Growing businesses have, amongst other things, growing regulatory requirements to comply with. One such compulsory regulation is that of provident fund for employees under the Employees’ Provident Fund Scheme (EPS) 1952. This Act was enacted by Parliament in order to provide financial security and stability to employees in an event that the employee is temporarily or no longer fit to work or at retirement. Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organization (EPFO) of India. Let us see what stipulations have the law laid down for business owners/employers to follow so as to comply with the provisions of the EPFO:
• Any business/establishment with 20 or more employees working in any one of the 180+ industries should register with EPFO.
• 12% of the Basic, DA, and cash value of food allowances have to be contributed by the employer and employee each to the EPF account of the employee. The rate of contribution is 10% in the case of following establishments:
- Any covered establishment with less than 20 employees, for establishments cover prior to 22.9.97.
- Any sick industrial company or company with accumulated losses equal to or exceeding its entire net worth.
• Pay administrative charges at 1.10% of emoluments
• For exempted companies under P.F. Scheme, an employer is liable to pay only inspection charges @ of 0.18% of emoluments.
Directives to Employer’s:
• Enroll under EPS all categories of employees including employees engaged by contractors and piece-rated, hourly-rated employees
• Remit the contributions and administrative charges to the EPFO Office in your city before the 15th of the following month.
• File the timely returns in prescribed forms:
- Initial – Form 9, Form 3(P.S.), Form 5A. o Monthly – Form 12A, Form 5, Form 10 and Challans for remitting the dues.
- Annual – Form 3A and 6A after reconciliation with Challans and form 12A.
- Duly attested Form No.2 and the claims forms submitted by the employee/ legal heirs/ nominees.
• Make available all relevant records for inspection of visiting officials
Delay Charges: In case of delayed remittances of contributions, administrative / inspection charges by an employer, he has to pay both interest and damages for the period of delay.
• Interest is payable @ 12% on the amount of remittance due
• Damages are payable as penalty from 17% to 37% p.a. depending upon delay.
When is an Employer Exempt?
• When an employee or class of employees get Provident Fund benefits on par with or better than statutory provisions – Exemption should be applied for in Form 1 under Para 27 of EPS
• The employer can seek exemption from P.F. Scheme for the entire establishment if the majority of the employees also consent for exemption, subject to certain conditions governing grant of exemption and certain formalities.