Overall responsibility for ensuring compliance under the EPF and MP Act, 1952 for employees working through the contractors rests with the Principal Employer
The Employees Provident Fund Organization (“EPFO”) has recently issued a letter on 2nd February, 2017 clarifying the obligations of Principal Employer for ensuring compliance under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) in respect of employees engaged by or through contractors.
In India, large number of employees are hired on contractual basis by various Principal Employers including Government Departments, PSUs, autonomous organizations, financial organizations, etc. However, it has been observed that such contract employees are not provided social security benefits under the EPF Act which they are entitled to.
Reiterating the various provisions under the EPF Act, the EPFO clarifies that as per Para 30 (3) of the EPF Scheme, the Principal Employer has the responsibility to pay both the contribution payable by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor and also administrative charges.
Further, the EPF Act defines employee (as per Section 2(f) of the EPF Act) as any person who is employed for wages in any kind of work, manual or otherwise, in connection with the work of an establishment and who gets his wages directly or indirectly from the employer, and includes any person employed by or through a contractor in connection with the work of the establishment. Therefore, the EPFO clarifies that the EPF Act does not differentiate between casual, contractual and regular employees.
Recent direction issued in the letter dated 2nd February, 2017:
With a view to providing social security benefits to contract employees and in pursuance of the statutory liability of a Principal Employer under the EPF Act, the EPFO has advised the Principal Employers to comply with the following:
• The Principal Employer must ensure that the contractor is registered with EPFO before awarding any contract. After award of the contract, the contractor details should be entered in the EPFO portal.
• Payments due to the contractor should be made only after verifying that the statutory PF payments have been made to EPFO. This can be verified either directly from the EPFO portal or insisting on a payment receipt obtained by the contractor from the EPFO portal while making payment.
• If the contractors have separate PF code number, the overall responsibility of ensuring the compliance under the EPF Act, for the employees working through the contractors rests with the Principal Employer.
• The Principal Employer is empowered to deduct EPF dues from the contractor’s bill and deposit the same against the contractor’s code number or their own code number.
• Also, a provision on the official website of the EPFO, has been added under the “establishment search option” to verify whether the contractors are regularly depositing Provident Fund Contributions in respect of their employees.