Does the relaxation on PF contribution rates really benefit employers

As part of the ‘Atmanirbhar Bharat’ (Self-Reliant India) campaign, which is the Central Government’s initiative in its war against the Covid-19 pandemic, the Ministry of Labour and Employment (“EPF Amendment”) through a notification dated May 18, 2020, has introduced an amendment to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”).

The EPF Act is the key social security legislation in India, under which both the employer and employee are required to contribute a certain percentage of the employees’ salary to the Employees’ Provident Fund Organisation (“EPFO”) (or to a trust in case of exempted establishments). Pursuant to the EPF Amendment, read with the FAQs dated May 20, 2020 issued by the EPFO (“FAQs”)[1], the statutory rate of provident fund (“PF”) contributions under the EPF Act, for both employers and employees, has been reduced from the existing 12 percent to 10 percent, for the months of May, June and July, 2020. The EPF Amendment is applicable to all establishments except: (i) Central/State Public Sector Enterprises; (ii) establishments owned or controlled by the Government; and (iii) establishments covered under the Pradhan Mantri Garib Kalyan Yojana (for whom the Central Government is already contributing both the employer’s and employee’s share – at the rate of 12percent – for the period from March to August 2020). The EPF Amendment is expected to benefit more than 40 million members of the EPFO and more than half a million establishments.
Continue Reading Reduction in the rate of PF contributions: Some practical considerations

EPFO tightens norms around Provident Fund inquiries under Section 7A

The Employees Provident Fund Organisation (EPFO) has recently issued Guidelines for Initiation of Inquiries under Section 7A (“Guidelines”) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”)[1]. Section 7A is the provision under which PF commissioners (who are vested with the powers of a civil court), can initiate an inquiry, by order, to determine (i) the applicability of the EPF Act to an establishment in case of a dispute; and (ii) to determine amounts due from any employer under the EPF Act and its schemes.

The EPFO has recognised that currently, assessing officers are following different yardsticks for initiating inquiries under Section 7A, which often leads to inquiries being initiated for wholly insufficient and untenable grounds, causing general resentment among the employers on one hand and prolonged pendency of inquiries on the other. The Guidelines have been issued to prevent such deleterious effect.
Continue Reading EPFO tightens norms around Provident Fund inquiries under Section 7A