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Tuesday, 25 November 2014

Compliance under the EPF & MP Act, 1952 in respect of employees engaged by or through the Contractors.


कर्मचारी भविष्य निधि संगठन
( श्रम मंत्रालय, भारत सरकार )
क्षेत्रीय कार्यालय, मुंबई -III, कांदिवली
भविष्य निधि भवन,प्लाटनं. 222,सेक्टर 3,
चारकोप मार्केट, चारकोप पोयसररोड,
कांदिवली (),मुंबई - 400 067
फोन : 28692604 / 28692531 फैक्स : 28695297

(Ministry of Labour, Govt.ofIndia)
BHAVISHYA NIDHI BHAVAN, PLOT NO.222, SECTOR-3 CHARKOP MARKET,  CHARKOP  POISAR ROAD,                                                KANDIVALI (W) MUMBAI-400067
Tel: 28692604 / 28692531  Fax: 28695297

No.MH/PF/RO/KND/EDP/378                                                                                                                    Date: 24-Nov-14


Subject: Compliance under the EPF & MP Act, 1952 in respect of employees engaged   by or through the Contractors.

              You may be aware that Employees’ Provident Fund Organisation administers the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the Schemes framed thereunder which aim to provide social security in the form of Provident Fund, Pension and Insurance to all the employees who are employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who get wages directly or indirectly from the employer and which includes any person employed by or through a contractor in or in connection with the work of the establishment and apprentices engaged therein (other than the apprentice under the Apprentice Act, 1961).

2.           You have been regularly complying with the provisions of the Act in respect of your direct employees under EPF Code no. ____________ However, activities like watch and ward, house-keeping, data-entry etc. you must have outsourced to agencies and contractors. At times, the workers engaged by these agencies and contractors are deprived of Provident Fund, Pension and Insurance. Even if they receive such benefits, those do not commensurate with the wages they earn every month. Similarly, various agencies and contractors often receive employer’s contribution on full wages from you but while extending the provident fund benefits etc. to their workers, these agencies bifurcate the wages into basic wages and various other allowances, which are not within the ambit of basic wages, to evade the provident fund. This is nothing but subterfuge of wages. As a result, the poor workers are deprived of their legitimate share of provident fund etc. Further, the residual employer’s contribution which these agencies do not pass on to their workers tantamount to pilfering of provident fund money. Thus, while settling the periodic bills of agencies and contractors which you engage, you become a party to this pilferage unknowingly. Your intervention in this regard will ensure that all such employees do get social security benefits.

3.           While awarding various contracts, it may please be ensured that the agencies and contractors shall have Provident Fund Code Number and all the contract employees deployed by them are enrolled as members of Provident Fund. In this regard, your kind attention is drawn to Paragraph 30(3) of the Employees’ Provident Fund Scheme,1953 which provides that it shall be 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 the employees employed by or through a contractor.

4.           A provision has been made on the Official Website of EPFO.,on the “establishment search option” to verify as to whether the agencies and contractors having Provident Fund Code numbers are regularly depositing Provident Fund Contributions every month in respect of all the employees deployed by them. The above facility may be utilized to check the compliance position of the agencies and contractors to the provisions of the Act and the Schemes framed there under to whom the contractors are awarded by you. Wherever the contractors do not have any Provident Fund Code number or if any non-compliance by any agency or contractor is noticed, the details of such establishments may please be informed to this office so that appropriate action can be initiated and poor workers’ interest is protected.

5.           The Enforcement Officer of this Office shall be visiting your establishment to ascertain the status of compliance in respect of the contract employees. You are requested to handover the details of the outsourced work together with the name and address of the contractor in the following format for verification so as to ensure compliance.

Sl No.
Name of Contractor outsourced Agency, Address
Work Order(s) no. and Date and duration of work
Nature of work
No of employees
Wages paid
PF Code No. If any
Name of PF Office where PF and allied dues are deposited by contractor

6.           I am sure that your esteemed organization is interested in compliance of laws of land and therefore, you will give full support to the Enforcement Officer of the department. You will give us no occasion to resort to other statutory provisions existing in Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes framed thereunder. Our joint venture is that contract/outsourced employees get the social security benefits to which they are entitled to and to which your organization is committed.

