All organisations in the private sector should start provident fund (PF) scheme for their employees latest by May 31 this year, either with the Royal Insurance Corporation of Bhutan or Bhutan Insurance Limited, the labour ministry has notified.

Department of labour’s director, Sonam Wangdi, said that as per Section 99 of the Labour and Employment Act of Bhutan, 2007 and its regulations, an employee is entitled to PF and gratuity upon retirement from service.

“Although some big firms and corporations have implemented this scheme, most private firms have not,” he said. “The Act requires to have PF but it was not implemented immediately.”

The director said that it was high time ministry ensures that all companies follow the notification and implement the scheme. The ministry will start monitoring its implementation from June this year.

Those who fail to comply with the Act would be penalised as per the provisions of the labour Act. The International Labour Organisation also mandates that an employee irrespective of private or government should get equal benefits.

“We used to inspect before and penalise for non compliance and created awareness to start the PF,” he said, adding that the main objective of implementing is for the benefit of the employees who resign from service after five years.

Excluding the civil servants, there are 53,557 employees with 3,696 private enterprises, corporations and local government have PF membership with RICBL, BIL and the National Pension and Provident Fund from 2000 until December 31, 2017.

The ministry, as of now, does not have record on the number of private firms that do not have the PF scheme.

However, Sonam Wangdi said, most private employers informed the ministry that when they went to discuss about initiating such schemes, most employees chose to leave the company.

“This is because, five percent of one’s salary would be deducted, which many do not prefer and five percent would be borne by the company,” the director said. “It benefits the employees but not many understand this and we’re now looking at the companies that have more than five employees.”

It was also found that most employees do not stay for five years in one company while some don’t return after going on leave.

The PF should be reflected in the company’s Internal Service Rule (ISR) and endorsed by the ministry. Some companies were also penalised for not framing the ISR.

During inspection, if a company is found to have not complied with the Act, the ministry first issues an improvement notice to implement PF within a month to 45 days following which they would be issued a penalty memo equivalent to maximum of 360 days and minimum of 90 days.

“This notification would be like a reminder to the companies although there are increasing numbers of companies that has been complying,” Sonam Wangdi said.

Few companies were imposed penalty and there is no defaulter according to the records maintained with the department.

A penalty of Nu 762,500 was collected from private enterprises from 2013 to 2018 fiscal years for not framing ISR, not instituting PF scheme, not providing personal protection equipment, not maintaining wage records and for not providing weekly rest period, among others.

There are about 1,350 large-scale private firms, 1,748 medium and 5,886 small firms excluding cottage industries according to labour ministry records.

Yangchen C Rinzin