The country's first private pension and payroll services company India Life Hewitt Ltd has asked the government to provide a framework for private players and separate the PF regulator from the administrator.
"The PF Commission competes as well as polices the private corporate administrators. There should be two separate entities. One managing the funds and the other regulating the players," India Life Hewitt Ltd director Ashok Reddy said.
India Life has around 250 clients in India and manages a portfolio of a Rs 1,000 crore. At present, India Life manages private trusts for its clients which is regulated by the PF Commission and acts as a service provider to the corporates.
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Reddy said by permitting private administrators like India Life, the quality of the services will improve. "One can have multiple criteria but there should not be any restriction on numbers," Reddy said. Currently, 60 per cent of the provident funds are being managed by the government, while the rest is being managed by trusts.
Reddy listed out a series of measures to overhaul the current PF system. These include, mandating forced savings so that employees are forced to contribute and curtail withdrawals from provident fund and penalise those who do so.
"Any non-compliance should be referred to the regulator. Any non-compliance should be severely penalised," Reddy said.
Reddy said investments of PF fund should be deregulated in a phased manner and the percentage of PF contribution should be brought down to make it less attractive for withdrawals.
Both Hewitt Associates, a global outsourcing company and India Life recently entered into a strategic partnership to become the largest provider of human resources, payroll and pension administration services in India.
The combined operation will serve over 250 clients in the outsourcing arena, including Heinz, IBM, Motorola, Oracle, Pfizer, Procter & Gamble, Siemens and Star. The asset base will be around Rs 1,000 crore and will service around 2.4 lakh employees. The equity infusion into the new entity will be $ 5 million - $ 8 million.
India Life Pension Services Ltd plans to raise around $3 million from its second round of funding. India Life received its first round of funding worth around $2.2 million from Boston-based investment and private equity company, View Group based in Boston. The merged entity is planning to acquire seven to eight chartered accountant firms in the country to expand its network.
The company uses the application service provider model to offer on-line access to payroll, pension and other related information to both employees and employers of client organisations.