Process review likely for firms surrendering EPFO exemption

The Ministry of Labour and Employment plans to review the process for the surrender or cancellation of the exempted status given to employers under the Employees’ Provident Fund Organisation (EPFO) to protect workers’ interests.Organisations employing workers above a certain threshold can seek exemption and manage provident fund contributions in-house under the EPFO’s watch. Employers surrendering their exempted status would come under the EPFO, which would then manage the PF money of their employees.

The new rules, while trying to speed up the process, would impose greater accountability on employers that surrender their exemption, according to the draft minutes of a February meeting of EPFO’s central board of trustees.

Some members of the central board of trustees have complained about issues such as inclusion of illegal migrants and other fraudulent practices, unavailability of data and employers failing to take accountability that delay the process of surrender or cancellation of the exempted status, impacting subscribers, as per the draft minutes, which ET has seen.

A committee will be set up to look into the necessary changes needed to procedures governing the surrender and cancellation to ensure the process is transparent with a minimum scope of any fraudulent activities.

The revamped standard operating procedures will also work towards fast-tracking the process so that applications are processed in a time-bound manner without a lag. This will help the EPFO get more subscribers.Labour and employment minister Mansukh Mandaviya, who is the chairman of the central board of trustees, in its last meeting held in February directed the retirement fund body to constitute a committee to review the SOPs and to give recommendations for consideration of the executive committee and the board, according to draft minutes of the 237th meeting of the CBT. Exempt Organisations
Establishments that wish to manage the provident fund corpus of their employees need to seek exemption under Section 17 of the EPF Act, enabling them to manage their own PF trusts without making statutory contributions.

However, such exempted establishments are statutorily mandated to provide benefits that are at least on par with those provided by the EPFO to subscribers and comply with the notified conditions of exemption as outlined in the Act.

Government data show India had 1,002 exempted establishments as of March 31, 2023, managing a corpus of ₹352,000 crore belonging to 3.12 million members.

In the last two years (2023 and 2024), 27 establishments surrendered their exemption, adding about 30,000 employees and ₹1,689 crore to EPFO’s funds. In FY24, 17 establishments applied for surrender against 14 in 2022-23 and three in 2021-22. Another 15 surrender and 14 cancellation cases were proposed for consideration in the February meeting.

Exempted establishments can approach the EPFO to give up their exempt status.