At 1315 IST, shares of the company were trading down 1.5% at Rs 1,231.80. (File Photo, enhanced using Google Gemini)
TeamLease Services, one of India’s largest staffing solution and recruitment companies, has received a showcause notice from the Employees’ Provident Fund Organisation (EPFO) that has a financial implication of Rs 184.58 crore. In a stock exchange filing on Tuesday, TeamLease said the EPFO’s showcause notice alleges certain contraventions in relation to the administration and management of funds by the Employees’ Provident Fund Trust.
Amid the key allegations are charges related to investment losses, losses on sale of bonds and debentures, misappropriation of reserves, and certain employee-related amounts which are recorded as recoverable but for which the EPFO has sought supporting documentation.
The showcause notice was issued on April 13, while the company stated that it received the communication on April 23. The quantum of implication as per the notice is Rs 184.58 lakh, which the company disputes, the exchange notice said.
“Before surrender we have taken clarification from Regional Provident Fund Organisation, Bengaluru (Central) wherein employer is allowed to fund only to the extent of the shortfall arrived as per the Balance Sheet and the same has been funded on March 30, 2022. We are working closely with the department to resolve the demand,” the company said.
At 1315 IST, shares of the company were trading down 1.5% at Rs 1,231.80.
TeamLease Services Limited had set up its provident fund trust in the year 2006 following which it surrendered its exempted establishment status and transitioned to the EPFO-managed system in 2022 as it suffered losses due to investments in DHFL and IL&FS. The PF Trust had made unsecured investments of around Rs 173 crore in bonds of DHFL and IL&FS that were under liquidity stress. These bonds were due for repayment between FY21 to FY27. Starting from March 1, 2022 (March contribution payable in April 2022), the employee’s PF contributions were then made to PF office, Bangalore, as per the company’s website.
Last year, the Ministry of Labour and Employment Ministry has internally held discussions on slowly phasing out the system of exempted establishments or exempted provident fund trusts under the EPFO, especially for non-compliance with the PF body’s norms. In the financial year 2024-25, around 33 exempted establishments surrendered their exempt status, over 73% increase from 19 establishments that had surrendered in the previous financial year 2023-24. As of March 31, 2023, there were 1,002 exempted establishments managing a corpus of Rs 3.52 lakh crore of 31.20 lakh members.
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Exempted establishments maintain their own provident funds from the EPF contribution from their employees and are required to comply with 31 terms and conditions as detailed in Section 27AA of the EPF Scheme, 1952. They are required to provide interest rate at the same level as announced by the EPFO and deposit only the Employees’ Pension Scheme (EPS) component of the employees’ contribution with the EPFO.
The EPFO had mandated the exempted establishments to file mandatory monthly returns in 2014. The requirement for online filing of monthly returns was mandated in March 2017.
The EPFO has been undertaking a monthly ranking exercise for exempted establishments since July 2017, according to which companies are ranked out of a total score of 600 based on various compliance requirements. 100 points each are allotted for transfer of funds before due date, investment, remittance to the trust, interest declared, claim settlement and audit of accounts, taking the total score to 600.
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