What Happens if a Contractor Misses the PF Challan Deadline? Employer Liabilities Explained

If a contractor does not submit the PF challan on time or after the 15th of each month, what liability or penalty arises on the employer under which the contractor is deploying his labor.

Every month, please ensure that the contractor is consistently paying the PF amount to the PF office. This should be a checkpoint before processing monthly dues. The principal employer may ultimately become liable for PF contributions if this verification is not conducted diligently on a month-to-month basis.

Dear Gaurav, The principal employer is the one on whom the final liability for payment of the PF dues lies. In case the contractor deployed by the principal employer defaults regarding the monthly remittance time aspect, the PFO would send a notice (and eventually follow it up with a summons if not attended within 15 days/time allotted) once they realize that there has been a delay in payment.

PFO generally conducts this reconciliation once a year.

Last year, after the new government came into power, a directive was issued to all PF Offices to audit and reconcile the PF records for the previous 5 years. On average, almost 75% of the member companies at each of the regional PF Offices were issued notices for some issues related to short-payment, non-payment, delay in payments, etc. This was a massive exercise conducted by the PF Office, and a lot of cases were resolved/closed after payment of dues, penalty, and interest by the defaulted establishments.

In my opinion, this was a very important activity carried out by the PFO nationwide, considering the plan to transform all PF-related activities online. Cleaning of previous records had to be done. The advantage for member companies/establishments is that there is a minimum of paperwork regarding submissions now, and the withdrawal/settlement of dues takes very little time (provided all previous records are clean and details furnished in the forms are accurate). The UAN is also a part of this initiative, which enables number portability for your PF account. Form 5 consisting of employer details could also be filled out online (paperless activity). I am told that there are quite a few more friendly initiatives that are in line to be released by the PFO in the coming months.

Regards, A.B.

As per the Contract Labour Act (R&A), if the contractor fails to honor statutory acts, it is the liability of the principal employer to cover it. Not only the UAN for PF but the principal employer/contractor mapping in ESI also helps in monitoring. However, there is still a long way to go to create awareness and implement it across the construction industry in India. To my knowledge, many laws are ignored in this sector.

Thank you for the valuable suggestions. However, I actually want to know the actual liability that arises on the employer when the contractor does not submit the PF challan on time.

Thank you for the valuable suggestions, but actually, I want to know the actual liability which arises on the employer when the contractor does not submit the PF challan on time.

Gaurav,

The liability of PF will devolve on the Principal employer if the contractor does not pay the PF dues. The actual liability cannot be clarified by any member here because it will depend on the amount of PF dues and any applicable fines for late deposits, etc.

I understand that the liability of the principal employer is to verify the deposit of PF/ESI dues. If it is late, the department will examine the matter (as stated above by one of our members) and will charge interest and/or a penalty. The principal employer is not supposed to perform the functions of the ESI/EPF departments. However, the principal employer must ensure the deposit of ESI/EPF dues in respect of the employees deployed. This must be verified before releasing payment to the contractor.

I hope I am clear.

Thanks,

V K Gupta

If contractors do not submit the PF challan on time, then there is no liability for the principal employer. If the contractor submits the PF challan after the mandatory date, they will have to pay a penalty when the PF authority inspects their company account. The contractor must pay the penalty; otherwise, they will be punished according to the law. There is also no loss for the contractors' workers; hence, there is no liability for the principal employer.