Navigating HR Procedures During a Company Shutdown: How Do You Handle PF and ESI Closures?

Procedures for HR During a Company Shutdown

Can you tell me what procedures should be followed by HR during a company shutdown for closing the PF and ESI? Should we issue any certificates for the employees for the shutdown, etc.? Can you guide me through this?

Thanks,
Ishwarya Velliangiri

Dear Iswarya, please send the letter to the concerned SSO and PF Commissioner with respect to the Esment Code and make a CC to IF/DCIF in case of the manufacturing unit.

Evidence to Show

Please show the following evidence to them:
- Closing Electric Supply Document
- Bank Account
- Machine Selling Document
- Etc.

You must inform the employee if anyone has worked for more than 5 years; this means you must pay gratuity.

Thank you.

The records of employers with reference to compliance under the ESI Act, 1948, are maintained at the appropriate Regional/Sub/Divisional Offices of ESIC. Therefore, it is necessary that the correspondence in respect of temporary or permanent closure of the factory/unit should be sent to the appropriate office as mentioned above by indicating therein the Code Number and date of such closure. In case intimation is not received by the appropriate authority, the dues can be assessed on an ad hoc basis under sections 45-A/45-B of the said Act.

There may be some documents of closure of the unit, such as a sale deed, disconnection of the electric meter, dissolution of the firm, etc. Therefore, copies of all such documents may also be sent along with the letter as mentioned above.

There is no harm if the copies of the letter are also sent to the appropriate Social Security Officer/Branch Manager of ESIC.

Thanks, Venkat and Harsh Kumar Mehta, for your valuable reply. Can you also tell me how many months' pay we should give to employees? Does it depend on the company, or are there any standard formalities?

Thanks,
Ishwarya

Let me summarize your query as follows:

1. Procedures that HR has to follow with respect to employees, F & F settlement.

2. Procedures required with the Labour Department.

3. Other requirements.

Suggested Steps for HR During Company Shutdown

I suggest the following steps (with the information provided, to save time I will provide these steps directly, but you should ensure what is required by consulting the appropriate authorities):

1) First of all, you should apply in the prescribed form seeking permission from the appropriate government authority, the Labour Department, surrendering the registration certificate issued by them. If the Industrial Disputes Act is applicable, you have to comply with the provisions of Section 25 (o). Please see the attachment for details.

The minimum compensation required for the settlement of employees includes:

- Retrenchment compensation: 15 days' salary for every year of completed service.
- Gratuity: As per the Gratuity Act or your applicable Gratuity rules.
- Encashment of accumulated leave.
- Settlement of EPF or transfer formalities wherever applicable and other formalities as per the Employee Pension Fund, EDLI.
- Any other funds/benefits accrued to them in case of cessation of employment.

There won't be any payment from ESI. You may check with them whether these retrenched employees are eligible to avail treatment, etc., until the end of the contribution benefit period (up to October '14/March '15).

2) It wouldn't be sufficient to only issue letters to employees, EPO, ESI, PTO. You have to issue advance notice individually to all the employees, which have to be acknowledged by the concerned parties, quoting the reference number of the government approval.

You have to file the return ONLINE on the portal of EPO & ESI to close all the employee-related data as required.

(Nowadays, EPO & ESI do not close the registration of the employer only on receipt of a formal closure letter; they also require certified accounts and proof of closure of bank accounts to support the completion of closure efforts. I am not sure whether authorities in Chennai insist on all these at present).

3) Surrender of Excise Department, Service Tax, VAT registration. Compliance requirements have to be taken care of by your Finance/Accounts and/or Company Secretary, including formalities required under the Companies Act, 1956.

Regards.