Are Small Group Companies Exempt from PF Contributions? Seeking Clarification

I would like to know if Company A and Company B are owned by a single Director, with Company A contributing to PF while Company B has 3-8 employees and is not currently contributing to PF as per the act.

I am seeking clarification on whether Company B is required to be covered under PF or if it is exempted due to the minimum number of employees required for PF contribution.

Kindly clarify, please.

Regards,
Anbarasu

You mentioned that both companies are owned by a single Director. Could you clarify if both companies operate in the same business under the same name or if they are involved in different businesses under different names? It's important to distinguish this as the statutory implications for these companies could vary based on factors such as the nature of the business, number of employees, and industry.

In my understanding, Company B may not need to be covered under the PF act since it has fewer than 20 employees.

Regards,
M. Kannan

Conditions for Clubbing Companies for PF Coverage

If the following points are jointly applicable to the two companies, they can be clubbed together, and the employees of Company 'B' shall be covered under Company 'A':

1. Unity of ownership
2. Unity of labor
3. Proximity
4. Same source of finance
5. Managed by the same person
6. Same service conditions
7. Functional integrity
8. Unity of purpose
9. Same book of accounts, balance sheet, bank accounts, etc.

Regards,
Varghese Mathew

Thank you, sir. Business is different, but as per the PF Inspector, what Mr. Varghese said is correct. They have been reiterating the same points. Can you please share any documents or cases supporting Mr. Varghese's statement?

Regards,
Anbu

Separate Companies and PF Contribution

If they are separate companies under the Companies Act, then they cannot be clubbed together. The PF inspector can "pierce the veil" if he finds that the second company was formed only to avoid PF, and that the business comes from the same sources and is executed by the same team. This means that the employees work on executing the orders for both companies.

Regards