The new year brought with it a window of opportunity for employers who had not enrolled employees who were entitled to benefits under schemes administered by the EPFO under the aegis of the EPF Act. The maximum number of complaints received by the EPFO of such non-compliance pertain to contract workers—where the contractor fails to enrol such contract workers or fail to submit either whole or part of the provident fund contribution with the provident fund authorities despite receiving the contribution from the principal employers. Under law, the principal employer has the primary responsibility to contribute towards provident in respect of the contract labour engaged by it. But, typically in contract labour arrangements, the contractor and principal employer contractually agree that the principal employer will pay the contractor and contractor will make the contribution to the provident fund authorities and submit proof of payment to the principal employer.
Although for a limited period of three months ending on March 31, 2017, the ministry of labour & employment launched an amnesty scheme to encourage non-complaint employers to voluntarily enrol employees who are entitled to provident fund but had not been enrolled in the past.
The amnesty scheme, called Employees’ Enrolment Campaign 2017, is available for those employees who (a) were entitled for provident fund membership during the period from April 1, 2009, to December 31, 2016; (b) are alive; and (c) furnish Form 11. The employer is required to make a declaration in the prescribed format for enrolling employees for membership, specifying amongst others details, the date of eligibility in respect of each employee for membership. However, in case of pending proceedings under the EPF Act against an employer, the declaration under the scheme cannot be made for the period the proceedings relate to. Once the declaration is made, the employer is required to deposit the past provident fund contribution along with interest and nominal damages of Re 1 per annum within 15 days of making the declaration for the declaration to be valid and thereafter file a return in the prescribed form.
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The incentives for employers opting to enrol employees under the scheme entail waiver of the employee’s share of contribution, provided that the same has not been deducted from the wages of the employee; waiver of administrative charges; and reduction of damages to Re 1 per annum.
Given the fast approaching deadline for closure of this window, employers should take advantage of this opportunity and the incentives offered, which will save on substantial cost for the employer. Principal employers should put checks and balances in place and impel the contractors engaged by it to enrol its contract workers under the scheme to mitigate risks of unwarranted litigation.
Depending on the success, this scheme may cross the hurdle of enrolment of employees hitherto deprived of provident fund benefits; however, another major hurdle is that of non-contribution or reduced contribution, especially in case of contractor workers, for which another similar scheme may be worthwhile.
-By Pooja Ramchadani & Kriti Kaushik
Pooja Ramchadani is partner and Kriti Kaushik is associate, Shardul Amarchand Mangaldas