What Is A Provident Fund?
A provident fund is a compulsory retirement savings scheme that is managed by the Government. The Employees’ Provident Fund Organisation is responsible for the regulation and supervision of pension and provident funds in India.
It was set up with the motive of providing financial support to workers and their dependents in case of premature death or after retirement. The EPFO issues a twelve-digit number called the Universal Account Number to employees who are contributing to EPF.
Now the problem is how an employee will know whether the employer is contributing to his/her EPF contribution. We will read in this article the steps that an employee can follow if the employer is found not depositing to EPFO or trust. It has been found that several companies deduct contributions towards provident funds but do not deposit the contribution to the trustor EPFO.
According to the employee’s perception, he/she knows that the benefit will be provided to him/her on resigning or retirement, but hell breaks loose when they get to know that the employer was not depositing the contribution.
There are two parts of employee contribution to provident fund: one is contributed by the employee, and another is contributed by the employer.
The employee contribution is around 10 or 12 percent of basic salary. For women employees, it is 8 percent of basic salary for the initial three years and converts to 10 or 12 percent of basic salary after that.
The employer also contributes an equal amount of 10 or 12 percent of the basic salary that the employee contributes.
Ways To Check Whether The Employer Is Depositing Employee’s Contribution To EPFO
There are specific ways to check online whether the employer is depositing EPF contributions to EPFO. Some of the methods are given below:
Through The Official EPFO Website
Employees can check the Provident Fund website to find out the monthly provident fund deposit by the company. Individuals can verify through this information whether their contribution is being deposited by the employer to EPFO. But it must be noted that the actual money of each individual is not available. The total money deposited by the employer is recorded in the books. This contribution data is available only for those companies who are depositing the EPF money by availing the E-Challan and Receipt (ECR) facility. One can check this by visiting the Establishment Information Search at the EPF website.
The steps are given below:
- Details of deposits can be searched through the establishment code numbers (7 digits) or through the establishment name. E.g., if you search ‘Infosys’ you will get records of twenty-four different establishments.
- Search your establishment name and click on the ‘View Details’.
- After scrolling down, click on the ‘View Payment Details’.
- Look for the Key icon towards the end of the row.
- Now click on the “Payment” icon on the second row, you will get all the records of your establishment’s EPF deposits done electronically. Details like ‘Date of Credit’ to EPFO, the ‘No. of Employees’ whose money has been deposited by the employer, and the total ‘Amount’ credited will be shown.
Through SMS Facility To Registered UAN Holders: Individuals can register the Universal Account Number so that updates regarding deposits by the employer are sent to the employee through SMS alerts. This is similar to SMS alerts from banks whenever an individual’s bank account is debited or credited. But some institutions are exempted, and therefore employees of such institutions cannot avail of such facility. The format of the SMS from EPFO is as follows: ‘Dear member (UAN <10 digit UAN number>), Rs XXXX for 03/2021 has been credited in your EPF account. For details, download m-epf mobile app from Google Play Store.
Through E-passbook: E-passbook maintains the transaction records of an individual’s EPF account. It records and maintains any amount that is deposited by the employer on behalf of the employee. The passbook generally gets updated in batches, and it is outdated most of the time. An individual who has recently opened an EPF account will not find any records available in the passbook.
Steps An Employee Can Take If The Employer Fails To Deposit The EPF Contribution To EPFO
There are several companies that deduct contributions towards provident funds from the employees but fail to deposit such amounts with the EPFO or their trust. The employees believe that they are contributing to the provident fund and can have the amount after retirement or after resigning from the job. But later on, they get to know that the employer was not depositing the money, and that’s when the problem arises.
Employees do not know how to handle such situations or what to do when such situation arises. They don’t know whom to complain about such defaulting employer.
It is a legal offense to deduct from salary contributions for provident fund and not deposit the same with the EPFO or their trust. The financial problems of the company is not an excuse for failing to pay the contributions of the employees to EPFO.
When the company deposits the employer’s and employee’s contribution regularly to the provident fund office, it is controlled by the provident fund office. The employer should be held responsible for failure of payment and should be held liable to pay.
