Hi all, Kindly help me in resolving the following issue?

In one of the company Directors, Promoter of the company are taking monthly salary but like other employees they are not taking Provident fund and company is only deducting Rs 200 as PT as the company is in Maharashtra.

Is this practice common in the industry?
Is it legally OK to treat them as employees as they are promoters? Going ahead what will be the legal challenge ?
Company is not deducting Provident fund from their monthly salary? They are paid fix amount every month.
Is it legally safe to show their salary in Payment of wages register?
What should be the correct legal procedure?
Which authority can question and on what reason?

Please share your valuable inputs.

From India, Pune
Doctor Siva Global Hr
Management Consultancy

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A Promoter can be an employee, there is nothing legally against it. They have to be PF member only if they are eligible for it. Otherwise show them as non-contributing employees and inform the RPFC Office. Get the Form II filled up for them and submit to EPFO.
From India, Mumbai

Dear Colleague,
All the Labour Laws contain 2 terminologies- 1 ) Employer and 2) Employee for the ease of demarcating their responsibilities. In practice many directors / promotors are also coming to office regularly and working like other employees. It does not mean that they are not directors or employee and vice- versa. Any Director can work in his business and no Law puts any bar of such kind. Normally the listed Directors are intimated under the Provisions of Companies Act and they hold the status of Director for the purpose of Companies Act and for other Compliance status and responsibilities.

As long as the compliances are done by the Directors there is absolutely no bar that they are also working as employees in their company. But take a call that they shall not be paid any Salary to get into the definition of Employee and land in lot of complexities, arguments from compliance authorities. You show them as employee but do not pay any Salary as they are eligible for their remuneration under Companies Act and they can be exempted from any Labour Laws complaice as they are the Directors.

From India, Chennai
Dear Dr. P Sivakumar,

Thanks a lot for writing and sharing in detail. It will surely help me.

As you are aware that refusing to pay to directors will surely annoy them and we need to look at the other possibilities which are legal as well to make sure that Directors are paid monthly remuneration.

Sir, I need your view on the following points:
1. If company in the article of appointment mentions about the payment of remuneration to director
Is it possible if in BOD meetings, resolution is passed to pay a fix amount to these directors and publish in the P & L sheet and disclose the name and amount paid to them.

Or any other legal way if possible.

Dharmendra Singh Negi

From India, Pune

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