Placement firms come under EPFO lens over PF payments

Written by Raj Kumar Ray | New Delhi | Updated: Oct 15 2013, 14:14pm hrs
Private placement agencies supplying contract labour to government departments have come under the scanner of Employees Provident Fund Organisation (EPFO) for allegedly stripping workers of salaries and evading provident fund (PF) payments.

While the government departments have been paying wages to outsourced workers in full, some job agencies are bifurcating those wages into basic wage and various allowances. Since PF payments are based on basic pay, the wage spilt lowers the PF contribution to contract workers even as it lowers their tax outgo.

In a strongly worded circular to all government departments, EPFO said, "This diversion of residual employers contribution is tantamount to pilfering of PF money. As the employer of contract workers, the respective government department unwillingly become a party to this pilferage, EPFO did not name any placement firms in its circular.

The clampdown assumes importance in the wake of a rising trend among government departments to hire contract workers for a wide range of activities, from housekeeping and security to IT-related work. The central government, along with its PSUs, employs about 18.4 lakh contract workers.

As per the EPF Act, the principal employer is responsible to pay PF for both direct employees as well as contract labourers. This is not enforced in true spirit by various government departments both at Centre and states, the EPFO circular said.

Earlier, the parliamentary consultative committee had slammed EPFO over the working conditions of contract workers in government departments. EPFO is on a reality check drive on whether labour rules, including that for provident fund contributions, are being adhered to by the respective ministries. While big, registered HR firms generally comply with labour norms, there have been instances where smaller contractors have flouted rules to cut costs and win job contracts.

In December 2012, labour commissioners started inspecting ministries and departments, finding close to 5,000 contract workers. The health and family welfare ministry employs around 1,794 contract workers while the railways engaged 704 such workers. The figure for commerce and industry ministry was 401, revenue and expenditure departments under finance ministry 413, and HR ministry 249.

Though labour minister Sis Ram Ola recently ruled out absorbing contract labourers in various ministries and PSUs, saying there was no provision to regularise workers under the Act, the government has been reiterating that contract and permanent workers are to be paid same wages for similar kind of work as per Rule 25 of Contract Labour Act, and any contravention of this provision is punishable.