EPFO moves to protect contract workers

NEW DELHI: The Employees Provident Fund Organisation's central board of trustees, the apex decision-making authority, on Friday approved major changes to the law governing statutory savings which would arm it with powers to ensure that even government contractors are brought under the PF umbrella.

The step is aimed at ensuring that contract workers in government organizations are also brought under the social security net. This comes at a time when government organizations are increasingly relying on outsourced staff, especially at the class IV level.

In a separate proposal, though the trustees did not factor in the frequent demands for raising the Rs 6,500 mandatory limit for EPFO, they said that a provision be made to ensure that the salary on which the contribution is made is not lower than the stipulated minimum wage in the state. The move is aimed at protecting the interests of casual labour as often contractors and employers do not even pay the specified minimum wage. "The Act also has provisions so that as and when the mandatory limit is revised, we can just issue a notification. There would not be any need to go to Parliament," labour secretary PC Chaturvedi said.

At the same time, exempted establishments, typically large companies that choose to manage the PF money of their employees, could lose flexibility. EPFO appears set to take over fund management of the 2,775 exempted establishments. This means that while these establishments will continue to manage the accounts of their employees, they will lose the independence to invest these funds. The move, officials say is to protect the interests of employees.

The trustees also unanimously approved the draft of the amended PF Act that incorporates this amendment. The draft would now be sent to the government and after cabinet approval, a Bill will be tabled in Parliament.

If the proposal is approved the funds being invested by EPFO will rise almost 50%. The exempted establishments have a corpus of Rs 1 lakh crore while EPFO, that manages the funds for six lakh establishments at present, has a corpus of Rs 2 lakh crore.

"The proposal is that companies will need to move their entire surplus after clearing claims of employees to the EPFO every month. The EPFO will then invest the funds. This has been done so that in case a company becomes sick or there is any other problem, the employees' interests are protected," Chaturvedi who is the vice-chairman of the CBT said.

The proposed amendments also say that all establishments will be covered unless they are specifically exempted. This is a departure from the earlier regime where industries had to be brought under the purview of PF Act through notifications, as had to be done for the software and the BPO industries when they first came into being. "Earlier, EPFO had to be constantly on the lookout for new industries because as per the Act only the 186 listed industries were covered. Now we are turning that around," explained an official.

In a bid to control the PF inspector raj, the Act proposes that inspectors can exercise their powers only after written approval from the controlling authority and employers do not require to produce records for more than three years. The Act also empowers EPFO to realize the principal/interest to be paid by a defaulting establishment in which it has invested by attaching its bank accounts and auctioning its property.
source-times of india
steven
management trainee-fundamental analysis
DENIP consultants Pvt Ltd