The Vishal Megamart you visit each month for value-for-money shopping is fighting tooth and nail against a legal notice that says it’s not been crediting its employees provident fund (EPF) accounts to the extent it should. While as a customer of Vishal, it does not mean that the detergent you buy is a bad deal, but the fact that a well-established organization could be indicted, should certainly be a warning signal for you as an employee of any company.
This is what happened at Vishal: Early this year, the Employees Provident Fund Organisation (EPFO), a statutory body that manages the mandatory retirement corpus of employees, cracked down on Vishal Retail on the grounds that the firm had deposited insufficient funds in the PF accounts of close to 13,000 employees. The company is fighting the case on the grounds that the shortfall was due to the way the salaries were structured. While both sides are holding firm, the employees seem to be oblivious of the threat to their PF.
Also Read Pension Funds Warning Signals (Graphics)
The law book says that 12% of your basic, dearness allowance, and retaining allowance (other components of your salary are not factored in to compute PF) is deducted from your salary, matched by your employer and moved to the EPF. Part of it is moved to the Employees Pension Scheme (EPS). You can access this money only during a financial emergency, or when you retire or change jobs—it is part of the state vision of putting in place a security that salary earners can fund as they earn.
But what if your employer either does not deposit the money he deducts from your salary to EPFO, or contributes an insufficient amount for his share of the deal?
There are no clear-cut answers to this question. Says Manish Sabharwal, managing director, Teamlease, an HR consulting firm: “EPFO does not have any tracking systems for payments, settlements and this is the weakest link in the chain. Any exempt trusts that pull out of EPFO to run their own trusts offer online access to contribution and balance data.” Adds an EPFO official who did not want to be quoted: “It is the annual inspection that detects any discrepancy. But it takes much longer to deal with the gaps, as employers may not cooperate in furnishing returns of their employees. So, tracking PF dues becomes extremely difficult.”
Also Read Long Road to Recovery (Graphics)
The system may be ridden with flaws, but the law book has provisions to prevent your employer from tinkering with your PF money. Under the EPF and MP (Miscellaneous Provisions) Act, 1952, EPFO has been given the power to punish rouge companies. Their assets can be sold to recover the dues and the employers can be imprisoned. But the system in India grinds slowly and to wait for the wheels to turn to get your dues could leave you hungry at 60. It’s much better to be in control and catch the first symptoms of financial distress in your company. Here are some warning signals.
Cash flow problem: This is the first sign that should spur you into finding out more. You can spot this if your salary suddenly starts coming late, if you see guards hustling people who want to be paid, telephone calls from people aggressively asking for their money or news reports of a cash crunch. Suggests Sabharwal: “Any signs that the company is delaying payments to vendors, suppliers, contractors, salaries, are important signs of liquidity issues. Liquidity problems do not mean that PF contributions are not being made but it could be an important flag to think about benefit remittance.”
Pay slip: While most of you would pin your attention to the zeros of your salary cheque, it would make sense to study your pay slip that comes along. It carries the break up of your salary, mentioning major components such as basic salary, house rent allowance, special allowance, tax deducted and PF contribution. Check to see if a full 12% of your basic (plus dearness allowance and retaining allowance, if any) is being deducted. Remember, your employer is supposed to match this 12% and credit the entire amount to EPFO.
PF statement: You get this once a year, usually at the start of a fiscal year. This statement comes directly from EPFO and gives you detailed information on the contribution that you and your employer have made. In addition to the break up of the contribution, the slip also carries any record of non-contributory period. If you don’t get this thin long strip of paper by May for the preceding fiscal year, you need to press the panic button. Says Kartik Varma, co-founder, iTrust Financial Advisors: “Employers get this statement from the EPFO and can share the same with their employees. For organizations that do not practice such transparency, the employee can demand for a copy of Form 3A, which is an individual annual statement that an employee furnishes with the PF account of every employee.”
What you can do?
Unfortunately, not much. Approach your HR if these documents tell you a story. If you face stonewalling or do not get a proper reply, you could also approach the regional EPF office or lodge a complaint online. Usually, an employer can’t tamper with your part of the PF contribution, but you need to be careful. And find another job.