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PF Compliances – Five Pitfalls to Avoid

PF Compliances – Five Pitfalls to Avoid

Provident Fund Compliances are governed by Employees Provident Fund and Miscellaneous Provisions Act,1952 and the Schemes framed thereunder. An Employer is liable to ensure due compliance for all the provisions of the law, failing which he may be held liable for defaults and non- compliances. Hence, it is important to know the following five areas of compliance which can get easily missed

1) Contractual Employees are liable

PF laws have a very wide definition of employees and employees engaged through a manpower supply agency are also liable for PF compliances. In case of default on the part of the contractor, the principal employer can be held liable for default.

Payrule Note for Clients : In case you have engaged manpower agencies for carrying out work in your unit/ premises/ site, kindly ensure that the contractor is ensuring due compliance of the law and keep compliance documents on record for future reference

2)PF ExclusionConditions

Exclusion of an employee from PF coverage is possible only after fulfillment of the following conditions at the time of joining

– His Pay(PF wages) should be more than Rs 15000/- per month

– He should not have been a PF member in any of the previous employments

The PF exclusion should be supported with properly filled Form 11 which should be kept on record

Payrule Note for Clients : Kindly insist all employees to come under PF coverage and in case of exclusion, Form 11 should be duly filled in with due signatures at the time of joining and should be kept on record along with aadhar copy of the said employee

3) Expat / International Worker(IW) – PF Contribution on full pay

For employees who hold other than Indian Passport, PF compliances are not the same as that of an Indian Employee. Further, an Overseas Citizen of India / Person of Indian Origin holding other than Indian Passport should also be termed as an International Worker/Expat and PF compliances have to be met accordingly. The wage ceiling limit of Rs 15000/- is not available for such employees, and PF should be paid on Full Pay and not restricted to Rs 1800/- per month. Further, we need to verify if the employee belongs to SSA country or non-SSA country

Payrule Note for Clients : Kindly check employees passport at the time of joining and ensure that he is not an IW for PF compliances

4) PF Voluntary Coverage

Establishments which have less than 20 employees (including contractual employees) can opt for voluntary PF coverage but once the PF registration is done, the employees cannot voluntarily opt out of PF unless they fulfill conditions mentioned in Pt (2) above

5) Pension Contribution – Not liable after 58 years

In case of Senior Citizen (employees who attain 58 years of age), all of the PF corpus has to be parked in PF Scheme and diversion to EPS (Employee Pension Scheme) is not allowed

CA Darshan Balai


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