An employee can claim a copy of Form 12 to know whether the employer is depositing the provident fund contribution and the details of money deducted. The Employers are required to send this form to EPFO by the end of each month. But it is often seen that employers decline to furnish Form 12 to employees.
The employees can also file a Right to Information application to the regional provident fund office when the employer refuses to provide the details of provident fund contributions. Employer code and the employee’s provident fund account number is to be mentioned while filing such application.
The following can be done if the employee finds that the employer is not contributing:
- The issue can be addressed to the provident fund department by informing them of the details in their official email id. Individuals can also furnish a written complaint to the regional provident fund office and can get suitable contact details at the official EPFO site.
- Employees can file a complaint with the local police station regarding non-payment of provident fund contributions on the part of the employer.
- Employees can also file a complaint to the Chief Vigilance Officer appointed by the Ministry of Labour.
- Employees can also approach the regional provident fund inspector and file a complaint about action against the employer. It is to be noted that for any complaints regarding the provident fund, the employees need to furnish their salary slips that show the deduction for provident fund, provident fund registration number, employer’s name and address if possible.
According to EPFO, if a company is non-compliant with its provident fund deposits, the company has to pay the dues along with penalty interest, depending on the tenure of delayed payment. They are as follows:
- If the delay of payment is for less than two months, there will be a yearly interest payment of five percent over and above the amount payable for the number of days of delay in payment.
- If the delay of payment is for two months and above but not more than four months, ten percent interest will be charged yearly over and above the amount due for payment.
- If the delay of payment is for four months and above but not more than six months, then fifteen percent yearly interest will be charged above the due amount.
- If the delay is for six months and above, then twenty-five percent interest will be charged above the amount due for payment.
Contribution To EPF While Employer Claims Financial Problems
The Company Auditor who audits financial books of accounts of the company has to make sure that the company is depositing the provident fund contributions to the EPFO. Under Companies Audit Report’s Order (CARO), 2003, the auditor has to particularly state whether the company is regularly depositing provident fund due to the EPFO authority and, if not, the amount of arrears of provident fund shall be reported by the auditor. The auditor also has to take into account the period for which the payment of dues has not been made.
The CARO, 2003 requires the auditor to particularly state if the undisputed dues of the provident fund have been deposited regularly with the EPFO authorities. The auditor should report if the payment is not made, the amount of the arrears of provident fund on the last day of the financial year that is concerned for a period of more than six months from the date they became payable.
The companies who are not regular in their payment of provident funds provide excuses for the unstable economic condition of the company. Such excuses are not entertained for the failure of payment in the provident fund. The auditor should include such an amount of arrears in their reports.
Withdrawal Of Provident Fund While Company Claims Financial Problems
The Provident Fund withdrawal form is often ignored by employers citing reasons for financial problems. But employees need to know that provident fund withdrawal has nothing to do with the company’s financial crisis. The employer, after deducting the provident fund contribution from the employee’s salary, must deposit the amount to EPFO.
After the employer receives the provident fund withdrawal form from the employee, the employer must submit the provident fund withdrawal forms to the concerned provident fund office within five days of receiving the form.
The acknowledgement slip issued from the provident fund office should be passed on to the employee. Effective communication modes must be adopted to carry forward the acknowledgement slip to the employee through courier, by post, email, or through SMS.
It is advised to keep documental evidence of submitting provident fund forms to companies and an acknowledgement from the company of receiving the said form. This should be done to counter later claims from companies of untraceable forms or claims of not receiving the forms.
When The Employer Or The Company Becomes Insolvent
According to Section 11 of the Employees’ Provident Fund and Miscellaneous Provisions Act 1952, when the employer is deemed as insolvent or if the employer is a company and an order of winding up of the company has been made, the arrear amount from the employer, whether in respect of the employer’s contribution or employee’s contribution must be included among the liabilities that are to be paid on a priority basis like all other liabilities by selling the assets of the company or the property of the insolvent.
In other words, such nature of payment is considered as preferential payment over others, provided the liability accrued thereof has been acknowledged before the order of winding up is made or is regarded as insolvent.