Yours Faithfully,

Assistant PF Commissioner

Friday, 17 October 2014

“Inspector raj” set to be history with Modi govt's first big-bang labour reform

Hon'ble Prime minister has. Inaugurated Pandit Dindayal Upadhyay Shramev Jayate Programme. Highlights are as under :-
1.Unified Web Portal of Labour Ministry.
2. Labour Identification Number for every establishment.
3.Computer draw will decide Inspection.
4.Inspection Report to be uploaded within 72 hrs.
5. One Return for 16 Labour laws.
6.Universal Account Number of PF for workers.
7.Apprentice Promotion Scheme for ITI students to get more seats in industries.
8.Employment Exchanges to be made as Career counseling Centres.
9. 27000 Cr. Rupees are to be returned to workers.
10. Rastriya Swasth Bima Yojana for In Un organised workers.

“Inspector raj” set to be history with Modi govt's first big-bang labour reform:
NEW DELHI: The NDA government is set to unveil its first big-bang labour reform by partially dismantling the factory inspector raj, perceived by industry to be arbitrary and corrupt. Under the proposed reforms, labour inspectors will lose their power to decide which unit to visit and the number of forms related to compliance with labour laws that employers have to file will drop from 16 to 1. However, cutting down on the inspector raj will be twinned with pro-worker measures, such as making it easier for employees to access provident fund accounts and insurance schemes, according to a concept note prepared by the labour ministry which EThas reviewed. Some of these changes could be unveiled as early as Thursday by Prime Minister Narendra Modi, in the presence of state labour and health ministers from across the country. Modi is likely to inaugurate a new programme, christened Pt Deen Dayal Upadhyay Shrameva Jayate Karyakram. Under the programme, the labour ministry is setting up a 'Shram Suvidha', or labour facilitation, portal and will unveil a new 'Labour Inspection Scheme' that will cut down on the inspector raj and bring in transparency for e-filing of returns related to compliance with various labour laws. It will also make it easier for workers to access welfare schemes such as Employees' Provident Fund and insurance.Importantly, the new scheme introduces portability for EPF accounts by linking them with bank accounts.
As part of the inaugural ceremony, the PM will send SMSes to 1,800 labour inspectors of four central organisations (Chief Labour Commissioner, Directorate General of Mines Safety, Employees' Provident Fund and Employees' State Insurance Corporation), which will immediately come under the new scheme.
These four organisations administer 16 out of 44 central labour laws in government and private companies across the country. In the second phase of the programme, the government intends to bring in the remaining labour laws and also all the state governments on to the portal to ensure that all the units of the country are covered by this scheme.As part of the new system, a unique Labour Identification Number (LIN) will be allotted to factories or industrial units to facilitate online registration. Instead of 16 separate returns, units need to file just one consolidated, self-certified and simplified online return.
Inspectors will lose their power to choose which unit to visit. Instead, a computer-generated random list of units will be given to inspectors, that too only the previous day. The need to inspect a factory because of a specific complaint will be decided centrally after examining evidence.
Further, the labour inspectors have to upload their reports within 72 hours of the inspection to ensure timely redress of grievances of employers. The eventual aim of the exercise is to have a complete database on employers, employees and industrial units on one website.
The portal will be operated by four central organisations: Chief Labour Commissioner, Directorate General of Mines Safety, Employees' Provident Fund and Employees' State Insurance Corporation. The ministry has already collated information about all the 11 lakh units under these organisations and digitised and de-duplicated them reducing the total number to 6-7 lakh. All these units are being offered LIN from 16.10.2014 onwards.

