Can a Proprietor Skip PF Compliance for a New Business with Fewer Than 20 Employees?

The proprietor already has a PF registration for a manpower supplies firm, referred to as "A," as the number of employees was more than 20. The proprietor now wants to start a paper trading business in the firm, referred to as "B," and the number of employees shall be less than 20.

The question is: Can the proprietor avoid PF compliance for firm B, stating it's not applicable as it's a separate firm/business and the number of employees is less than 20?

Hi, if Firm B is going to be a separate entity and the employee count is less than 20, then registration under PF is not mandatory.

However, if Firm B is going to be the branch office of Firm A in the same location, the same PF Establishment code can be used. In case the branch B is opened in another state, a PF subcode can be applied.

Whatever the nature of the business, being a proprietary establishment, there will be financial interdependence between these two companies. Even if you have separate RCs, which is a requirement of law if you run businesses in separate buildings with separate building numbers, the labor enforcement authorities would club them for coverage with a retrospective date. Therefore, the employees in business B should be given coverage right from the beginning.

Thanks for the reply, @Madhu T K. As you mentioned, being a proprietary establishment, there will be financial interdependence between these two firms, and hence no separate PF number shall be required.

Can you please corroborate the above with any specific section in the Act or any other legal reference?

I meant to say that because of financial interdependence, the employees of the new company, i.e., B, will also be covered by EPF even if the number of employees in that company (B) is less than 20. Therefore, you have to deduct and contribute PF in respect of employees of Company B right when each of them joins. Since there is a separate name for the establishment, you can take a subcode for that establishment.