Is EPFO a time bomb asks S. Nag

The ongoing fiasco at the National Stock Exchange (NSE) is testimony to the blatant disregard of sound corporate governance practices in institutions, which are allowed to function as closed entities, despite being instrumental in decisions and actions that have immense national as well as public significance.

I have been a close observer of such an institution named the Employees’ Provident Fund Organisation (EPFO) that is responsible and accountable for its decisions and actions that touch the lives of millions of the salaried class individuals, from daily wage earners to the corporate honchos. But, in many ways, this same institution has, over the decades, conducted itself in a manner that gives it the form of a closed institution with a deep-rooted ethos and culture that is not in consonance with a modern-day institution.

EPFO, which is a custodian of billions of rupees of the salaried class with almost no accountability to the public and comfortably safeguarded under the Provident Fund (PF) Act, an archaic statute legislated around the time of Indian independence, continues to impose its medieval-mindset-driven relevance through its conduct, functioning, processes and people.

Let us try and make sense of the DNA of an institution like the EPFO in the modern context.

I am sure most of the readers would agree that EPFO is nothing less than a long-term savings bank account of an individual with certain norms of withdrawal and the so-called stipulations to ensure that the saver’s corpus out of the monthly savings (read PF contributions) at the time of his retirement is allowed to give him reasonable financial freedom when he would need it the most.

So, in essence, it is a service-provider to millions of such individuals. But, find me a word ‘service provider’ in the EPFO dictionary (read – PF Act) and soon, everything that practitioners of PF in any organisation or a mere salaried person contributing to PF every month would begin to relate to falling in place.

A closely guarded fragile information technology (IT) infrastructure manifested through the unified portal, or unified account number (UAN) portal has been so unstable for years that even beta versions of newly launched web businesses will seem to be comforting to the eyes. The EPFO portal has frequent periods of prolonged downtime without a single notification to the users. Imagine an internet banking portal cut off for days!

Many would argue that since it is a long-term savings account with limited transaction possibilities, why should downtimes worry people? Well, why not? Among all such people or users are those who have suddenly felt the need to withdraw money for emergency medical reasons, especially during the pandemic, and have struggled. In most cases, they have given up on the hopes of withdrawing funds from the PF portal because of erratic behaviour exhibited frequently by the portal.

A mere scan of the Twitter handle of EPFO @socialepfo will reveal the sheer number of disgruntled users, not to mention the most unapologetic replies of the EPFO, “We have highlighted the concern to our IT department,” for days and months on end.

A notification in the form of an acknowledgement of the issue and its probable period of downtime would also be helpful –which, I am afraid, is possible only if the people in the inner circle of the EPFO themselves know of it.

As things stand today, it is an institution comprising officers, who think it is not within their remit to address or confront such issues as the PF Act remains their Bible, and the Act has no such obligations prescribed to be strictly followed.

Now, some of you may think these are tactical or administrative issues and why should there be a cause for concern or even a relatable issue of the nature of NSE fiasco. But, hold on!

If an email exchange can smash into smithereens of the foundations of an institution like NSE, why cannot such small issues collectively and finally reveal the constitution of an entity like EPFO? It may expose the gigantic and irreparable loss of crores of rupees which are the retirement savings of wage and the salary earners of the country.

Carrying forward the same argument of a ‘service-provider’ of small savings scheme of the working class, which an EPFO should ideally be, let’s focus on the know-your-customer (KYC) factor. KYCs have come to be known as the fundamental basis for identifying users of the financial and banking system in India. The fulcrum of this movement is driven by the Aadhaar tagging of all possible accounts held by an individual in the financial system, so to speak.

And so shall it be for the EPFO to not miss out on projecting itself as equally committed to protecting small savings through Aadhaar-based KYC. But, unlike banks and other financial institutions, which have seamlessly transitioned onto the Aadhaar-based KYC through networks of branches, the EPFO web-based KYC authentication system is left wanting with several loopholes.

From the most primitive ways of submitting forms at the PF office for any changes—to a PF subscriber’s records in line with Aadhaar—to coming up with circulars for tightening the Aadhaar-based KYC system by asking employers to submit heaps of documents to substantiate the employee’s identities—the process has been made so convoluted that there is a stalemate in KYC authentication of several PF subscribers. The EPFO’s inefficient handling of it is just another way to project itself as an institution that remains at arm’s length to the general public’s concerns.

