Employer Penalties: What Are the Fines for Not Implementing PF and ESI?

Could you please provide me with information on the amount of fine that an employer is required to pay for failing to implement PF and ESI in their company? Thank you.

If the act is applicable to your establishment, then you should pay ESI and PF dues with interest and damages.

Regards,
Vikram Trivedi
Labour Laws Consultant
[Phone Number Removed For Privacy Reasons]

Penalties for Non-Coverage Under the ESI Act, 1948

If any factory or specified establishment is coverable under the ESI Act, 1948, but not covered, the following penalties will be payable upon coverage of the unit later on when detected and found to be coverable:

1. The unit will be covered retrospectively from the very date it qualifies for coverage.
2. The employer will not be able to deduct the employees' share of contributions from the wages of the employees for the past period but will be required to deposit the same.
3. Interest will be liable to be recovered from the employer for the late deposit of contributions.

Similar provisions exist in the EPF & Misc. Provisions Act as well.

Regards

The employer is liable to pay simple interest at 12% with effect from 01.10.05 from each day of default. If any contribution payable under this Act is not paid by the Principal Employer on the date on which such contribution has become due for payment, he shall be liable to pay simple interest at the rate of 12% per month or such higher rate as may be specified in the regulations till the date of its actual payment.

Rate of Interest:

- Up to 19.10.1989: 6%
- 20.10.1989 to 31.08.1994: 12%
- 01.09.1994 to 30.09.2005: 15%
- 01.10.2005 onwards: 12%

Regards,
Raju

Our company is a manufacturing and marketing company, but the employer is not willing to cover us under ESI and PF. How can we take action without disclosing names? Are we eligible for the same, as we are drawing thirty thousand every month, and the amount is credited directly to the bank, but no payslip is generated? However, at the end of the year, we receive Form 16A.

I don't know how the employer is manipulating things. Can anybody help us out?

Consequences of Not Implementing ESI and PF

For not implementing ESI and PF in the company after eligibility as per the act, the respective inspectors will issue notices. You have to pay both the employer and employee shares for the back period. You cannot recover these amounts from the employees for the back period. This will be a significant expenditure and burden to the company.

Besides this, you are liable for penal consequences as per the acts, including fines, interest, damages, and imprisonment as well. Please implement these soon to avoid such consequences.

Regards,
D. Gurumurthy

Apart from what seniors have advised, the penalty will be up to a maximum of Rs. 10,000/- with a maximum imprisonment of up to 3 years as decided by the inspector.

I would like to clarify that the penalties and imprisonment under the provisions of the Act are not imposed by the Inspectors. When prosecution cases are filed by ESIC under the relevant provisions of the ESI Act, 1948, the Honorable Courts having jurisdiction decide such matters and impose penalties and imprisonments as they deem appropriate in each case. Only under the damages provisions, damages are imposed by the concerned Department, and that too at a senior level after affording the principal employer an opportunity for a hearing.

I kindly request the member who made the remarks as mentioned above to indicate the specific provisions of the Act/Rules/Regulations that allow for the award of penalties and imprisonment by Inspectors.

Thank you.

Best regards

I recently joined an FMCG manufacturing company where the total number of workers is over 350. All employees are on daily wages, and it's not more than 250. Most of our employees do not want to have their PF deducted from their salaries. I would like to inquire if there are any policies or rules regarding not deducting PF from the salary. If there are any, please guide me.

Regards

Holding Contractor Payments for PF and ESI Non-Compliance

If the contractor has not contributed to PF and ESI, then hold his bill. The total amount to be held is 25.61%, which includes an employee contribution of 12%, an employer contribution of 12%, and administrative charges of 1.61%. This amount will only be released if the contractor provides PF challans along with ECR copies. If the contractor fails to provide these documents, the amount should be deposited with the PF office.

The same procedure applies for ESI contributions as well. For ESI, the employee's contribution is 1.75%, and the employer's contribution is 4.75%, making the total contribution 6.5%. This amount should also be held until the contractor presents ESI challans and contribution history.

Regards,
P K Prasad