Wednesday, 3 September 2014

Understanding of PF, Pension and EDLI with new amendments of Rs.15000/-

Your attention is drawn to the Gazette notification dated 22/8/2014 enhancing wage ceiling from 6500/- to 15000/- per month from 1/9/2014.
There are 3 parts to the said notification as follows :
1) Employees earning (Basic wages + DA/Special Allowance + retaining allowance + cash value of any food concession) upto 15000/- pm will be required to be COMPULSORILY covered under PF.
1.a) All existing employees who are excluded and who have filled in Form 11 and are currently not covered by PF by crossing the limit of 6500/- will henceforth effective 1/9/2014 be required to be covered for PF upto 15000/- monthly salary drawn. Wherever establishments have covered employees above 15000/- limit, can continue to do so. Current and new examples shown below :
Current wages
Pensionable wages
Employees contribution at 12%
Account No.1 – employer’s contribution
Account No.10 – Employer’s pension
Scenario 1 old
Scenario 2 old
Scenario 3 old
Scenario 4 new
Scenario 4 new
Scenario 5 new
Scenario 6 new
Scenario 7 new
As per notification, Department has enhanced wage ceiling to 15000/- and any new employee coming with salary of more than 15,000/- and is not a previous member of PF Fund and if the establishment does not have a PF scheme if the strength is below 20, he will not be a member. However, if a new employee is a member of the PF Scheme earlier and even if his salary crosses 15000/- he continues to be a member in the company’s PF driven Scheme because of the benefit given by the company to its employees. However, if he is a new employee and if the company has a PF scheme and is salary is more than 15000, EPS will not be applicable to him.
Scenario 8 new
1250 (pension 8.33% on 15000
Scenario 8 new employee joining
No pension
No pension but PF & EDLI
Scenario 9 new for employer
2400 for PF on 20,000 and 1666 on pension on 20,000 and 58 addl 1.16% on 5000
PF at734+ Admin. Charges at 1.10% ( 220.00 )
EDLI charges at 0.50% ( 75.00 ) EDLI admin at 0.01% ( 2.00 )

(Employer) 8.33% on 20000 = 1666 + (Employee) 1.16% on 5000 = 58 (1724) opted for pension

1.b) The employees whose pay at the time of joining the establishment in case is over and above 15000/- pm are only required to join the Employees Provident Fund, 1952 and EDLI Scheme, 1976 and shall not be eligible for joining the Employees Pension Scheme, 1995 subject to point 2.(a) below.

2) Employees Pension Scheme 1995 also undergoes a change for those whose pay as on 1/9/2014 is less than or equal to 15000/- This is so because Govt. has decided to fix a minimum pension of 1000/- per month in all cases of monthly widow pension. Monthly children pension for each child shall be equal to 25% of amount admissible to widow of not less than 250/- pm and if not survived by widow and there are only children, then 75% of amount admissible to widow of not less than 750/- pm. For purpose of calculation, all cases of exit/death on or after 1/9/2014, it will take into account average monthly drawn pay of last 60 months on prorata basis before leaving the Organization upto a maximum pensionable salary of 15000/- pm if the member was not in receipt of full pay in the last 60months. Accordingly, the pensionable salary shall be calculated on prorate basis by taking 12 months average separately for the period upto 31/8/2014 upto the wage ceiling of 6500 pm.

2.a) Existing Employees Pension Scheme Member as on 1/9/2014 who had been contributing on salary exceeding 6500/- will be required to exercise a fresh option jointly between employer and employee whether or not, to continue contributing on salary exceeding 15000/-pm provided if there is willingness on both sides, then employee will be required to contribute an additional 1.16% on salary exceeding 15000/- from and out of contributions payable by the employee per month, over and above 1.10% which is already paid by employer as administrative charges. Please note that this additional contribution has no relation to administrative charges. This option is valid for 6 months and extendable by another 6 months if sufficient cause for delay is accepted by RPFC after which pensionable contribution made if any will be diverted to PF account with interest. This means that an employee is not interested in joining the EPS Scheme except for PF & EDLI. In case no option is exercised, it shall be deemed that member has not opted for contribution over the wage ceiling and the contribution made to the pension fund over and above the wage ceiling of 15000/- shall be diverted to PF Account of the member along with interest declared under EPS-95. Please see scenario 8.
In any case, the provisions for contributing on higher salary has been deleted and as such, no new options can be allowed to any member of EPS 1995 on and after 1/9/2014.
An EPS will henceforth apply only to EPF members whose pay at the time of becoming PF member is not more than 15000/- pm. On or after 1/9/2014 the entire employer and employee contribution shall remain in PF for all new PF members on or after 1/9/2014 having salary of more than 15000/- at the time of joining.
2.b) If an employee does not qualify for pension as per laid down rule of 10 year service or completion of 58 years of age whichever is earlier, he can withdraw the benefit as per table “D” or opt for scheme certificate if member is not 58.
3) EDLI Scheme benefit has been increased by 20% in addition to existing benefits. Maximum sum assured was 3.00 lakhs earlier and now enhanced the maximum sum assured to 3.60 lakhs including 20% adhoc benefit. That is, if an EPFO subscriber dies, his family will be entitled to a maximum of 3.60 lakhs.

