How Can We Fix EPF and ESIC Issues for Employees Who Joined or Left Mid-Year?

I would like to know how to handle the following problem:

Problem Definition:

A company has 26 employees (+/- 3 employees per month). Consider the financial year 2019-2020. At the beginning of the year (1-4-20), on record, it had 18 employees (all eligible for PF).

Now note the following events of joining and leaving:

(a) 02 employees (Mr. A and Mr. B) joined in June 2019,

(b) 01 employee (Mr. C) joined in August 2019,

(c) 02 employees (Mr. D and Mr. E) joined in November 2019,

(d) 01 employee (Mr. A) left in January 2020,

(e) 02 employees (Mr. C and Mr. E) left in February 2020.

For the financial year (1 April 2019 - 31 March 2020), the company appointed one HR agency to file EPF-ECR and also ESIC challans. Throughout the year (1 April 2019 - 31 March 2020), the HR agency filed EPF-ECR & ESIC for only those 18 members who were on the roll on 1 April 2019. The HR agency was being updated every month on joining/leaving employees. However, due to poor working/organization in the HR agency, the EPF+ESIC was filed only for those employees who were on the roll on 1 April 19. The people who joined or left had no EPF/ESIC paid, but it was deducted from their salary.

Questions:

1) How to handle this situation and regularize the EPF.

2) How to handle this situation regarding ESIC and regularize.

3) What are the legal implications?

In my opinion, although the HR agency did not file the ECR for the remaining employees, it is the primary duty and responsibility of the Principal Employer to ensure that the EPF & ESIC dues of all its eligible employees are paid.

How to handle this situation and regularize the EPF

The company needs to approach the EPF department immediately and pay the due amount. The EPFO commissioner may levy a fine for the delayed payment, which may exceed up to 100% of the dues. However, the company needs to convey the issue at hand. It will be up to the EPFO Commissioner to enforce the quantum of penalties. But it is advisable for the company themselves to approach the department instead of any action under Sec.7A of the Act.

How to handle this situation regarding ESIC and regularize

The same procedure should be followed for ESIC dues.

What are the legal implications?

Considering that these employees, although they left the organization, were on your payroll and their names appear in the mandatory registers that have to be maintained by the company, the company will be open to inquiry and litigations under the PF Act & ESIC Act. In fact, if the EPF & ESIC dues are deducted from the wages of the employee and not remitted to the EPF/ESIC authority, it may attract penal consequences of a criminal nature as well. After you have duly paid the dues, the EPFO Department may initiate an enquiry under Sec 7A of the Act and ask for the past 5 years records of the company. The company should be in a position to satisfy the EPFO commissioner that such an instance has not occurred in the past. Considering the gravity of the matter, I would advise having a strong local EPF consultant appointed to deal with the department.

Hope this satisfies your query.

Regards