consultant, Humanised HR and Payroll 5 min read

On this page
  1. What the EPF and ETF Acts say about who must remit
  2. What a payroll service agreement can and cannot shift
  3. Late payment: what the Acts impose, and on whom
  4. Six clauses to put in an accountant-client payroll agreement
  5. Evidence to keep: approval trails, payment receipts, filed returns
  6. What to do the month a client pays you late
  7. Frequently asked questions
  8. Who is fined if EPF is paid late: the employer or the accountant?
  9. Can an accountant be held personally liable for a client's late EPF payment?
  10. Can our agreement say the accountant pays any surcharge caused by their error?
  11. What happens if we switch payroll bureaus mid-year?
  12. Does an indemnity clause protect the employer from a surcharge?

If your firm calculates and pays a client’s EPF and ETF, the employer stays liable when either is late, not you. This holds even when you do the work and pay on the client’s behalf. The EPF Act and the ETF Act address the employer, not the firm running the payroll.

What the EPF and ETF Acts say about who must remit

EPF (the retirement fund: employee 8%, employer 12%) is due before the last working day of the following month, under the EPF Act No. 15 of 1958. ETF (a fund the employer alone pays 3% into) is due on or before that day, under the ETF Act No. 46 of 1980. Both Acts name the employer as the party that must pay. Neither Act names an accountant or a payroll bureau as a party with its own duty to pay. See the EPF employer guide for registration, forms and both funds’ rules in full.

What a payroll service agreement can and cannot shift

A payroll service agreement can set out who does the calculating and who pays whom. But it cannot move the statutory duty away from the employer of record. See Outsource Payroll or Run It In-House in Sri Lanka? for that choice. The employer stays responsible for EPF, ETF and APIT (income tax the employer takes from pay and sends to the IRD) compliance, whoever processes the numbers. Your contract with a client can fix who does the work. It can also fix who covers a mistake, between the two of you. It cannot change who the EPF Act and the ETF Act hold responsible when a payment is late.

Late payment: what the Acts impose, and on whom

A surcharge (a fine added for paying late) applies to both funds. It runs from 5% for a short delay to 50% for a delay over 12 months. The EPF Act lets the Commissioner accept that a delay was beyond the employer’s control. If so, the surcharge is not imposed. See EPF and ETF Late Payment Surcharge Rates for the full band table and a worked example.

Beyond the surcharge, failing to pay EPF is an offence under section 37 of the EPF Act. On conviction, this can mean a fine or imprisonment. The Labour Department recovers arrears through the Magistrate’s Court. ETF arrears are recoverable under section 28 of the ETF Act. Under section 31 they rank as a first charge. The Act does not say against which other debts this ranks first. Every one of these sections addresses the employer. This holds whatever your service agreement says between yourselves.

Six clauses to put in an accountant-client payroll agreement

None of these six items comes from the EPF Act or the ETF Act. They are practical terms worth agreeing in writing before a client goes live. That way a late month does not turn into a dispute about who said what.

ClauseWhat it should cover
Data deadlineThe date each month the client must send approved hours, new joiners and leavers.
Approval stepWho signs off the EPF and ETF figures before you pay, and by when.
Payment authorityWhether you pay from the client’s account or your own, and who funds it.
Late-client-data ruleWhat happens to the deadline if the client sends data after the cut-off.
Surcharge responsibilityWho pays a surcharge caused by your error. Who pays one caused by the client’s late data or late funds.
Handover on exitWhat records you hand over, and by when, if the client leaves.

Evidence to keep: approval trails, payment receipts, filed returns

Keep a dated record for every client, every month:

  • The date you asked the client for approval, and the date they gave it.
  • The date funds were confirmed available for the EPF and ETF payment.
  • The payment confirmation or bank reference for each fund, with the date paid.
  • A copy of the C-form, R1 or R4 filed for that month.

None of this is required by either Act. It is what lets you show, month by month, who caused a delay.

What to do the month a client pays you late

  1. Pay EPF and ETF from client funds the day they arrive. Do not hold the payment for the next request cycle. See how to pay ETF online in Sri Lanka for that payment step.
  2. Tell the client in writing which surcharge band the delay falls into, with the figure.
  3. Date your own record of when you asked for funds and when they arrived.
  4. Do not advance the payment from your firm’s own account without a written agreement on who repays it.

This page sets out what the EPF Act and the ETF Act say. For a real case, take the facts and your agreement to a lawyer.

Do this automatically in Humanised. Payroll software for accountants keeps every client’s C-form ready, and calculates each client’s EPF, ETF and APIT. The employer still files and pays. There is a free 7-day assisted trial, set up by the Humanised team on your own client data.

This is general payroll guidance. Every case is different. For your own case, speak to a payroll practitioner or a lawyer.

Frequently asked questions

Who is fined if EPF is paid late: the employer or the accountant?

The employer. The EPF Act names the employer as liable for the surcharge. It also names the employer for the offence under section 37. This holds whatever a service agreement with an accountant says.

Can an accountant be held personally liable for a client’s late EPF payment?

The EPF Act and the ETF Act do not name the accountant or bureau as a party with a statutory duty. Whether a firm owes its client money for a mistake it caused is a separate, contract question. It sits outside these two Acts.

Can our agreement say the accountant pays any surcharge caused by their error?

Yes, an agreement can set that out between you and the client. It settles who repays whom, between the two of you. It does not change who the EPF Act and the ETF Act pursue first. That is always the employer.

What happens if we switch payroll bureaus mid-year?

Get the year-to-date EPF and ETF figures from the outgoing firm before the switch. Also get every filed C-form, R1 or R4. This way the new firm’s running totals are correct from day one.

Does an indemnity clause protect the employer from a surcharge?

An indemnity clause can require the accountant to reimburse the employer. It does not stop the EPF Department or the ETF Board pursuing the employer first. The employer is who the Acts address.

Do this in Humanised

Humanised is payroll software in Sri Lanka. It calculates EPF, ETF and APIT every month and produces the payslips, bank file and returns. From LKR 10,000 a month.

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