Navigating PF Dilemmas: Should Employees Transfer or Withdraw Their Funds?

Dear Mr. Mallick,

There are some changes taking place in our organization. There is a startup proprietorship company that is going to take over some part of the organization. Our organization is currently a Public Ltd. company, and we pay PF and ESIC for our employees. However, I have been asked to transfer these employees to the new company's payroll. Now my question is, should I ask all the employees who are getting transferred to withdraw PF, or should I transfer it to the new company's PF account?

Please answer as this will really help me to close this before 1st July.

With Regards,
Sujata

Dear Sujata,

Your company is a public limited company, and some part of your organization is to be taken over by another firm, which is a proprietorship concern. There might be some agreement on the basis of which this has been done. Legally, you cannot ask them to withdraw; this should be transferred. There is no discontinuity in the job; it has to be transferred.

Regards,

J. S. Malik

Hi Sujata,

A similar situation occurred in our organization. We changed the company name and entity. Consequently, we requested resignations from all employees under the previous company name, provided them with appointment letters for the new company, and transferred their PF from their previous accounts. The withdrawal of PF funds is subject to the employee's discretion, so we cannot instruct them to withdraw. Additionally, the withdrawal process can only commence two months after the last working day.

Gunjan

Dear Sujata,

You can't transfer the PF amount to the new company until you get a new PF number for your new company. You should continue all workers on the old account and submit a list of transferred PF accounts to the new company's PF office. You can't withdraw PF for any particular employee.

Employees do not wish to withdraw PF because they are not leaving the company; instead, they are moving to a branch company (sister concern). You can also keep PF accounts of all employees in your head office, eliminating the need to transfer PF accounts for workers. However, you will still need to obtain a new PF number for your company.

Best Regards,
Sajid Ansari

This is all applicable if the concern taking over a part/division or segment of your company is not a seasonal/sick/brick industry, etc., and has more than 20 employees working with it. The new concern should be registered for the Provident Fund and will have its own code, as we see in our PF numbers, e.g., Location/company code/... And then it can easily be transferred to the new account from the previous account.

Dear Mr. Malik,

This is with regard to your clarification to Ms. Sujatha's PF query. What happens to the employer's contribution when transferring the entire employee PF contribution to the new owner? Does the new owner bear the liability when settling their employees' PF claims during employee separation? Please guide.

Thank you.

In any circumstances, it is highly advisable to get the PF accumulations transferred to the new company as it has good future benefits for employees at the age of 58 years. It is a highly secure amount of savings for all employees. So, get it transferred.

Hi Sujata,

If the new company has a separate PF code and PF account for employees, then you should go for transferring the old company PF amount by submitting Form 13 through the current employer to the concerned PF office. It is better to transfer so that all employees can avail of the PF benefits.

Regards,
Krishna

Dear Sujatha,

Upon reviewing your query, please clarify whether your present establishment is for transfer and sale.

If so, the present employer and proposed employer must provide letters to all employees with their signatures confirming the takeover.

Please refer to the draft letter below for your reference:

========================================

Subject: Transfer and Sale of _____________________ (Present company name) to __________________ (Proposed company name).

The entire ___________ (present company name with address) has been transferred to and now belongs to _______________ (proposed company name with address) as an ongoing business.

Following the transfer and sale of ___________ (present company with address), your employment will be transferred to __________ (proposed company name with address) from _________ (date, month, year) under the following terms and conditions:

1. Your services shall not be interrupted by the takeover, and your tenure after the takeover will be considered continuous.

2. The current terms and conditions of your employment (including retirement benefits) shall remain in effect after the transfer, and;

3. ___________ (proposed company name) commits to fulfilling all statutory obligations regarding your employment as if there were no interruption due to the takeover.

Please sign and return the duplicate copy of this letter to confirm your acceptance of the above within 7 days of receiving it.

Yours truly,

We confirm the above

(for ______________)

Present Company Head for ____________________

Proposed company head

I accept the above and agree to continue service with

________ (proposed company name) with discipline and loyalty.

Employee signature

Name

Employee ID No:

Department

================================================== ===============

Additionally, you must inform all relevant government entities about the takeover for the necessary transfer procedures.

This ensures that the existing PF/ESI code numbers allocated to you will remain active, and there will be no need to withdraw PF contributions of your employees.

