Government’s EPF COVID-19 Scheme could have been a fruitful, enormous step offered towards incentivizing employers not to retrench employees of organized sector and in helping employees retaining financial continuity. It could be such, sans the maze and whoops, take a look!
When GoI offers to pay for employer and employee, one would expect it to be couched in well-being for beneficiary. Getting too close can only shake up that confidence, with restoration being remote.
How does it work?
- It is applicable to establishments employing upto 100 employees with 90% of which should be earning INR 15,000 a month;
- Threshold of INR 15,000 is for basic wages* (basic wages has gone through its own identification crisis over the years and finally stood tall under the Surya Roshni Case SC 2019);
- Under the Scheme GoI has promised to pay EPF contribution both for the employer and the employee @ 12% each totaling to 24% from March to April. This is the last month;
- GoI promised to amend the regulations for the scheme to enable employees to draw up to 75% of non-refundable advance or upto 3 months of wages whichever is lower;
- Employers have to make this contribution and submit the proof by way of the prescribed Challan, thus, securing its position to receive the 24% contribution from GoI.
So? Where is the Haze?
i. What about companies under insolvency and now stalled? Who probably have either not paid employees for months or retrenched already.
ii. The Scheme operates on the model where employers submits the challan evidencing the payment and the GoI, reimburses. In the current scenario where employers are seriously considering retrenchment/ retrenched, will they feel motivated to incur the 24% payout upfront for 3 months in advance and then be reimbursed?
iii. It was a commitment for 3 months of March to May 2020. With an announcement made around April, would employers have proactively completed the exercise?
iv. Will there be a penal action against Employers who do not subscribe and execute under the scheme? We have already entered the 3rd and the final month of the benefit- May 2020.
v. In view of the slow Flattening of the Curve, will potential extended restrictions, prompt GoI to increase the benefit tenure?
vi. Would a non-compliance by the Employer be viewed as hampering the right of the employee given by government?
There is a loop on the Basic Wages
i. The SC ruling on Feb 28, 2019 under the Surya Roshni Case, had dismissed a bunch of PF appeal cases to settle a long standing issue around components of “basic wages”;
ii. A de-brief of the Surya Roshni had kept several employment lawyers busy for a while.
iii. Here is why? The Salary Structures of employees, typically have had low basic wages so that the deductions were low and the employees had a higher cash in hand since the deductions towards EPF would be calculated on the basic wages.
iv. A prompt conclusion of SC ruling requires structures of salaries to evaluate and “basic wages”[1] –
- basic wages cannot be camouflaged as allowance to avoid deductions and contributions;
- it cannot include payments for special tasks or if something is not paid across board.
v. The Apex Court’s ruling sent many employers on an assessment of salary structures, exercise. The salary structure data of employees in the INR 15,000 bracket of contract labourer contractors, was capable of causing a brain freeze.
vi. Wading through excel sheets of multiples State Laws, multiple classifications of employees, increments, withdrawals, etc. made it evident that salary structures would have to be reworked and deficits have to be paid.
Why is this relevant now?
We are in the 3rd month of the offering of the relief. Chances are, if the employers have not moved on this already, it will be a case of “too little too late”.
i. It’s been over a year since the clarity on components of basic wages was communicated;
ii. Have employers completed and implemented the revision exercise and filed the differential amounts wef.,March 2019?
iii. PF contributions were most violated compliance in view of the multiple pending appeals before various forums. Employers, have scored high on a historic non-compliance on this, was this rectified in accordance with the ruling? We need a data hunt on this.
iv. Was the differential reconciliation done after the Apex Court’s order for employees who switched jobs, retired, or withdrew PF half-way?
v. Interestingly, the COVID relief promise is possible basis UAN number. While evaluating the SC order with employers, it was revealed there were significant number of employees who did not possess UAN. Has a migration to UAN, since, been achieved?
vi. To add to the cauldron, as recently as last Thursday, Bombay High Court (Aurangabad Bench) has allowed employers to deduct salaries of workers who remain absent from work where the lockdown is lifted. While am sure the Employers of the plea may not have looked at completing the EPFO/ COVID relief requirements, but are troubled by absent labourers, by choice.
Note: what about workers, who after huge efforts have now been sent to their homes and cannot return to work? What if the worker cannot come back to work because of COVID-19 infection? What if the worker now is unable to return due to inter-state travel restrictions? What if he returns, only to be quarantined again? What if the industry, factory has to be shut down because of infected cases in the factory?
- What happens to contributions to be made by the companies under insolvency?
- How simple is the process of withdrawal, if the employee wishes to exercise the use of the benefit through withdrawal?
- Many employees have moved back to native lands, would they still have received the relief, rightfully offered to him by the GoI? Perhaps, the government whom, he chose to re-elect.
Receiving the EPFO COVID 19 relief is not an automatic relief for the employees, not as automatic as it sounded when GoI announced it. If anything, it is under the dominant discretionary powers of the Employers.
With rostering rights to deduct part of wages, employers may choose to get busy calculating deductions than making twin sided, 3 months, advance contributions.
[1] EPF Amendment Bill proposes to amend this to “Wages” and is brought in tandem with the definition of wages under the Code of Wages, 2019
Disclaimer: This Note is for general information only and not intended for solicitation. Please do not treat this as a legal advice of any sort. Views contained in this, are personal with interpretive value of the author and teams assisting the author.Readers are encouraged not to rely solely on these contents before making any decision.