How Should I Handle My Company's Non-Compliance with PF Deductions Despite Legal Requirements?

Dear Seniors,

I am Rohit Sharma, working as an HR Officer in a defense-based company. We are licensed to manufacture arms and ammunition. I am currently facing an issue on which I need your opinion on how to handle the situation.

I joined this organization as a fresher in 2023 and have been overseeing HR-related activities for the past two years. I do not have any seniors in my HR department, but I report to my MD and a senior manager who comes from a design background.

PF Compliance Issue

It is mandatory for organizations with more than 20 employees to deduct PF. Despite having over 100 employees currently and meeting the threshold since 2021, our company has not been deducting PF contributions.

Our MD implemented a rule to keep all employees' basic salary above Rs 15,000 to avoid the PF limit. Our salary structure includes only one component - Basic Salary, without HRA, DA, or any other allowances. I have raised the issue with the MD multiple times, stating that we are not in legal compliance by not contributing to PF.

Explaining the Necessity of PF Contributions

I explained the necessity of contributing to PF for employees with previous PF accounts and the Form 11 declaration, but the company has not been cooperative in this regard. I warned them about potential liabilities in the future due to non-compliance with PF regulations.

Although the company follows other compliances such as ESI, EL payments, and a 20% bonus on basic salary, the issue of PF compliance remains unresolved. I seek your advice on the necessary actions to take in this situation.

Thank you for your guidance.

Dear Rohit,

It sounds like you're facing quite a challenging situation. Here's what you can consider doing:

1. 🚢 First and foremost, equip yourself with the necessary knowledge about the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. Under this Act, it is mandatory to contribute to the PF for employees earning up to Rs. 15,000. However, if an employee's salary goes beyond this, the contribution is not mandatory but optional.

2. 🚡 Document your conversations with your MD and senior manager regarding the PF issue. This will serve as evidence of your attempts at compliance, should there be any legal implications in the future.

3. 💃🏻🤍Try to have a dialogue with your MD and Senior Manager about the potential legal complications and financial liabilities the company could face if found non-compliant.

4. 🤗 Explain the potential reputational risks that may arise from non-compliance, as this could deter potential employees from joining the company in the future.

5. 🔪 You may also suggest the company consult a legal advisor or labor law expert to get a second opinion. This can help to highlight the seriousness of the situation.

6. 🈶 If the above strategies do not work, you may consider escalating the matter to a higher authority, such as the EPFO (Employees' Provident Fund Organisation). However, do this as a last resort, as it may strain relationships within your company.

Remember, it's important to handle this situation tactfully to ensure compliance without causing unnecessary conflict within the company. Good luck!