Is Opting Out of EPF Legal and Does It Undermine Social Security Goals? Let's Discuss

Our organization is covered under the EPF Act as we have employed more than 20 employees. We have hired a contractor's services, but he has refused to pay the provident fund, claiming that the employees deputed in our organization have opted out of the scheme by filling Form 11, which he attached with the bills. However, the said form contains only a self-declaration that these employees are presently not members of such a scheme, but it does not indicate the employees' disinterest. Our organization is ready to pay the provident fund, but the contractor insists that it has no liability as the employees are not willing and their salaries are above INR 15,000.

In such circumstances, the issue is whether the EPF Act is not a mandatory Act. If yes, will it not affect the core spirit of the social security laws, as employees might prefer to take more salary home?

Understanding Form-11 and EPFO Membership

Here is a multiple dimension of the issue. Form-11 under EPFO is for a declaration from the employee whether the employee was earlier a member of EPFO or not. There is no option for the employee's willingness to join as an EPFO member or not. If the employee was an earlier member, then they must disclose all details, including the UAN number, etc.

If the employee was an earlier member of EPFO but discontinued joining a new organization as the PF gross is more than ₹15,000 per month, it is illegal. The employee should continue as an EPFO member.

If the employee is joining for the first time in any organization with more than ₹15,000 per month PF gross, the employee will be considered an excluded employee and will not be a member of EPFO. They may be a member of EPFO voluntarily, subject to the agreement of PE.

In the instant case, the merit has to be judged based on the above conditions.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions – To strive towards excellence with effort and integrity

Dear Sonkar, As SK has explained, if the employee joins a new organization with a salary above 15,000 (basic + DA) and does not have an existing PF account (never had or closed it by withdrawing the money in it), then they may opt out of PF by claiming to be exempt employees. For this, the details are filed in Form 11.

If they fulfill the criteria, then you are not liable for the PF. If you follow that route, keep copies of all the documents and ensure that any new employee also falls into the same criteria, or they have to immediately register and pay the PF.