Reproducing complete paras as per the Act where changes have been made :
The Employees’s Provident Fund Scheme, 1952 :
In para 2, clause (f) sub clause (ii)
Excluded employee means
An employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds “fifteen thousand rupees” per month.

In para 26, in sub-paragraph (6)
Notwithstanding anything contained in this paragraph, (an officer not below the rank of an Assistant Provident Fund Commissioner) may, on joint request in writing, of any employee of a factory or other establishment to which this Scheme applies and his employer, enroll such employee as a member or allow him to contribute on more than (rupees fifteen thousand rupees” of his pay per month if he is already a member of the Fund and thereupon such employee shall be entitled to the benefits and shall be subject to the conditions of the Fund, provided that the employer gives an undertaking in writing that he shall pay the administrative charges payable and shall comply with all statutory provisions in respect of such employee.
In para 26A, in sub-paragraph (2)
Retention of membership.
(2) Every member employed as an employee other than an excluded employee in a factory or other establishment on which this Scheme applies, shall contribute to the Fund, and the contribution shall also be payable to the Fund in respect of him by the employer. Such contribution shall be in accordance with the rate specified in paragraph 29.

Provided that subject to the provisions contained in sub-paragraph (6) of Paragraph 26 and (in Paragraph 27) or sub-paragraph (1) of Paragraph 27-A, where the monthly pay of such a member
exceeds “fifteen thousand rupees” the contribution payable by him, and in respect of him by the employer, shall be limited to the amounts payable on a monthly pay of fifteen thousand rupees including dearness allowance, retaining allowance if any and cash value of food concession.

The Employees’s Pension Scheme, 1995 :
In para 3, in sub-paragraph (2)
(2) The Central Government shall also contribute at the rate of 1.16 percent of the pay of the members of the Employees’ Pension Scheme and credit the contribution to the Employees Pension Fund:
Provided that where the pay of the member exceeds fifteen thousand rupees per month the contribution payable by the employer and the Central Government be limited to the amount payable on his pay of fifteen thousand rupees.
In the principal scheme, in paragraph 11
Determination of Pensionable Salary.
(1) The pensionable salary shall be the average monthly pay drawn in any manner including on piece rate basis during contributory period of service in the span of sixty months preceding the date of exit from the membership of the pension fund and the pensionable salary shall be determined on pro-rata basis for the pensionable service upto the 1st day of September 2014 subject to a maximum of 6500 per month and for the period thereafter at the maximum of 15000 per month.
Provided that if a member was not in receipt of full pay during the period of 60 months proceeding the day he ceased to be the member of the pension fund, the average of previous 60 months full pay drawn by him during the period for which contribution to the pension fund was recovered, shall be taken into account as pensionable salary for calculating pension.
2) If during the said span of 60 months there are non contributory periods of service including cases where the member has drawn salary for a part of the month, the total wages during the 60 months span shall be divided by the actual number of days for which salary has been drawn and the amount so derived shall be multiplied by 30 to work out the average monthly pay.
3) The maximum pensionable salary shall be limited to fifteen thousand rupees per month.
4) The existing members as on the 1st day of September 2014 who at the option of the employer and employee, had been contributing on salary exceeding 6500 per month, may on a fresh option to be exercised jointly by the employer and employee continue to contribute on salary exceeding 15000 per month.
Provided that the aforesaid members have to contribute @ 1.16% on salary exceeding 15000 as an additional contribution from and out of the contributions payable by the employees for each month under the provisions of the Act or the rules made thereunder.