I hope the information provided above is satisfactory in addressing your query.

Thanks & Regards,

Vadlamani SR

According to the PF Act, if a person transfers anywhere in India, they shall transfer their PF on the appropriate form provided by the PF authority.

Madhukar

Dear Sujata,

The only option to get it transferred individually is to their new P.F. Account in the new company. For PF purposes, it is just like leaving one company and joining a new company without a break.

Thanks,
Mohd. Arif Khan

Dear,

You can complete first of all the legal formalities for the new P.F. Account No. (for the new company) and after that give your Employees Two Options:

(1) P.F. Withdrawal

➔ If they require P.F. money.

➔ For withdrawal, they have to fill Form No. 19 and 10 C.

➔ They have to give resignation from the old company.

➔ They can submit their P.F. form to the P.F. Office, after 60 days from their Resignation date (Last working Day).

➔ After submission, they will get their P.F. money in their Personal Bank Account No. which is mentioned in the P.F. withdrawal form, but after a waiting period of 30 to 45 days.

➔ If the PF amount is not received within 30 to 45 days, you can complain to the P.F. Commissioner of your area.

(2) P.F. Transfer

➔ If Employees do not require money, they can choose this option.

➔ For this, they have to fill Form No. 13.

I can advise you to go for P.F. Withdrawal formalities because it is an easy process and you will get enough time for the new PF Account No. for the new company.

Thanks and Regards,

Rishikesh Desai

Dear Sujata,

You can complete first all the legal formalities for the New P.F. Account No. (for the new company) & after that give your employees two options.

(1) P.F. Withdrawal

==> If they require P.F. money.
==> For withdrawal, they have to fill Form No. 19 & 10 C.
==> They have to give resignation from the old company.
==> They can submit their P.F. form to the P.F. Office, after 60 days from their resignation date (last working day).
==> After submission, they will get their P.F. money in their personal bank account number mentioned in the P.F. withdrawal form, but after a waiting period of 30 to 45 days.
==> If the PF amount is not received within 30 to 45 days, you can complain to the P.F. Commissioner of your area.

(2) P.F. Transfer

==> If employees do not require money, they can choose this option.
==> For this, they have to fill Form No. 13.

I advise you to go for P.F. withdrawal formalities because it is an easy process and you will have enough time for the new PF Account No. for the new company.

Thanks & Regards,

Rishikesh Desai

When a new entity takes over, the new entity will already have a PF registration code. Thus, it is necessary for all the active employees of the old company to transfer their PF contributions to the new company. Once you transfer the money accumulated, your continuity of service is not broken, and this helps an employee to get a good pension at the time of retirement.

Dear Sujata,

First, ensure that the New Company's PF Account is generated, and the Code Number is allotted. Then, you may definitely advise employees to transfer their accumulated PF from the Old Account to the New PF Account.

Regards,
Vijay Jadav
vijay.jadav@ril.com

Please ensure first whether the proprietorship company is covered under the PF Act or not. If it is covered, then legally you have to get the fund transferred to the proprietorship company.

In case it is not covered, then check for the total employment strength (your division employees + Proprietorship company employees). If it exceeds 20, the proprietorship company falls under the purview of the EPS Act, and it has to obtain a PF code number.

If it does not exceed 20, the proprietorship company need not obtain the number, and your employees can withdraw the PF funds.

Hello friends,

All advice to opt for the withdrawal of PF accumulations (when one's employment is transferred from one company to another) is indeed done in the interest of the employee, as he would have the money in his hand and could rest only after spending it. Kindly note that this kind advice is against the principles on which the EPF law and scheme have been framed. The words "Provident Fund" mean providing a fund. If one goes through the objects of the Act, one can clearly see that it is meant to create a corpus for an employee to depend upon for his old age or for capital investments like building/purchase of a house or even providing for a wedding, higher education, or high-cost medical attention. So it is prohibited under the EPF LAW to withdraw the accumulations when one shifts from job to job. An employee is supposed to transfer his accumulations from the previous company to the new company. Only when he ceases to be employed in companies covered under the EPF Act should he withdraw.

Actually, the law prescribes that an employer is to obtain a declaration in form 11 from each incoming employee about his previous employment and details of his earlier PF. Nobody should ever advise a person to withdraw the PF in between jobs.

Please take care.

Regards