Have You Seen This? Contractors Using Fake Lists for Provident Fund Contributions

Hi,

During one of the training programs on Contract labor and their coverage under different labor enactments, I was surprised when one of the participants stated that some contractors maintain a separate list of persons for coverage under the EPF Act. This list contains names that are entirely different from those actually working in the company. These individuals are typically family members of the contractor and their relatives.

The contractor deducts the provident fund contribution from the actual employees, but the same amount is credited, along with the matching contribution of the contractor, into different accounts. This allows the contractor to keep the provident fund within the family, and the beneficiaries receive the amount without making any contribution.

I was surprised to hear about this and wanted to share it with others in case they have encountered such malpractice.

This situation necessitates a thorough scrutiny of the records and cross-checking with those who are actually deployed for work.

I would appreciate your comments on this matter.

Cyril

Hi Cyril,

These things are happening in every organization where there are more contract employees. The only way to cut down on this is to ensure the muster roll is correct, provide annual statements of individual contributions and accumulation from the PF office to every employee, give Form 3A, and take certain precautions during withdrawals such as providing the account number, crossed cheque, etc.

When such issues arise, it is better to change the vendor or contractor as a disciplinary measure.

Regards,
Deepak. M 😊

Hi Deepak,

Thanks for your response. When I heard this initially, I didn't believe such things could happen. I was not directly involved in the implementation of the Act, and hence did not come across any such cases. Now, a checklist has been made to deal with such cases. The contractors' workers have to personally appear before the Management's nominee, and the information submitted to EPF is cross-checked. The reasons for such cases coming up are lack of supervision, ignorance of workers, and even connivance of management with the contractor.

The HR people dealing with contract labour have to be more vigilant.

Cyril

Dear Cyril,

This is a very common feature in Tirupur. The problem here is that employees do not come regularly. They just hop jobs as the jobs here are abundant. So even the regulars also lose these benefits.

Balaji L

Dear Balaji,

It is very sad that low-paid contractor workers lose the benefits to which they are legally entitled. I am thinking of writing to the EPF Trust in Delhi, flagging this problem. I think under the Right to Information Act, a lot of material on this subject can be collected.

It is time this problem gets addressed with all seriousness.

Thanks for your response.

Cyril

Cyril,

I am a compliance manager for a renowned US retail chain.

Let me share how this comes into being: A contractor has been hired who doesn't fulfill basic norms of being a contractor. He doesn't even have a ration card or PAN number. This person is hired to get/maintain workers in the factory and may be paid a small sum of Rs 5 per worker per day as commission. It is his duty to get more workers if some of them leave.

Now the question comes, why do workers leave so often? Well, if there are no benefits such as PF/ESI and the majority of workers work on a piece rate, then you have a right to move ahead.

Most exporters believe in cutting corners, and labor benefits are a major area.

Also, when you hire a contractor wherein the number of workers is small, say 2-5 people in lean times and 20-30 in peak time, for example, "Kaj Button," then how would you get registration for the contractor done for the very first time?

At that point, his family members are shown on the roll, and this is a common practice.

Cyril, learn to relax. Don't be hasty in pushing any labor reforms in your company as the production/finishing managers and even owners may not be happy.

All they want is work done at the lowest cost.

Suryavrat

Suryavrat,

Thank you for your advice. I am aware of the practical problems and difficulties regarding the implementation of various Acts. However, we are all expected to be productive and effective by implementing the laws and not by adopting fraudulent practices such as the one under discussion.

If we develop our expertise in a negative way, surely one day, we will put our Principal employer at great risk. Once the principal employer is in trouble, I am sure he will put the whole blame on his advisors, and that will have more serious implications.

I am not advocating for any reforms. I am only concerned about the faithful implementation of the legislations.

All the same, thanks for your advice and views on the matter.

Cyril