Provided further that the fresh option shall be exercised by the member within a period of 6 months from the 1st day of September 2014.
Provided also that the period specified in the second proviso may, on sufficient cause being shown by the member, be extended by RPFC for a further period not exceeding 6 months.
Provided also that if no option is exercised by the member within such period (including the extended period) it shall be deemed that the member has not opted for contribution over wage ceiling and the contribution to the pension fund made over the wage ceiling in respect of the member shall be diverted to the provident fund account of the member along with interest as declared under the Employees Provident Fund Scheme from time to time.
In the principal scheme, in paragraph 12, in sub-paragraph (2)
Monthly Member’s Pension
(1) A member shall be entitled to :

(a) superannuation pension, if he has rendered eligible service of 10 years or more and retires on attaining the age of 58 years.
(b) Early pension, if he has rendered eligible service of 10 years or more and retires or otherwise ceases to be in the employment before attaining the age of 58 years.
(2) In the case of a new entrant, the amount of monthly superannuation pension or early pension as the case may be, shall be computed in accordance with the following factors, namely:
Monthly Member’s Pension = Pension salary x Pensionable Service 70
In the principal scheme, in paragraph 12, in sub-paragraph (2)
Provided that the members monthly pension shall be determined on a pro-rata basis for the pensionable service upto the 1st day of September 2014 at the maximum pensionable salary of 6500 and 15000 per month and for the period thereafter at the maximum pensionable salary of 15000 per month. 

Monday, 11 August 2014

PF Department to inspect establishments who split wages and pay PF on less than < 50% of gross wages

The PF Department has decided to inspect establishments who split wages and pay PF on less than < 50% of gross wages. The text of the notification and a link to access the notification copy are given below

View Notification


Inspection of establishments splitting wages to reduce PF liability - regarding.

The contribution payable by the employer under Employees Provident Funds Scheme, 1952 Is calculated on basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (If any} payable to each employee to whom the scheme applies. The meaning of basic wages Is defined under Section 2(b) of Employees' Provident Funds & Miscellaneous Provisions Act, 1952. It Includes all emoluments which are earned by an employee while on duty but excludes the cash value of food concession, dearness allowance, HRA, overtime allowance, bonus, commission or any other similar allowance payable to the employee and any presents given by the employer to his employees. However, It has been observed that many employers spilt the total wages payable to their employees Into several allowances In such a way that the said allowances are covered under the category of exdusions provided under Section 2(b) of the Act as explained above thereby encouraging the subterfuge of splitting of wages to exclude the PF liability. Instances have come to the notice where total wages of employees are splltted by employer to the extent that PF liability is reduced upto 50% of total wages.

2. In order to understand the gravity of the Issue it has been decided to have all those establishments Inspected where the employers have deducted PF contribution on fifty percent (or even less) of total wages paid to their employees. So all Officers In-charge of field offices are directed to get such establishments Inspected where PF contribution has been deducted on fifty percent or less of total wages. The exercise must be completed by 31.08.2014 and report In the proforma given below should reach Head Office by 07.09.2014.

Tax on PF withdrawal if service not of five continuous years

The withdrawal of the accumulated balance from a recognized PF triggers tax liability only if the employee has not rendered continuous services for five years or more to the employer. While computing the continuous services of five years, the period of previous employment is also included, if the accumulated balance maintained with the old employer is transferred to the PF account with the new or current employer.
Since you had already rendered service with the employer company for five years and seven days, there should not be any tax implications on withdrawal of PF. However, you would be required to report the PF accumulations in the tax return form to be compliant from disclosure perspective.

If the total number of years of service with a company are less than five years, withdrawal of accumulated PF balance shall be taxed in the financial year of withdrawal.
The total of employer’s contribution plus interest thereon will be taxed as salary. Further, the amount of tax benefit claimed under section 80C on account of your own contribution to the recognized PF shall be taxed. Also, the interest on your own contribution shall be taxed as “income from other sources”.
The tax rate would depend upon your applicable income slab in each of the fiscals during which the PF contributions were made. Further, the surcharge (as applicable) and education cess, shall be applicable for each of the fiscals and payable in addition to the basic income tax. Relief under section 89 shall be available as applicable.
Further, withdrawal of the PF accumulations will be as per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Accordingly, it would be required to have a cooling period of two months.

Alternatively, you can transfer the accumulated PF balance to the PF account to be maintained with the new employer.

For more information, mail it to

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