The Coffee Break Guide to Compliance – Vol. 6
This post is part of the Coffee Break Guide to Compliance by Anandan Subramaniam. Please subscribe to the blog updates if you’d like to be notified of these posts. As always, your questions are welcome: please comment below with your doubts and queries.
The Coffee Break Guide to Compliance – Vol. 6 (Subterfuge of Wages in PF for Contract Employees)
If you are an establishment having an office in location/s of India (except Jammu & Kashmir), or are exploring options to open up an office in India, and you have outsourced or are planning to outsource non-core jobs to third parties, you should know about Subterfuge of Wages. While outsourcing such contractors, you will be called the ‘Principal Employer’.
A Brief on One of India’s Largest Social Security Organisation
The Employees’ Provident Fund Organisation (EPFO) administers the EPF & MP Act, 1952 which provides social security in the form of Provident Fund (PF), Pension and Insurance to all 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).
What is Subterfuge of Wages?
There are instances where such outsourced workers engaged by those contractors are deprived of benefits under the EPF scheme. Considerable amount of contractors are extending the benefit but that does not commensurate with the right wages they earn in a month. Notwithstanding, many such contractors regularly receive the employers’ contribution from the establishment, but the remittance to EPFO does not always match. Not all such contractual workers receive the benefit in full, as there is a tendency that many contractors bifurcate the wages into basic wages and various other allowances, which are not within the ambit of basic wages. This is what is known as subterfuge of wages.
In the above scenario, the expectation of EPFO is that the Principal Employer should ensure the following:
- Contracts are awarded to those contractors who have a PF Code (which can be checked in EPFO’s official website)
- Contractors are engaged through a valid contractual agreement
- All contract employees deployed by them are enrolled as members of Provident Fund
- Such contract employees are paid with prescribed Minimum Wages or more
- 12% of PF from both employee and employer is deducted and remitted on such wages
- That, for whatsoever reason, the ‘Pay’ is not bifurcated
- Taking cognizance of the Paragraph 30(3) of the EPF Scheme, which states. “It shall be the responsibility of the principal employer to pay both the contribution payable by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor and also administrative charges”.
- Remittances are happening on or before 15th of following month
- Checking the remittances by the Contractors through online facility (with the TRRN number provided upon such remittances)
- In cases of late remittances, damage and interest are remitted as and when it is automatically generated and shared to the contractor, online by the EPFO
Many a times, the EPFO through their Regional Provident Fund offices, and through their Enforcement Officers, implement the provisions of the Act. As this is not complied with in letter and spirit, EPFO reached out to employers through a separate communication. The communication expects the employer not to be a party to holding the residual contribution due to the workers. This is reimbursed by the Principal Employers in full. Such intervention by the Employers will ensure the right social security benefit reaches the contractual worker.
Employers are also required to submit the details of the contractors in the following format for verification to the Enforcement Officer and ensure compliance:
|Sl. No.||Name of Contractor, address||Work order no. & date and duration of work||Nature of work||No. of employees||Wages paid||PF code no. If any||Name of the PF office where PF and allied dues are deposited by the contractor|
Be complied and be proud.
Please subscribe to the blog updates if you’d like to be notified of these posts. As always, your questions are welcome: please comment below with your doubts and queries.