EPFO directs officers not to send notices to employers to check wage structure

Move aimed at reducing harassment after apex court ruling that expanded scope of basic wages for PF calculation

The Employees’ Provident Fund Organisation has directed its officers not to send notices to employers and establishment owners for checking their wage structure for the last three to five years.

The move, which is aimed at cutting down on undue harassment of employers, comes in the wake of a Supreme Court ruling in February that has expanded the scope of basic wages for calculating provident fund.

“There is no reason or justification to initiate roving inquiries into the wage structure of complying establishments on the surmise that certain allowances in the nature of basic wages might not have been treated as part of pay for EPF contributions,” the EPFO has said in a recent circular, adding that in cases where notices have been sent without an evidence of arbitrary bifurcation of wages with the intention to avoid PF payment, the notices should not be pursued further.

“Such action amounts to roving inquiries/investigations which is impermissible in law,” the EPFO has said.

It has also said that field offices must take permission from the EPFO’s Central Intelligence Analysis Unit (CAIU) before carrying out inspections and should also not take any coercive measures until the pending review petitions filed in the Supreme Court on the issue have been heard.

Supreme Court ruling

In its ruling on February 28 this year, the Supreme Court has held that special allowances will be a part of the basic salary and will be used while calculating an employee’s The All India Manufacturers Association had raised the issue EPFO provident fund liability.

This in effect means that the employee’s take home salary will be come down while the PF component will increase.

This will also increase the employer’s PF liability.

The EPFO in its circular said that it has noticed that several field offices have issued notice to employers quoting this judgement and have proposed inspection of records for past three to five years to ascertain the wage structure and find out if any allowances which were a part of the basic wages have been omitted for

Field offices must take permission from the EPFO’s Central Intelligence Analysis Unit (CAIU) before carrying out inspections. 

the purpose of compliance.

The All India Manufacturers Association (AIMO) said the move will provide relief to honest and law abiding entrepreneurs.

According to an AIMO release, Central PF Commissioner Sunil Barthwal said, “AIMO had raised this issue about its members and members of the business community in general being issued with notices by statutory authorities.

After serious deliberations we felt that it had a valid point and in the interest of the development of business in India, we have issued the above circular to our officers to carry out investigations only after taking permission from CAIU and following the administrative guidelines.”