The Employees’ Provident Fund Organisation (EPFO) has cracked the whip on firms failing to ensure remittance of the provident fund, pension and insurance amounts on behalf of their regular contract workers and those employed through contractors. Having found laxity by the contractors, especially those in the construction sector and in textile and leather clusters in depositing the amounts after claiming huge EPF sums from the principal employers, the EPFO has fixed the responsibility of remittance with the latter.
“The issue of coverage of contract workers has been flagged as area of topmost concern,” Central Provident Fund Commissioner V P Joy wrote to all organised sector units.
“In this connection, I invite your personal attention towards deposit of provident fund by contractors of major principal employers, it is often observed that the contractors claim huge amounts towards EPF of contract workers from the principal employer but either do not deposit it at all or deposit it partly, thus depriving these workers of PF, pension and insurance benefits,” Joy wrote.
When contacted, Joy said that the organisation is determined to take legal action against the employers if the directive is not complied with, including imposing penalties as specified in the EPF Act. He added that the move is part of a drive to increase the number of active EPF accounts from 4 crore now (of the registered subscriber base of 15 crore) to 8 crore in a rather short period. “In the case of the construction sector itself, where the active EPF accounts is 89 lakh, we assume that there is potential to add a similar number,” he said.
Under the Employees’ Provident Fund Act 1952, an EPF account is mandatory for all employees earning up to Rs 15,000 per month in firms employing more than 20 workers. Of India’s 47.41 crore workforce, 90% is in the unorganised sector and the EPF benefits are practically restricted to this sector.
According to the Act, 24% of an employee’s salary, with equal contribution from employees and employers, is contributed to the EPFO. A little over one-third of the amount (8.33%), paid by the employers, goes to the employee’s pension scheme. The government chips in with 1.16% as EPS subsidy.
The EPFO directive said: “With a view to making the system more robust, transparent and reducing the cost of compliance for the employer, EPFO has launched a facility for the principal employers to register at the EPFO website the details of the contract employers of each contract awarded by them. The entire information can be viewed and updated by principal employers at any time.”
As per the rules, it is the responsibility of the principal employer to pay both the contributions payable by him in respect of the employees directly employed by him and also in respect of those through a contractor. “To facilitate this, a provision is available on the official website of EPFO www.epfindia.gov.in to verify as to whether the agencies and contractors having provident fund code numbers are regularly depositing PF contributions every month in respect of all employees deployed by them. The facility can be utilised to check the compliance position of all agencies and contractors…,” Joy said in the letter to firms.