COMMENTS / SUGGESTION / VIEWS OF BUILDERS ASSOCIATION OF INDIA ON THE PROPOSED COMPREHENSIVE AMENDMENT TO THE EPF & MP ACT, 1952 Section Present Provision Suggestion / Comment on Proposed Amendments Section -1 Applicability of the Act Present Act is applicable to establishments employing 20 or more person. Objective and intention of this threshold limit was not to burden the small and smaller establishments financially as well as with additional compliance work. Whereas proposed amendment intends to reduce the limit from 20 to ten, which has no logic. It is submitted that establishments employing 10 persons are mainly run by the persons who are self employed. These establishments will not be in position to bear additional financial burden. Also, then need to employ more expert manpower to comply with the provisions of the Act. It is also mentioned here that recently the Government of India has proposed to enact a simple new legislation for the factories employing less than 40 persons. The aim and object of the proposed Act is not to burden such establishments with complicated provisions of the Factories Act and other laws hence such establishments have been exempted from all other provisions of the Act. This is a step of the Government of India to ease the business. The proposed Act to be made applicable to factories employing upto 39 persons also provides separate social security scheme for retirement and medical. But the proposed amendment reducing the number from 20 to 10 putting 24% burden would make such units out of competition and towards closure. 1
Section 2 Section 2(n) and Section 7CC Definition of Wages Present definition of wage for making contribution includes basic and dearness allowance. Appellate Officer - New Additions It is, therefore, suggested that provisions of the EPF & MP Act be made applicable to establishments employing 50 or more persons. Whereas the proposed definition includes all allowances for making contribution. It is submitted that besides basic wage and dearness allowance, all other allowance such as house rent allowance, conveyance allowance, washing allowance, food allowance etc are given to defray the specific expenses and these are not liable for making contribution towards provident fund. Also, provident fund is meant to save for retirement and for pension but employees have to meet their present liabilities and they are not willing to have any deductions towards such allowances. It is, therefore, suggested that definition of wages for making contribution should include only basic wage and dearness allowance and all other allowance must be excluded. However, maximum it could be provided that wages for contribution should not be less than minimum wage as notified by the State Governments. The new additions in the Sections provides for appointment of Appellate Officer from the Department to hear appeal against an order passed under Section 7A or Section 7B or Section 7C or Section 14B. It is mentioned here that order under above Sections are passed by an officer of the Department and Appellate Officer is also from the Department. However, the Appellate Officer is empowered to ask the employers to deposit 50% of the amount due from 2
Section 2(ll) Section 2(f) Superannuation Age Presently, age of superannuation has been provided as 58 years for employees who are member of the pension fund. Definition of Employee In the new definition of employee, words include employees employed through other establishments in connection with the work of the establishment. his as determined by an officer of the Department under Section 7A, 7B, 7C and 14B. It is, therefore, suggested that either the additions as proposed in Section 2(n) and Section 7CC are dropped or if at all these are to be retained then there should not be any such power with Appellate Officer to hear the appeal on deposit of 50% or 25% of the determined amount. Such excessive power within the Department will be misused. Hence, it is strongly suggested that Appellate Officer should not have power to ask the employer to deposit any amount before hearing appeal. Whereas the proposed Act empowers the Government to provide the age of superannuation as prescribed by them. It is suggested that there should not be such sweeping power with the Government to provide the age of retirement rather it should be related to the age of retirement as per Standing Orders of an establishment or age of retirement as provided in the Service Rules of an establishment. It is common in the present business scenario that works are outsourced and all the establishments have independent identity. Such an amendment would invite lot of litigation and would complicate the matter. It is reiterated that all the establishments are to be covered independently, if coverable. Also, whenever there is a contractor who have a coverable establishment, he should be made liable 3
