Unremitted PF contributions can be paid in instalments: EPFO

The reason is simple — employers who deduct employees’ contributions from their salaries and don’t deposit them with EPFO are guilty of criminal breach of trust as per section 405 of Indian Penal Code and section 14 of EPF Act. EPFO is required to file complaints with the police against such employers for action under sections 406 and 409 of the IPC. If successfully prosecuted, employers are liable to pay a fine or be imprisoned up to three years (u/s 406) or upto ten years (u/s 409) or both.

But as per the new policy, unpaid employees’ contribution would also be covered in the instalment scheme. Moreover, the discretion to grant instalment facilities to defaulting establishments lies in the hands of EPF administrators. Regional provident fund (PF) commissioners are currently empowered to grant instalment facilities for defaults upto Rs 25 lakh, zonal additional central PF commissioners for defaults upto Rs 50 lakh and the central PF commissioner for defaults greater than Rs 50 lakh. But these powers were only restricted to defaults in employer contributions till now.

According to legal sources, the move may induce employers to withhold employee contributions knowing that they can manage to pay the same in instalments later. Paying PF contributions in instalments also leads to a loss of investment opportunities for EPFO and result in lower earnings as those funds remain uninvested that much longer.

Moreover, no instalment facility is extended to employers who have turned ‘sick’ and approached the Board for Industrial and Financial Reconstruction (BIFR) for a revival package, since the financial restructuring suggested by BIFR would prescribe the payment terms for the PF arrears as well. In these cases, EPFO has to simply wait for and accept the BIFR decision in toto. But it is learnt that EPFO now intends to allow instalment facility to sick units, simply on the basis of their BIFR application rather than wait for BIFR package to be finalised.

Employee representatives on the board told The Indian Express that the “proposal wasn’t discussed at length” in the February 2006 board meeting. “We were given the impression that this move will help employers who want to pay arrears, but can’t pay all the pending employee contributions in one go,” says Ashok Singh of Indian National Trade Union Congress. W R Varada Rajan, secretary of CITU, the trade union wing of CPI (M) said, “We will ask the labour ministry to review this move.”