Friday, October 11, 2013

Recent Development in the PF and Misc. Act

Recent Development in EPF and Misc. Act 1952, EDLI Act 1976 and Pension Act 1995 (not amendment)




Changes
1.       Electronically challan cum return
2.       Less time taken



Overview of this article:
Applicability
Development
Regulations on contract labours
New regulations in private PF
Issues in this area


India does not have comprehensive social security regime.
Employees PF Act is one of such social security measure.

Applicability of the PF Act: Does not apply to all organization
Mandatorily applies where 20 or more employees, voluntary coverage is available once covered cannot revoke the coverage.

Exclude:
Monthly 6500 INR, such employee can decide not to enroll however voluntarily option is there. Once membership acquired cannot be revoked during employment.
Not available for international worker

Following component of salary is excluded from the definition of salary:
HRA
OT
Bonus
Commission
Any other allowances which is not paid regularly.

Upper salary limit: 6500 only

Higher voluntarily contribution is allowed

6500 is not applicable to News paper employee and to international workers (working abroad)


Issues:
1.       EPF Act define as : Basic salary + allowances= basic wages (no clarity on allowances)- Manipal academy case and recent high court orders
2.       Whether PF will be on  Minimum wages or basic salary : if basic salary is lower than minimum wages
3.       Electronic return challan system : whether excess payment made will be adjusted
4.       Cross border employees coverage : 1.10.2008 notification- international workers-includes all foreign nationals working in an organization which is covered under EPF Act
5.       Foreign nationals- will be exempted- If employee is contributing in their country of origin or deputed from the country where India has bilateral social security agreement
6.       Foreign national has to be enrolled unless exempted
7.       Even if salary is paid by an Indian organization under ambit of EPF Act in India or abroad PF has to be paid
8.       Foreign nationals were getting problem to get refund of the PF contribution
9.       Social security agreement- with certain countries
a.       SSA signed and in force: Belgium, Germany, Switzerland, Denmark, Luxembourg, France, Republic of Korea, Netherlands, and Hungary
b.      SSA under signing process: Norway, Canada, Japan and Austria, Portugal

Contractor’s compliance: issues
EPF Act has not defined principle Act and Contractors.
Contractor has independent registration number
How to ensure full compliance of contractor


Recent Development in private PF Trust (not applicable to us)
Private PF Trust can be created but the benefit and coverage remains same as per the EPF Act.
Benefit of private PF Trust
Even before PF Act there were some PF trust in existence
IT helps for excluded employees
Better transparency and faster claim settlement
Better benefit to employees
0.92 % saving of payroll



Questions and answers:
1.       How EPF office is ensuring consistency in the improvement in PF settlement and plan for better service?
Within 10 days trying to complete the settlement using technology, 98% settlement is happening within 30 days
Pensioners are getting payment 1st of every month due to core banking
Insurance payment is also being paid within a months time

2.       More than 98% people are withdrawing before superannuation is this an issue?
Yes, it is an issue but we hope that the deposit will increase in the future. Claimant should not withdraw money before superannuation.

3.       If account is dormant, not operative for 36 months continuously, they do not get interest, is this forcing people to withdraw?
True, yes, this clause has made people to withdraw money. We are making an amendment in this

4.       There are lots of media articles comparing EPF and NPS and telling which one is better. What is EPFO’s say in this?
NPS and EPF are not comparable, EPF is an apple NPS is an orange. NPS does not provide benefits

Is there any plan to convert existing PF scheme to PF cum annuity scheme where people can withdraw partial or lump sum amount?
There is no such planning

Is there any plan for raising 6500 basic salary cap for PF coverage?
It is (6500 ceiling limit) very -very low. EPFO has advised government to Rs. 15000. It should be at least twice of the minimum wages and government has to take decision.

Is EPFO deciding on reducing employee strength from 20 to 10 for coverage?
We have made proposal to the government but no decision taken.

Is EPFO giving assurance that other allowances will not be added in the definition of salary for PF CONTRIBUTION?
When we say other allowances it includes commission and the payment which are not regular hence they will not be under the scope of PF coverage.



Contract worker who is responsible for compliance?
EPFO is helpful to principle employer. Now principle employer can check online whether

Why private trusts are given exemption date extended? What is the reason in extending deadline? What if they are not paying pension?
Come forward to complain if any employee has an issue related to payment. Deadline extended for better compliance.


How an organization can ensure that their application for exemption will not be turned down?
·         Ensure that they are not incurring loss for consecutively for 3 years
·         Account must be audited by the prescribed auditor
·         Payment must be regular


Bilateral agreement
Benefit after the date SSA becomes operative

Current stage of negotiation with US?
MEA has to take the decision


Which agreement are likely to come in next 3 months
Czech Republic


Expatriate who has HQ in US and deputed to India, salary is not paid by Indian subsidiaries, Does PF liability arise?
No, unless payment made by Indian subsidiaries, it is not mandatory for PF contribution.

What about Nepalese worker working in India?
They are considered as an Indian worker.

If an employee is coming SSA country, can he get excluded from paying PF contribution?
Can be excluded if he gets CSE from competent authority.

Expatriate has gone back to home country without paying the PF contribution, does the employer become liable for the default?
Relevant provisions need to complied alongwith damages by the employer, they are liable.

How to determine whether an employee returning from an SSA country is treated as an international worker (if he is an Indian worker)
It’s a gray area, will issue clarification shortly. The present definition says he can be treated as an international worker.

If there is any change in the international worker (in the absence of SSA, 58 years is withdrawal age)
No

Payment of PF to Indian outbound employee who are working abroad and salary is paid by the overseas company.
PF contribution if salary payable by the Indian employer only. No contribution is required if salary is payable by overseas employer. 


Guidance on definition of contractor (as not in the law)
Must see from the recruitment point of view. EPFO has made the thing simpler, everything can be seen from our website. Any outsourcing agency hired is a contractor. Worker should get social security benefit.






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