Should there be no attempt on the part of the EPFO to create convenience centres or tie-up with banks or institutions to make the process of KYC more seamless for PF subscribers than to ask them to appear in the PF office in person? And, conveniently passing the ball to the employers and continuously pester employers with letters or emails using authoritarian and Victorian language and tones, asking them to comply 100% with KYC—is just another way to sweep the issue under the carpet or to ignore the reality that the malady lies within.

It is not funny the way correspondences and letters are still sent to employers by the EFPO officials—almost sounding like “You are guilty till we prove you otherwise.”

Well, it is time the EPFO top brass realises that the institution is meant for the public, the small savers. It is time they start behaving like a service provider and continuously strive to make it easier for the small savers who entrust their life’s savings with you.

Coming to the counter-argument – EPFO, in one of its circulars, stated that the KYC process has been made to address fraudulent withdrawals issues. Let us remember that such frauds have repeatedly been committed by EPFO insiders by cloning PF accounts of daily wage workers and siphoning off crores of rupees thereby. EPFO, therefore, needs to put its own house in order.

Web infrastructure and KYC maybe just be specks in the dune of breeding inefficiencies in the EPFO offices.

Let us talk about the inner functioning of the EPFO, as I have come to understand it in all these years. It is a hub-and-spoke model with the Central PF commissioner (CPFC) at the helm providing directions and guidelines to the RPFC (reginal PF commissioners). Several cracks are apparent in this structure. There is a lack of consistency in the approach instituted by individual RPFCs from addressing concerns of PF subscribers to varying degrees of inefficiencies in different PF offices, such as staff going on leave for months on end and no one taking responsibility in place of such absentees.

Drop boxes left outside PF offices to collect letters or applications from employers and PF subscribers, which have vanished over time. The ultimate sufferers are the thousands of PF subscribers who went knocking at the PF offices seeking resolution of issues like KYC, emergency withdrawal of funds and death claims initiated by kin of deceased PF subscribers on account of COVID. The traumas are endless and never reported and shall never be known except to sufferers or those responsible in the organisations’ PF and human resources (HR) departments.

I wonder if such issues can be brought within the framework of consumer complaints and fast-tracked to ensure better accountabilities on the part of the regional PF offices as well as the people at the helm. It must also include a concerted effort to extract information on internal inefficiencies through the Right to Information (RTI) Act, or an out and out attack on the internal functioning through media houses that should pull up every person at the helm and make them answerable to such issues being faced by the general public.

Digressing again from the main issue, I would like to narrate an incident of one of my several visits to the EPFO office wherein I was surprised to find heaps of papers lying on officers’ desks. Also, the officer I had gone to meet was happily addressing a workers’ union gathering and only returned to his desk after two hours of waiting for him. I had gone there to inquire about my colleagues’ death claims who had passed away during the COVID pandemic and, despite claims being sent to the PF office on time, none got processed until I found five of them lying on the officer’s desk.

In absolute nonchalance, he said that he had been on leave for a month and would only attend to the death claims later after finishing all his pending work. On enquiring with the section head to whom the officer reported, she was equally nonchalant about this and simply said that they were understaffed! This, despite the order from the CPFC that death claims have to be processed with utmost priority.

These officials also have a quick way to deal with orders passed by the CPFC. They simply scribble a note asking for more information from the employer about the application, which may not be relevant to the claim settlement and thus evade responsibility to complete the task on time, with nobody to question the action! I am sure many would relate to this.

There are such issues galore that could be labelled as mere administrative matters; but, if considered as a whole, these cumulatively represent the functioning of an institution that remains least concerned with problems faced by the people. It has always projected itself as a regulator of the PF scheme with total disregard to the fact that the patience of the general public will soon exhaust, and they would be compelled to alter its stance from that of a close-ended regulator to a transparent service-provider.

The most worrisome issue is the money that EPFO is the custodian of and the myriad issues that a poor saver has to face when trying to transfer or withdraw funds, of which he has least knowledge. The pension scheme EPS is in several court battles between organisations, workers and the EPFO.

One such issue pertains to a 2014 mandate whereby the EPFO issued a circular amending the EPS provisions in the Act to state that employees contributing to PF on a salary exceeding Rs15,000 per month would not be required to allocate part (8.33%) of their 12% employer’s contribution to EPS.

Well, the conditionalities around the mandate might seem to be simple on the face of it but with the simultaneous launch of the UAN portal, which digitised all active PF accounts and left out all those which were not active before 2014, led to all kinds of confusion on EPS continuity for employees. Therefore, the employers took the safer option to continue the EPS as it was on restricted wages of Rs15,000 per month, although contributing PF on full salary.

