EPF has been issuing notices left right & center. Leveraging data from co departments such as ESI, INCOME TAX & PT they are finding creative ways to slap notices and fines. Ambiguity in law & various interpretations of the law has also led to many companies being fined. But one thing is clear. It is mandatory for companies & all legal entities to provide PF when employee count exceeds 20.
Here are the top 3 mistakes companies should avoid while filing their EPFs
Error in Employee Inclusion : From the perspective of EPF, employee count is the addition of
1. EMPLOYEES ON THE PAYROLL OF THE COMPANY
2. CONTRACT EMPLOYEES INCLUDING YOUR HOUSEKEEPING SECURITY & MANPOWER
3. DIRECTORS DRAWING SALARY
By relying completely on the employees on payroll count, management may be of the view that they need not register for PF but this may be far from the truth.
Eg, In Jan 2018 a company ‘ABC’ had 5 Employees on payroles , 12 Contract Workers & 4 Directors drawing salary . Even though the employee on payroll count was only 5 this company has to register for PF because the total of Payroll Employees + Contract Employees + Director drawing salary equals 21.
1. Fluctuation in Employee Count : Changing business environments makes for fluctuating employee counts. Some months may be dull and we reduce our contract employees while others may be busy and increase that count . During such fluctuations, even for a single day, the total employee count exceeds 20 as prescribed by EPF, then the legal entity has to mandatory register for PF.
Eg, on 11 Jan 2018 legal company ‘ABC’ had 5 Employees on payroles , 12 Contract Workers & 4 Directors drawing salary totalling the employee count to 21. As a law abiding legal entity, ABC registers for PF & starts paying PF towards its employees.
A few days later on 15 Jan 2018, ABC downsized to 3 Employees on roles, 10 Contract Workers and 4 Directors drawing salary totalling the employee count to 17.
Even Though the employee count has dropped below the threshold limit of 20, then too ABC has to pay PF . This is because once you start filling for PF you have to pay towards it perpetually till the legal entity ABC exists. Your obligations doesn’t end if the count drops below the threshold.
Foreign Employee Count : If you have even one foreign employee, you have to mandatory register for PF regardless of total no of employees . So, that means even if there are 6 employees on roll and one foreign employee, then PF registration becomes mandatory even though the total number is less than the threshold limit of 20.
More often than not, companies make errors in employee count and usually get caught when the officer comes for inspection. Over the last 7 years of the company’s existence, If the officer finds that that employee count exceeded 20 even for a single day the officer can slap a back dated coverage with fines and penalty! So be sure to keep an eye on your employee counts all the time.
Bonus Tip 1:
Inconsistent Employee Number : EPF officers have started matching Employee Attendance Registers of both the contract workers as well as on role employees with Professional Tax data or Shops and Establishment disclosures.
Sometimes they further probe by taking a view of your balance sheet, salary statement, attendance register, professional tax registration copy, professional tax returns, shops & establishment registration copy .
Any difference between the employee number declared in any of the above documents and that on record with EPF may lead to fines.
If you noticed such PF errors then contact your accountant to get them fixed immediately.
If you need help with your EPF problems do not hesitate to contact us on +91-9845068263 or email us at as@manitalks.com
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