Principal Employer can't fastened liability against Payment of Contract Worker Provident Fund Contribution
Yesterday I come across with this two question , trust raised below queries reverts may be helpful to you all also :-
1.Is Employee drawing
Basic Wages u/s 2(b) of EPF & MP Act 1952 can be exempted from PF Contribution?
2. Do Principal
Employer hold any liability for Contract worker PF payment?
Commentary
for point 1 is exhibited below
In
this connection the relevant para if 2(f) of the Employees Provident Fund
Scheme, 1952 is reproduced below wherein 'excluded employee' means-
I. an employee who,
having been a member of the Fund, withdrew the full amount of his accumulations
in the Fund under clause (a) or (c) of sub-paragraph (1) of paragraph 69;
ii. an employee whose
pay at the time he is otherwise entitled to become a member of the Fund,
exceeds [ceiling basic wages of Rs. 15000] per month;
{Note
- Basic wage here is referred as basic wages defined under Section 2(b)
of EPF & MP Act 1952}
Yes,
the schemes of Act had contended under Para 2(f) that an employee can be
excluded from the scheme on the basis of having higher basic wages than
maximum wage ceiling of 15000/.
Referring
to your case, this possibility occurs only if an employee whose starting salary
is more than ceiling basic wages of Rs. 15000 and had never been PF member,
will have the option of being exempt from PF for that said employee have give
in writing in form 11. In all other cases, employee has to be a member of PF
and contribute to it.
In
this connection the relevant Para if 2(f) of the Employees Provident
Fund Scheme, 1952 as produced above as 'excluded employee'.
In
the Para 2(f) cited above the employees getting more than Rs.15000 per
month are excluded employees and in Para 26 Classes of employees entitled
and required to join the Fund of the scheme they have been specifically
excluded from the benefit of the Employees' Provident Fund Scheme, 1952. In
this connection Para 26-A is also very relevant which reads as under:
Para
26-A Retention of membership (1)
(A) member of the Fund shall continue to be member until he withdraws
under Paragraph 69 the amount standing-to his credit in the Fund or is covered
by a notification of exemption under section 17 of the Act or an order or
exemption under Paragraph 27 or Paragraph 27-A.
Explanation-In
the case of claim for refund by a member under sub-paragraph (2) of Paragraph
69, the membership of the Fund shall be deemed to have been terminated from the
date the payment is authorized to him by the authority specified in this behalf
by Commissioner irrespective of the date of claim.
(2)
Every member employed as an employee other than an excluded employee in a
factory or other establishment to which the 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 subparagraph (6) of Paragraph
26 and in Paragraph 27, or sub- paragraph (I) of Paragraph 27-A,
where the monthly pay of such 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.
It
held that the maxim ‘expressum facit cessare taciturn’ should be applied in
interpreting the statute.
Commentary
for point 2 is exhibited below
The
workers employed through a contractor are the 'employees' under the E.P.F. Act
u/s 2(f) and the principal employer is responsible for contribution of
provident fund in regard to such employees. The employees engaged by the
contractor in connection with the work of the principal employer will be
employees as defined under the E.P.F. and Miscellaneous Provisions Act &
Principal Employer can't fastened liability against payment of Provident Fund
contribution of Contract Worker.
Admittedly,
the relevant paragraphs of the Scheme & Section of the Act which deserve to
be considered are paragraphs 30 & Section 8A & 2(f). Paragraph 30 reads
thus:
Para
30. Payment of contribution-
(1) The employer shall, in the first instance, pay both
the contribution payable by himself (in this Scheme referred to as the
employer's contribution) and also, on. behalf of the member employed by him
directly or by or through a contractor, the contribution payable by
such member (in this Scheme referred to as the member's contribution).
(2)
In respect of employees employed by or through a contractor, the contractor
shall recover the contribution payable by such employee (in this Scheme
referred to as the member's contribution) and shall pay to the principal
employer the amount of member's contribution so deducted together with an equal
amount of contribution (in this Scheme referred to as the employer's
contribution) and also administrative charges,
(3)
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.
Apart
from the Scheme, Section 8A has been added by Act
Section
8A. Recovery of moneys by employers and contractors
(1)
The amount of contribution (that is to say the employer's contributions well as
the employee's contribution) and any charges on the basis of such contribution
for meeting the cost of administering the Fund paid or payable by an employer
in respect of an employee employed by or through a contractor may be recovered
by such employer from the contractor, either by deduction from any amount
payable to the contractor under any contract or as a debt payable by the
contractor.
The
word " employee " has been defined in Section 2(f) of the Employees'
Provident Funds Act, 1952 :
Section
2(f) " Employee " means any
person who is employed for wages in any kind of work manual or otherwise, in or
in connection with the work of an establishment, and who gets his wages
directly or indirectly from the employer, and includes any person employed
by or through a contractor in or in connection with the work of the
establishment.
This
definition is comprehensive enough to cover the workers employed directly or
indirectly and they have specifically introduced a phrase in this definition
about a person employed by or through a contractor.
Trust
, above mention provisions are comprehensive enough to exhibit that the
Principal Employer is liable to pay PF contribution for both employee &
employer part
This statement is supported by the virtue of honorable High Court of Madhya Pradesh
in Malwa Vanaspati and Chemical Co. Ltd. vs. Regional Provident Fund
Commissioner, Indore and others, 1976-1 LLN 148 (M.P.HC); 1976 Lab. LJ
299 also in G.V.V. Swamy vs. Regional Provident Fund Commissioner and
another, 1987 Lab. IC 719; 1987 (I) LLN 94; 1986 Andh. LT 653.
