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Thursday, 11 July 2013 00:53 - - {{hitsCtrl.values.hits}}

I am surprised to hear that in the estate sector nearly Rs.1,000 million in total is due to EPF and ETF Departments remaining unsettled. Further, unions intend taking legal action against these companies for the recovery. In this connection I wish to state as follows:

It is the duty of the EPF and ETF Departments to check as to whether statutory dues are properly computed and settled on time with prompt submission of returns.

All late payments are liable for penalty on the increasing trend.

Legal action should be taken by these departments, only as they owe paramount duty towards the benefits of our employees. Further they are in a better position to check the accuracy of the dues demanding inspection of all income documents of the employees without any delay. In addition they could issue warrants on the employers for the recovery of principal amount together with penalty.

Union have to spend lakhs (members’ money) on legal matters and it will be time consuming as well (three to four years even); definitely they cannot place their hands on all records as I fear that records may be partly suppressed. Even implementation of a Court order may take time. In the meantime some companies could declare bankruptcy.

I doubt whether unions could file action for the recovery of penalty. Employees are not entitled to any relief till the dues are settled by the employers. They have no share in the penalty recovered also. Further they have to lose interest on the principal amount due to delay in settlement. Recently it was reported that Rs. 500 million was due from an estate company and the CEO was arrested. An immediate payment of Rs.10 million was demanded by Courts for his release. I am not aware what had happened to the balance Rs. 490 million to date. There was also another case where an estate company agreed to sell a part of its estate to settle 50% of the dues. Balance was to kept in arrears as they did not wish to sell the entire estate, About 15 to 20 years ago a leading company in Slave Island was closed. The executive director without any shame admitted that statutory dues were not settled for three years. Unions also have to be blamed for this. Instead of showing much interest in recovering subscription on time, they would have checked with the management and the respective departments as to whether the dues were settled on time. One official from these departments confirmed to me that unions have the right for such information and the departments would have complied with their request it demanded. EPF and ETF dues in total equal 23% to 25% of the monthly earning of employees. This is the saving they have at the time of retirement. When these are refused or delayed, they may have to commit suicide. I am of the opinion that EPF and ETF Departments functions fairly satisfactorily in Colombo. In a seminar one official from the ETF Department confirmed that they imposed a penalty of Rs. 600,000 on a bank for delay in submitting the return (please note it is only for delay in submission). If this attitude has been maintained by other regional officers, this massive arrears of Rs. 1,000 m (excluding penalty) would not have accumulated. Some time ago EPF and ETF Departments confirmed that nearly 40% of contributories only settle their dues on time with prompt submission of returns. EPF and ETF frauds are estimated in the following ways: 1. Income liable for deduction is not properly computed. Different types of allowances (travelling, entertainment, etc.) are paid to avoid statutory deduction (all are liable for PAYE Tax). Even sales commission, leave pay, free meals, etc., are liable for such deduction and several employers and employees as well are not aware of this. Proper HRM education is necessary. All should be aware of their duties and rights as well. 2. Deductions are not made. Employees are also happy that they are receiving their salary in full without realising that they lose 23% to 25% savings. 3. Deductions are not settled together with employer’s contribution. This is a clear fraud. Employers pay only 92% or 90% of salary and avoid 23% or 25% dues. It is an interest free loan or income even. Provisions would have been made in the accounts to secure tax claims and also to avoid audit queries. I appeal to the Government to consider this mater seriously. EPF and ETF Departments must adopt the following procedure together with suitable modification: a) An islandwide full survey of all establishments clubs charitable organisation which have paid employees be taken. This could be done on district or provincial basis. b) Appoint a professional team to check the records of all employers at least for two months on sampling basis. Checking of 40% complying establishments is simple. Balance 60% is troublesome, but verification is important. c) Issue warrants for immediate recovery of all arrears with penalty very important. d) Bring all CEOs to Courts early if dues are not paid on time. e) Publish the names of all materially fraudulent companies in the newspapers. This information will alert the lenders, banks, creditors and investors as well. For example a company may be solvent now but may become insolvent if statutory dues are to be settled early. f) Auditors should qualify their report if statutory dues are not settled on time. Very important. At present they include this information only in the management report, which is confidential. Public at large should be aware of such fraudulent companies. g) Normally auditors are satisfied if proper provision is made in the accounts for statutory dues. This is not adequate. They must certify that it was settled on time. More responsibility should be placed on auditors. I hope this matter will be discussed in Parliament. All members should cooperate in passing strict regulation to save Sri Lankan workers’ rights. At present domestic employees do not qualify for EPF, ETF and Retiring Gratuity benefits. Once the present situation is solved we have to concentrate on domestic employees also. A separate system has to be established. It may be difficult for individual families to send remittance to EPF and ETF dues of their domestic employees. Instead a pass book could be opened and money settlement should be made regularly on time.

Domestic employees also should be educated to check the pass book every month for due credits. The interests of hotel employees are also have to be looked into. EPF and ETF should be paid on their service charges. After all service charges are taxed under PAYE. I hope due publicity would be given in the media for the benefit of our workers. Long live workers’ rights and benefits. S.R. Balachandran BSc. FCA, FCMA (Sri Lanka)