How Can We Handle EPF Deduction Challenges with Uncooperative Masons and Contractors?

Respected seniors,

EPF Deduction Limit Increase

The limit for mandatory deduction of EPF has been raised from ₹6,500 to ₹15,000 effective from 1st September 2014. We are a construction company and are registered under EPF. We are facing the following problems:

• The petty contractors working with us are not registered in EPF. They do not want to submit their payrolls to us. Even they do not want to contribute under EPF. How can we fulfill our obligation under EPF?

• The masons who were earlier out of the EPF range now fall under EPF, but they do not want to be enrolled in the scheme. They do not allow us to deduct the employees' share of EPF from their wages. They also do not provide us with details of their bank accounts. How can we overcome this situation?

Please advise.

EPF Liability Challenges in Civil Construction

We are a civil construction company registered under EPF. We do certain calculations to arrive at workable rates at the time of tendering. Previously, most of the skilled labor was out of EPF coverage. As such, the component of EPF on labor and staff earning more than ₹6,500 was not taken into account when arriving at the workable rates at the time of signing agreements.

Now, with the increase in the EPF slab from ₹6,500 to ₹15,000, the EPF liability has escalated heavily. Rates are not workable now. The principal employer has refused to compensate us for the increased EPF liability. Please advise a solution. Can we get an exemption from the increased liability on contracts in force before the raising of the ceiling?

PF Compliance for Employees and Subcontractors

The answer to both of your queries is the same:

PF is mandatory and needs to be paid for every employee who does not fall under the exempt category. The exempt category at the moment includes those earning more than ₹15,000 (basic + DA) as of 1-9-2014 and not having an existing/active PF account.

Of course, PF applies to companies with more than 19 employees. Since you are working in a factory where more than 20 employees are working, you cannot claim the exemption.

Since your subcontractors are not registered, you are liable to pay under your code for them as well. Your client is liable to pay under their code if you do not pay. The law allows them to recover the amount from you thereafter.

Whether your contractors and their masons want PF is immaterial in law. You are liable, and you need to negotiate with them. It's a business and an industrial relations problem, actually. Similarly, you need to negotiate with the clients and get them to revise the rates. They know your cost and the impact of PF and what they are doing in exploitation of contractors. But there is no law against it. Next time, ensure that you have an escalation clause.

Regards

It is human nature that everyone thinks of short-term benefits and resents EPF deductions as the accumulations shall be available after many years. However, I suggest that you have a workshop or something of that sort to educate the ignorant employees of your company, your contractors, or subcontractors about the benefits of EPF and EPS, including the group insurance amount. I am sure the majority of them would agree except for a few who may have real financial problems. In any case, you have to comply with the deductions in respect of such a minority also - there is no escape route for you; rather, you will be punished heavily on their behalf at your own cost for non-compliance.

Contractual Provisions for EPF Reimbursement

Secondly, as regards the provisions under the existing contract for the reimbursement of the incremental increase in EPF contributions, check the contract clauses. Since the law is very clear that employers have to comply with increased liability irrespective of the contract provisions or the source of funding. Since it has been a matter of the past 2-3 months, bear the cost and then negotiate with the Principal Employers to bear the cost of the incremental increase fully or partially for an amendment in the ongoing contract to meet the liability of future months.

Regards

The main problem in the construction industry is that workers, whether contractors or subcontractors, are not stable, and there is often no continuity in employment. Within a month or even 15 days, contractors are changed, or workers leave for each new job. How do we handle the deposit of PF contributions, and who is responsible for claiming them? I would appreciate your advice and opinions on this matter.

Thank you.

To some extent, now the problem will be solved with the introduction of UAN. Since the UAN remains the same irrespective of who the worker works with or for how many days, they can accumulate and withdraw when they are no longer working. By linking that with Aadhaar, it should be easier. But the problem still lies at the human resource, IR level. It is crucial to make them understand that it benefits them.