Section 5A Central Board Presently, the Central Board of Trustees consists ten representatives of employers and ten representatives of employees on the Board. independently and parent organization should not be held liable for his liability. It is therefore, suggested that amendment in the definition be dropped. Moreover, the present definition be amended to the extent that all establishment who have separate code number should be held liable for their liabilities. It would minimize the litigation. In the proposed amendment, representatives of employers and employees have been Reduced to five from ten. Also, it is mentioned that representatives can be nominated only for two terms. We could not understand the reducing the representatives to five from ten as both employers and employees representatives are the stakeholders of the Fund and contribute in the interest of employers and employees about the management of the Fund. It is not out of place to mention here that the PF Schemes are being run mainly with the funds contributed by the employers and employees hence their view points are always important. It is also mentioned here that it should be left to the employers and employees organizations to whom they wish to nominate. It is, therefore, recommended that employers and employees representatives should remain the same on the Central Board of Trustees i.e. ten each and also it should be left to the organizations to whom they nominate to represent. 4
Section 6 Contributions to the Fund Present and proposed provision of contribution to the Fund at the rate of 12% is a big burden on both employers and employees, particularly when ceiling of wage limit is being increased time to time. Even employees are not keen rather agitate to contribute at such a high rate. It is, therefore, recommended that this rate of 12% be reduced to 6% or 8% particularly for the establishments in small and medium sector. Section 6 Proviso to Section 6 New provisions have been added in the Act which empowers the Central Government to reduce or waive-off the contribution of employers or employees It is recommended that all the workmen in the unorganized sector including such as construction industry and purely casual workers who have to earn daily to meet their day to day necessity should be exempted from making any contribution and only employers contribution in their case is payable. Section 6C EDLI Scheme Presently, contribution to the EDLI Scheme is 1% of the total wage as per ceiling. Since wage ceiling has been enhanced by more than two times, it is recommended that 1% contribution be also reduced to 0.50 per cent. It is also on record that lot of money is lying unutilized in this head. Section 7A Determination of money due from Employers Proposed amendment is welcome whereby proceedings to determine any dues has been limited to 5 years. This was a long pending issue which led to enumerable disputes. As you are aware, all labour legislations requires an employer to keep records upto three years 5
Section 7 D Employees Provident Fund Appellate Tribunal Presently, composition of Appellate Tribunal is of one person only and that also of judicial person with qualification to be appointed as a Judge of the High Court or a District Judge. only. While making this amendment, we suggest that let it in consonance with other labour legislation which requires an employer to maintain records for inspection of labour Authorities upto three years only. It is now proposed that Tribunal shall consist of three members one from Judiciary and other two from administration to be appointed by the Central Government. It is further added that administrative members one will be to the rank of Joint Secretary and other Additional Central Provident Fund Commissioner. It is mentioned that orders under Section 7A have been passed by the officials of the Department of EPFO and further supported by the Appellate Officer of the Department, if the proposed amendment are enacted. Then again the officials of the Department will dominate the proceedings in the Tribunal having not only majority but also will be influenced by the proceedings conducted by their own Department. It is, therefore, strongly recommended that this proposal to have three members Appellate Tribunal shall be dropped and in its place only Judicial persons to be qualified as Judge of the High Court or District Court be appointed, as per the present provisions. If the Government wants to make any addition to the Appellate Tribunal, additional person should not less than a retired High Court Judge. 6
Section 7-O Deposit of amount due on filing appeal In the present law and in the proposed law, it is mandatory to deposit 75% of the amount as determined in the proceedings under various Sections by the Authorities appointed by the Department. Though the Tribunal has power to reduce or waive off the amount to be deposited, but in view of this provisions mostly it is taken as if the employer can proceed only when an amount equal to 75% is deposited. Thus the deposit of amount should be reduced to 15% of the total determined amount and deposit of rest be decided on conclusion of the proceedings. Section 14 Penalties While amending the Act, it is perceived that enhancement of penalties is only way to tackle employers. All fines and penalties have been enhanced by seven to twenty times. It is relevant to mention here that this is a social security legislation where one of the major stakeholder is employers. Hence, the Act and the Schemes framed thereunder must be employers friendly. Enhancement of fines and penalties will amount to more harassment and shall ultimately lead to corruption. It is suggested that present provisions of Section 14 are already too harsh and should not be made more stringent. Hence, the proposal should be dropped. Besides that there should not be any imprisonment clause which is too deterrent for employers to do the business. ***** 7