Facing EPF Inspection Challenges: How to Address Vendor and Trainee Payment Issues?

EPF Inspection Queries

Today we had an EPF inspection in our office premises. During the inspection, there were certain queries put forth:

1. One of our vendors hasn't paid PF or opened an account for their employees. We are paying the vendor the total sum along with the PF contribution. Now, the PF Inspector has asked us to pay the amount as we are the principal employer.

2. The basic pay is 33% of the gross pay in our organization. The officer has requested clarification on this.

3. Trainees who join us will be paid a stipend for the first year (Rs 16,500). We calculate and pay PF based on the entire stipend. Next year, when the trainees are converted to regular employees (the basic pay is less than the stipend, Rs 7,000), we pay for the basic. Now the question arises why we pay the pension starting only in the second year. The officer has requested clarification, even when we said that the basic is less in the second year, so we start deducting the pension.

Please help me understand and clear these issues.

Regards,
Nagarajan Sekar
[Phone Number Removed For Privacy-Reasons]

Brakes India Ltd. Case Summary

1) In Brakes India Ltd. (Brakes Division), Sholinghur-631 102, represented by its Vice-President (Pers. & HRD) vs. Employees’ Provident Fund Organisation, Vellore, represented by its Regional Provident Funds Organisation, 2015 LLR 635, the Madras High Court reinforced the point that the Employees’ Provident Fund Authority is not entitled to recover either Provident Fund contribution or damages from the principal employer in respect of employees engaged through contractors, registered with the PF Department, having an independent code number. The Hon’ble Court concluded: Hence, the claim of the PF Inspector is not maintainable.

Internal Circular on Provident Fund Contribution

2) There is an internal circular in the Provident Office stating that the Provident Fund Contribution should be a minimum of 60% of the Gross. The PF Inspector's claim is maintainable.

Reduction of Contribution

3) Any reduction of contribution is questionable. However, you can convince the Inspector that due to the rationalization of the salary structure, the reduction in PF contributions is unavoidable.