The
Employees Provident Fund Organization (“EPFO”) had also issued a letter on 2nd
February, 2017 under Notification No – CAIU/011(33)2015/HQ/VOI.
II/28445 (Notification is enclosed for your kind scrutiny) elucidating the
obligations of Principal Employer for ensuring compliance under the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) in respect
of employees engaged by or through contractors.
Direction
issued in the letter dated 2nd February, 2017:
With
a view to providing social security benefits to contract employees and in
pursuance of the statutory liability of a Principal Employer under the EPF Act,
the EPFO has advised the Principal Employers to comply with the following:
The Principal Employer must ensure that the contractor is registered with EPFO
before awarding any contract. After award of the contract, the contractor
details should be entered in the EPFO portal.
Payments due to the contractor should be made only after verifying that the
statutory PF payments have been made to EPFO. This can be verified either
directly from the EPFO portal or insisting on a payment receipt obtained by the
contractor from the EPFO portal while making payment.
If the contractors have separate PF code number, the overall responsibility of
ensuring the compliance under the EPF Act, for the employees working through
the contractors rests with the Principal Employer.
The Principal Employer is empowered to deduct EPF dues from the contractor’s
bill and deposit the same against the contractor’s code number or their own
code number.
Also, a provision on the official website of the EPFO, has been added under the
“establishment search option” to verify whether the contractors are regularly
depositing Provident Fund Contributions in respect of their employees.
Further,
the EPF Act defines employee (as per Section 2(f) of the EPF Act) as any person
who is employed for wages in any kind of work, manual or otherwise, in
connection with the work of an establishment and who gets his wages directly or
indirectly from the employer, and includes any person employed by or through a
contractor in connection with the work of the establishment. Therefore, the
EPFO clarifies that the EPF Act does not differentiate between casual,
contractual and regular employees.
Adding
to this, shall like to alarm you on legal consequences exhibited below
OFFENCES
–
Employees
Provident Fund and Miscellaneous Provisions Act, 1952
Section
|
Offence
|
Penalty
|
14
|
Making
false statements or causes false statements to be made for the purpose of avoiding
any payment to be made under this Act or the Schemes or of enabling any other
person to avoid such payment
|
Punishable
with imprisonment upto one year and/or fine upto Rs.5000.
|
14
(1-A)
|
Contravening
provisions of section 6 or clause (a) of sub section (3) of section 17
paragraph 38 of act/scheme relating to payment of administration and
inspection charges
|
Punishable
with imprisonment upto three years but which shall not be less than one year
and a fine of 10000 Rs case of default in payment of the employees'
contribution and which shall not be less than six months and a fine of 5000
Rs, in any other case
|
14
(1-B)
|
Contravening,
or default in complying with the provisions of Section 6-C, or clause (a) of sub-section
(3-A) of Section 17 in so far as it relates to the payment of inspection
charges
|
Imprisonment
for a term which may extend to one year but which shall not be less than six
months and a fine which may extend to five thousand rupees
|
14
(2)
|
Contravening,
or default in complying with, any of the provisions of the Act or the Schemes
|
Imprisonment
for a term which may extend to one year, or fine which may extend to four
thousand rupees, or both.
|
14
(2-A)
|
Contravening
any provision of this Act or of any condition subject to which exemption was
granted under Section 17, if no other penalty is elsewhere provided by or
under this Act for such contravention or non-compliance
|
Imprisonment
which may extend to six months, but which shall not be less than one month,
and a fine which may extend to five thousand rupee
|
Employees
Provident Fund Scheme, 1952
Para
|
Offence
|
Penalty
|
32-A
|
Delay
in deposit of contribution deducted from employees.
|
Depending
on period of default rate of damages as % of arrears per annum varying from
17% to 37% are payable.
|
76
(b)
|
Fails,
refuses to submit or submits a false return / statement / document or makes a
false statement
|
Imprisonment
for 1 year and / or fine upto Rs. 4000
|
76
(d)
|
Guilty
of contravention of non-compliance of any other requirement.
|
Imprisonment
for 1 year and / or fine upto Rs. 4000
|
|
|
|
|
|
|
Employees
Pension Scheme, 1995
Para
|
Offence
|
Penalty
|
42
|
Fails,
refuses or submits a false return / statement / document.
|
Imprisonment
for 1 year and / or fine upto Rs. 5000
|
42
|
Guilty
of contravention of non-compliance of any requirement of the Act
|
Imprisonment
for 1 year and / or fine upto Rs. 5000
|
5
|
Default
/ delay in payment of contribution
|
Depending
on period of default rate of damages as % of arrears per annum varying from
17% to 37% are payable.
|
|
|
|
|
|
|
Employees
Deposit Linked Insurance Scheme, 1976
Para
|
Offence
|
Penalty
|
|
|
|
29
(b)
|
Fails,
refuses to submit a return or submits a false return / statement / document
or makes a false declaration
|
Imprisonment
for 1 year and / or fine upto Rs. 4000
|
|
|
|
29
(d)
|
Guilty
of contravention of non-compliance of any requirement of the Scheme
|
Imprisonment
for 1 year and / or fine upto Rs. 4000
|
8-A
|
Default
/ delay in payment of contribution
|
Depending
on period of default rate of damages as % of arrears per annum varying from
17% to 37% are payable.
|
So, if you are willing to hire
any employee as an excluded member as per the Act then you are required be secure
else it will be legal ambush. Kindly write back in comment section in case of any further
elucidation is required.
