Hello Experts, I have come across a company through some acquaintances which has committed the following misdemeanors:
During the fiscal year 2017-18, they recruited around 15 employees and stated in their appointment letters that the Employee Provident Fund (EPF) would be deducted at 12% of the basic, subject to a maximum of 15K being considered as basic.
All the employees who joined had a basic salary of more than 15K.
The company deducted the PF amount but did not deposit either the company's share or the employee's share with the Employee Provident Fund Organization (EPFO).
Now, they have received notices under section 7A.
I am aware of the damages that they need to pay under sections 14Q and 7A. I also understand there is an additional penalty to be paid.
However, the company is currently in dire straits and has no money to pay any of the outstanding dues.
My queries are:
1) What options does the company have at this point?
2) If all the employees are made external independent consultants (not contract labor), can the company claim that there was no necessity to pay the EPF contribution?
3) What recourse do the individuals, whose EPF has been deducted but not paid, have? I understand all of them have resigned from their services in 2019.
4) If the company fails to pay the due amount, what punitive actions will the EPFO take against the company and who within the company will be held responsible? Also, what is the timeframe within which the EPFO initiates action after delivering the 7A notice?
The location of the company is Mumbai, India. I would appreciate your valuable insights into this situation.
From India, Mumbai
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8During the fiscal year 2017-18, they recruited around 15 employees and stated in their appointment letters that the Employee Provident Fund (EPF) would be deducted at 12% of the basic, subject to a maximum of 15K being considered as basic.
All the employees who joined had a basic salary of more than 15K.
The company deducted the PF amount but did not deposit either the company's share or the employee's share with the Employee Provident Fund Organization (EPFO).
Now, they have received notices under section 7A.
I am aware of the damages that they need to pay under sections 14Q and 7A. I also understand there is an additional penalty to be paid.
However, the company is currently in dire straits and has no money to pay any of the outstanding dues.
My queries are:
1) What options does the company have at this point?
2) If all the employees are made external independent consultants (not contract labor), can the company claim that there was no necessity to pay the EPF contribution?
3) What recourse do the individuals, whose EPF has been deducted but not paid, have? I understand all of them have resigned from their services in 2019.
4) If the company fails to pay the due amount, what punitive actions will the EPFO take against the company and who within the company will be held responsible? Also, what is the timeframe within which the EPFO initiates action after delivering the 7A notice?
The location of the company is Mumbai, India. I would appreciate your valuable insights into this situation.
From India, Mumbai
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Here are the corrected answers to your queries:
1) The company should immediately consult with a labor law consultant or attorney to understand the best course of action. They might need to negotiate a payment plan with the EPFO or consider insolvency procedures if they are unable to pay the dues.
2) Making employees external independent consultants would not retroactively absolve the company of their past dues. The EPF Act applies to all past and present employees, and the dues must be paid regardless of their current status.
3) The individuals whose EPF has been deducted but not paid can file a complaint with the EPFO. They should provide all relevant evidence, including payslips showing the PF deductions and any communication with the employer regarding this issue. The EPFO can then take action against the company to recover the dues.
4) If the company fails to pay the due amount, the EPFO can take various punitive actions, including prosecuting the company under the EPF & MP Act, 1952. The employer is personally liable for compliance. If the employer is a company, then all directors may be held liable. As for the timeframe, the EPFO typically initiates action immediately after the 7A notice if the dues are not paid. The exact timeframe can vary depending on the specific circumstances.
Please note that this is general advice, and the company and individuals involved should seek legal advice to understand the best course of action in their specific situation.
From India, Gurugram
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1) The company should immediately consult with a labor law consultant or attorney to understand the best course of action. They might need to negotiate a payment plan with the EPFO or consider insolvency procedures if they are unable to pay the dues.
2) Making employees external independent consultants would not retroactively absolve the company of their past dues. The EPF Act applies to all past and present employees, and the dues must be paid regardless of their current status.
3) The individuals whose EPF has been deducted but not paid can file a complaint with the EPFO. They should provide all relevant evidence, including payslips showing the PF deductions and any communication with the employer regarding this issue. The EPFO can then take action against the company to recover the dues.
4) If the company fails to pay the due amount, the EPFO can take various punitive actions, including prosecuting the company under the EPF & MP Act, 1952. The employer is personally liable for compliance. If the employer is a company, then all directors may be held liable. As for the timeframe, the EPFO typically initiates action immediately after the 7A notice if the dues are not paid. The exact timeframe can vary depending on the specific circumstances.
Please note that this is general advice, and the company and individuals involved should seek legal advice to understand the best course of action in their specific situation.
From India, Gurugram
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Compliance for EPF members going abroad 20.1.2015.pdf
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