Is Hiding Employee Numbers in PF & ESI Registrations a Risky Move for Companies?

Interview Question on PF & ESI Registration Practices

My name is Hrishikesh. I was invited for an interview for the position of HR Executive in a company. During the interview, the interviewer asked me a question related to a scenario where a company has around 100 employees. If, during the PF & ESI registration process, they only declare 40 employees and conceal the rest, would this practice be considered healthy or unhealthy for the company? Are there potential problems that could arise in the future due to this practice? Additionally, would the company benefit financially from engaging in such practices?

Seniors, I kindly request a detailed explanation of the entire situation. I would appreciate a thorough explanation.

Regards,
Hrishikesh Jyoti Baishya

Please join a company that is ethical and where your seniors have the right knowledge of the law. The question itself is wrong, and you can't fool the law always. There are multiple entries in different registers with security, HR, finance, etc. Manipulation is possible, but you should be smart enough to avoid that. However, your company owner and directors carry a big risk of litigation.

Regards,

First of all, let me tell you that it's just an interview question to judge your knowledge and not an indication that the company will be practicing the same.

Answering the Interview Question

To answer such a question, the reply should be: It's illegal to hide the rest of the 60 employees as per the Provident Fund and Miscellaneous Act 1952. If an employer has 100 employees and their basic + DA is more than Rs 6500 (which is the wage ceiling limit for PF), they must register all their employees. According to the registration process mentioned by the EPFO, the employer should send a list of all the 100 employees along with their BASIC + DA to the EPFO. The consequences of not doing so will result in heavy penalties and imprisonment of the employer. Such a company cannot be earning any profits in the present or future. It was a tricky question to check your knowledge.

Kindest Regards,
Pooja Khanna

Thank you for your reply. Yes, I know that it is an interview question. The same question was asked during my interview as well. I handled that situation tactfully. However, I later found out from other sources that the company does not provide PF and ESI benefits for its employees. Since they did not select me, I am now considering reporting this issue to the regional office.

Hi Pooja Khanna, thanks for your reply. Yes, I know that it is an interview question. The same question was posed to me during the interview. I handled that situation tactfully. However, after some time, I learned from other sources that the company does not offer any PF and ESI benefits for its employees. Since they did not select me, I am now considering complaining about this matter to the regional office.

Well, in that case, my friend, I understand your emotions. Yes, you can take that step, but you may face consequences for a few reasons:

- Firstly, you are not an employee of the company.
- Secondly, they did not select you in the interview, so they might try to argue that you are holding a grudge.
- The main reason is that instead of getting involved in reporting and such activities, you could focus on finding better job opportunities in the market to not waste your time.

I am not saying that you are doing a bad job. However, consider this: if companies engage in such practices and their employees choose not to take any action but continue working, outsiders have limited ability to address the issue. Additionally, the company could tarnish your reputation in the market and even blacklist you. It might be more beneficial for you to enhance your knowledge in HR and payroll while actively searching for a better job.

The decision is yours.

Regards, Pooja Khanna

My friends have expressed their views. Most companies are following the law and not hiding anything. However, some management teams have been manipulating the figures. During inspections by statutory bodies like ESI and PF, you have to pay the price. They not only claim the contribution but also require you to pay interest and damages. They will go through the ledgers, payroll, etc.

In addition, if you cover only partial employees and deny benefits to the rest of the workmen, it leads to bad industrial relations in the industry. The interviewer simply checked your ethical standards.

Regards,
G.K. Manjunath
Sr. Manager-HR