Over 1,250 private funds managed over $Life savings of Rs 3.50 lakh crore to nearly 3.2 million employees will have to offer “better or at least equal” benefits to their workers compared to the terms offered by the government-run Employees’ Provident Fund Organization (EPFO), according to new standard operating procedures (SOP).
A senior official, who requested anonymity, said: “Failure to comply by any private institution will lead to the cancellation of the exemption status.” Private or exempt institutions are companies that manage their own provident fund (PF) instead of depositing employee contributions in the central pool of EPFO. They are public and private sector companies.
The new and simplified standard operating procedures for the exemption have been approved by the EPFO’s Central Board of Trustees (CBT) headed by Labor Secretary Mansukh Mandaviya, the official said. He added that the new SOP will integrate the existing four SOPs and the Exemption Manual into one comprehensive framework to reduce the compliance burden and enhance ease of living.
The document said the new SOPs “reiterate and emphasize that the benefits offered by the exempt institution must be better or at least equal to those offered by the EPFO” and in order to protect members, balances of non-performing and non-KYC accounts must be transferred to the EPFO along with the accrued interest.
The new rule also restricted private trusts from paying arbitrary interest to their members and kept the cap at a maximum of 2%. “To maintain inter-generational equity, the higher interest is maintained at two hundred basis points above the EPFO interest rate,” the standard operating procedure (SOP) said. The above-mentioned official said that this provision was included as some public sector companies give benefits of up to 30-34% to their employees.
The 133-page document not only provides a clear list of documents required for grant, surrender and cancellation of exemption, but also reduces the number of documents required for various exemption processes. It seeks to establish a comprehensive mechanism with regard to monitoring, inspection and reporting of compliance and adherence to investment standards and timely settlement of claims.
The SOP also provides a comprehensive digital process for the delivery and transfer of backlogs. The technology-based governance approach will make the review of exempt institutions more transparent and efficient, the official said. “The aim is to provide clarity and uniformity in the supervision of exempt trusts operating under the supervision of the EPFO,” the official added.
In order to protect the interests of common employees, the Standard Operating Procedure (SOP) has also made it mandatory for private trusts to have an online grievance redressal portal, which should be integrated with the general grievance redressal system of EPFO. “All stakeholder grievances should be directed to the exempt institution online through the EPFO’s public grievance system,” he added.
“These standard operating procedures represent a shift towards a technology-enabled, risk-based and stakeholder-centric regulatory system,” the document said. It encourages voluntary compliance, reduces administrative burden, enhances transparency, protects members’ funds, and builds trust between employers, employees and regulators, thus supporting sustainable governance and “ease of doing business,” he added.
Some of the enterprises exempted as per the EPFO list for August 2024 are – Bokaro Steel, Jindal Stainless Steel, TVS Motor Co, Raymond Ltd, Larsen Toubro Ltd, Wipro, Infosys, Tata Tea Ltd, Reliance Industries Ltd, BHEL, Hindustan Unilever, Hindustan Petroleum Corp Ltd, Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and NTPC Ltd.