Fast forward, even today, PF offices are not allowing withdrawal or transfer of the PF of subscribers due to this stance adopted by companies eight years back. Moreover, if it was a change in stance by the EPFO, why not rectify and add back the money back to the EPS contribution of the employer PF at the back-end? Why bring organisations and employees to a virtual stalemate when EPS itself is such a confusing part of the PF that 50% of workers do not even have an understanding of the EPS scheme and its final objective of providing a monthly pension post-retirement? This is just another way to hide inefficiencies by cunningly diverting the issue to employers and employees.

What happens to the millions of PF subscribers who joined the corporate bandwagon after September 2014 and contributed to EPS by virtue of the organisation’s call where they worked. They cannot transfer or withdraw their PF because the EPFO wants the past contributions to be rectified by the employer. If you are the fund manager, custodian, and account keeper, why you cannot do it yourself rather than prolong the issue and virtually bring it to a stalemate?

Well, as I see it, it is again a smart, cunning move by the EPFO to skirt the issue of underfunded pension monies by investing them in junk bonds and securities and therefore, procrastinating the problem or bringing about a stalemate by putting the ball in the employer’s court. They are happy to litigate rather than address the issue by liquidating the pension investments and redirecting to EPF. It may need additional funding from the government to cover up the losses due to bad investments and asset liability management (ALM).

It is a known fact that the EPFO takes six to eight months to credit interest to PF subscribers’ accounts every year. Can a bank be allowed to not credit interest to deposits or savings accounts on time? But is anyone complaining? And who is accountable for all this?

There are several instances of wrong accounting of interest which never get addressed by the EPFO as it is always a communication between the PF subscriber and the PF office which never come to the fore because the PF subscriber has had enough in dealing with the unscrupulous and uncouth responses that the EPFO gives to such queries.

The grievance portal of the EPFO is a sham. After reading some of its responses, I feel that even a small kid would provide better-articulated answers than the ones the general PF subscriber receives for her query.

Amidst all these, the question that would still lurk in the minds of the reader is, “How does the EPFO continue to remain relevant for all these decades?”

Well, there is no simple answer. I think there is an inherent risk of eventual financial loss or even a risk of data loss or data breach, which could lead to one’s savings being wiped up thoroughly because of the callous attitude and the inefficient conduct of the EPFO authorities in close-guarding every aspect of the PF rather than just playing the part of a regulator and entrusting record keeping; fund management with professional institutions as the Pension Fund Regulatory and Development Authority (PFRDA) does, for the new pension scheme (NPS).

I would not be surprised if one fine day, I find my PF passbook amounts being replaced by some other amounts or for that matter, through my login, I get to see another person’s PF statement and mine vanished. This has happened in the not so distant past wherein PF passbooks displayed zero contributions for almost a day. People who logged in on that fateful day were utterly taken aback when they found all entries wiped out on the PF passbook.

So the moot question remains: Who will take this issue up and who has to address this?

The HR fraternity is too busy philosophising on issues such as ‘the great resignation’, ‘performance management’, ‘workforce skilling’ and such fancy terms which become catchphrases for HR webinars and seminars which in its finality has yielded no results till date.

So-called HR folks indulge in such flagrant portrayal of wisdom on social media as though the world would not be enlightened if they did not exist. But the real issue is never discussed. The labour and PF commissioners are invited to seminars and webinars and revered for their position and powers. It is always a consultant’s claim to fame that she can leverage relations with the who-is-who in the circle of commissioners to help her client’s issues be addressed.

The lack of interest on the part of the HR fraternity to address fundamental issues will one day boomerang on the face of the industry and the poor PF subscriber will be left with no choice but to lament on her own fate!

Finally, in my opinion, the issue lies in the EPFO coming within the purview of the labour ministry. This ministry has always been seen as a plump portfolio for a minister from the marginalised section of society. Labour is a concurrent subject in the Constitution and many of the issues get lost in discussion and deliberation without any fruitful and thought-provoking outcomes. Case being in point, the PFRDA comes within the purview of the finance ministry. Thus, within a decade, has gained prominence and has created a delivery framework for NPS that is unparalleled to that of EPFO.

The big question remains: Who has to take this up finally – industry, industry bodies, HR fraternity, management consultants or would it boil down to the poor saver again? more