EPF Compliance by Contractors

The Employees’ Provident Fund (EPF) & Miscellaneous Provisions Act, 1952, in India, defines an employee as any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer.

This includes any person employed by or through a contractor in or in connection with the work of the establishment.

Thus, a business is responsible for EPF Compliance in all the below situations

1. Employees as Employer

2. As Principal Employer

   1. People hired through contractor

   2. Employees of other businesses to which a business process is outsourced

Even if the contractors are having separate PF code numbers, the overall responsibility of ensuring the compliance under the EPF & MP Act, 1952 for the employees working through the contractors by deposit of dues with the EPFO regularly, rests with the Principal Employer.

Failure to Comply will Result In

1.      Interest on delayed payments at up to 12% p.a.

2.      Penalty up to Rs. 50,000/-

3.      Imprisonment up to 3 years of Officers-in-Charge

Businesses are advised to ensure that their contractors are registered with EPFO before awarding any contract and ensure timely compliance by the contractor.