The Ministry of Labour and Employment is likely to review the surrender process for exempted establishments under the Employees' Provident Fund Organisation (EPFO). Discussed in the Central Board of Trustee (CBT) meeting in February, the draft minutes of the meeting have points regarding the impact on subscribers, as per a report by the Economic Times. The issues include unavailability of data, employers not taking accountability, delay in the surrender process, or fraudulent practices.
Thus a review of the process would be helpful to minimise these impediments. For this, a committee is expected to be set up to evaluate the process's viability, and chances of fraudulent activities, and recommend changes to protect the interest of subscribers.
To make the surrender process smooth, transparent, and less time-consuming, EPFO plans to change the standard operating procedure (SOP).
What Is An Exempted Firm In EPFO?
A firm or organisation which obtains the government's permission to manage provident funds of its employees through their own private PF trusts under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, is called an exempted establishment under EPFO.
Similar to EPFO, these trusts manage the funds and are expected to offer returns either equal to or more than what EPFO provides. When an entity surrenders its exemption, its provident fund subscribers are then transferred to EPFO, which then manages their funds and provides its services. Reportedly, there would be stricter rules for employers to surrender the exemption.
Surrendering Exemption:
According to the EPFO circular dated October 30, 2023, establishments mostly surrender their exemption due to their inability to match the benefits and services provided by the EPFO.
However, in some instances, the exemptions can be cancelled out as well. "any exemption can be cancelled only by the Authority which granted it if an employer fails to comply with the prescribed statutory conditions", per the circular.
The number of establishments surrendering their exemption status has been rising for the last few years. According to the notification of the Ministry of Labour and Employment, 17 establishments surrendered their exemption in the financial year 2023-2024, compared to 14 in FY2022-23 and mere three entities surrendered in FY2021-22.
So, to safeguard subscribers' interest and make the processes faster for exemption surrender, the committee would recommend the changes. With more establishments surrendering their exemption, the subscribers to these PF trusts will come under EPFO increasing its total number of subscribers.
As of August 7, 2024, there were 1,279 exempted establishments, per the EPFO website.
