Nearly 300 companies may not be paying interest on PF
Hundreds of thousands of people putting money into the government-run Employees’ Provident Fund (EPF) every month may not have been earning interest for the last two years.
The government has found that nearly 300 companies that are running their own PF trusts are flouting rules and may have been failing to pay interest.
Data from the labour ministry shows that EPFO was suspicious about the activities of 331 exempted establishments or companies who collect and manage their employees’ provident fund corpus. The EPFO has ordered a departmental enquiry against them.
“(At least) 331 establishments had not reported the interest rate for the financial year 2016-17 and it’s still not clear whether they have declared interest rate for 2017-18 as yet,” said a labour ministry official requesting anonymity. The EPFO had announced 8.65% interest rate to its subscribers in 2016-17 and 8.55% in 2017-18. All exempt establishments are legally bound to pay the interest rate declared by the EPFO or more than that.
Following a preliminary investigation, it was found
NEWDELHI:
that some 57 of the 331 companies have declared and disbursed interest. “EPFO field offices are still investigating the rest,” said a second government official.
Separately, some 10 establishments were found declaring or disbursing interest rates that were less than the statutory rates for 2016-17. Of these, seven are in West Bengal, Sikkim and Andaman and Nicobar Islands zone and one each in Tamil Nadu, Andhra Pradesh and Kerala. Of these 10, the EPFO cancelled the exemption status of three, one has surrendered the status, two have made up the shortfall in the interest rate paid to the employees and one has been served show cause notice. The rest have moved court against the retirement fund manager.
This comes days after the parliamentary standing committee on labour told the government to frame stringent rules for exempt establishments and raised concerns that these companies may have been misusing employees’ PF savings as their own working capital.
The committee said there is a need for a strong audit mechanism even though the government had told the committee that they have not found any establishments using such money as working capital. There are some 3,805 exempt establishments under the EPFO, which together manage over ₹2 trillion of retirement corpus.