Navigating PF Contributions on Retention Allowance for Seasonal Sugar Industry Workers: What Happens If They Don't Return?

Dear Sirs,

Seasonal Employment in Sugar Industries

As per sub-section (kk) of Section 2 of the Employees' Provident Funds Scheme, 1952, sugar industries fall under seasonal factories. Being a seasonal establishment, the crushing season usually runs intermittently. Accordingly, seasonal employees are given a seasonal break during the off-season. However, they are eligible for Retention Allowance up to 50% category-wise for the off-season period to retain their services.

Retention Allowance and PF Contribution

This allowance is paid if they report for duties during the next season, subject to completing about 40 days from joining the duties during the next season. Under the circumstances, it is not feasible for the employer to consider PF contribution on Retention Allowance during the off-season. The employer generates a common separate ECR & Chalan of Retention Allowance and remits it to EPF after the completion of 40 days in the next season. While generating the online ECR, the PF contribution is considered on a cap of Rs. 15,000/-; there is no other way to consider monthly contributions on the Retention Allowance for the off-season period.

EPF Authority Notice and Employer's Dilemma

The EPF authority has issued a Notice under Sec 7A & 14B for interest and damages on delayed payment of Retention Allowance. According to their contentions, the Retention Allowance is salary, and it is obligatory on the part of the employer to consider PF contribution on the Retention Allowance in each month of the off-season.

Now the question is, if we consider PF contribution for each month solely for PF contributions' sake, later if the employee fails to join duties in the next season, they will not be eligible for Retention Allowance, but they may claim, as we have paid PF contributions on the same.

Kindly guide us in light of the provisions of the applicable law to defend the case.

Understanding Retaining Allowance

Retaining allowance means an allowance payable for the time being to an employee during any period in which the establishment is not working. This is paid just to retain the services of the employees. It is paid every month and not when the establishment resumes work. If you pay retaining allowance in a month, then why don't you pay a contribution on that in the same month? If you do not pay any wages or retaining allowance, then file a NIL return for that month. Pay a contribution only when you pay retaining allowance. If you do not pay it every month/during the off-season, there is no need to remit a contribution. The question will arise only when you pay retaining allowance every month but hold payment of contribution when the season starts.

PF Authorities' Demand

The demand of the PF authorities is correct because retaining allowance is part of PF qualifying wages as per the EPF Act. In the 7A inquiry, you can say that you do not pay any such allowance during the off-season. But when the season starts, we pay an amount to those who rejoin us. That is not part of remuneration but a gift. It is a bonus to employees who are committed to come back and work for us. You can also say that it is available only to those employees who complete 40 days in the season.