Latest on Employee’s Provident Funds – Part 1

PETITION FILED IN SUPREME COURT TO DECIDE
ALLOWANCES FOR PROVIDENT FUND CONTRIBUTIONS

 

Surya Roshni Limited, having its industrial establishment in Gwalior (MP), has filed a Special Leave Petition in the Supreme Court which was heard on 2nd March, 2012 and the notice was issued to the EPFO for further proceedings and for staying of Order of the Madhya Pradesh High Court.

 

It may be recollected that in Surya Roshni Ltd. vs. Employees Provident Fund & Anr., 2011 LLR 568, the Madhya Pradesh High Court (Gwalior Bench) has held that transport allowance, attendance incentive, washing allowance and special allowance being paid to all the employees except house rent allowance and the lunch allowance not being paid to all the workers will be treated as ‘basic wages’ for the purpose of
attracting provident fund contributions.

 

The above case is perhaps the first case where the controversy, as prevailing all over India, will be decided once for all.

 

EPFO TO END INSPECTOR RAJ

 

Senior officials of Employees’ Provident Fund Organisation (EPFO) say the EPFO will begin the process on April 1 when the entire compliance operation will be on line. That will eliminate the need for any EPFO officer to personally inspect company records. In the new system, the EPFO will ask companies to voluntarily disclose all information required to comply with the Employees’ Provident Funds & Miscellaneous Provisions Act. Based on the information, the EPFO will devise parameters to discover defaulters. The parameters will change each year to avoid companies being compliant with only certain parameters.

 

Last July, the Central Bureau of Investigation registered cases against nine senior officials of the EPFO for causing a loss to the exchequer amounting to Rs.169 crore. Most defaulting companies usually understated the number of employees to bring down EPFO liability. In view of the above, the visits from the EPFO office to your Company may be a thing of past.

 

 

COMPENSATION TO AN EMPLOYEE NOT FOR DUTY
PERFORMED – NOT TO ATTRACT EPF CONTRIBUTIONS

 

The grievance of the appellant in the appeal is that the order dated 15.06.2011 passed by the EPF Authority under section 7A of the Act stating that the amount paid towards compensation to an ex-employee for not performing duty would attract EPF contributions is illegal. The EPF Appellate Tribunal observed that compensation was paid for keeping the employee away from duty, there is no document to show that the employee was continued in service without interruption. The amount paid is not the payment of wages for duties performed. Therefore, the amount of damages or the compensation awarded under a court settlement would not constitute ‘basic wages’ as envisaged by the Act and would not attract EPF liability. Hence, order of the EPF Authority is set aside and appeal allowed.

 

M/s. Binny Engineering Ltd. vs APFC, Tambaram, Chennai, 
ATA
No.605(13)/2011 decided on 23.02.2012

 

Source: Labour Law Reporter