Dear All,
We have appointed one driver purely on a contractual basis and are paying him a consolidated amount of Rs. 4000 per month. My question here is: Is it necessary to provide him with PF and ESI? Our company is very new, and we currently have only two employees on contract. For just two employees, we do not want to register ourselves with the PF & ESI authorities. This driver has been working with us for the last 15 days and is now requesting insurance coverage. In my opinion, it is essential to provide insurance to the driver, but is it also legally required?
Please guide me.
Regards,
Priyanka
From India, Mumbai
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1We have appointed one driver purely on a contractual basis and are paying him a consolidated amount of Rs. 4000 per month. My question here is: Is it necessary to provide him with PF and ESI? Our company is very new, and we currently have only two employees on contract. For just two employees, we do not want to register ourselves with the PF & ESI authorities. This driver has been working with us for the last 15 days and is now requesting insurance coverage. In my opinion, it is essential to provide insurance to the driver, but is it also legally required?
Please guide me.
Regards,
Priyanka
From India, Mumbai
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Hi Priyanka,
If the number of employees is more than 20 in your organization, then you are required to register your organization with ESI and PF; it is mandatory. If it is fewer than 20, there is no need to register your organization for the same.
Meanwhile, you may provide them with health cards, the premium for which is very low, approximately Rs. 400 per year for an amount of Rs. 25,000.
Regards,
Amit Seth
From India, Ahmadabad
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If the number of employees is more than 20 in your organization, then you are required to register your organization with ESI and PF; it is mandatory. If it is fewer than 20, there is no need to register your organization for the same.
Meanwhile, you may provide them with health cards, the premium for which is very low, approximately Rs. 400 per year for an amount of Rs. 25,000.
Regards,
Amit Seth
From India, Ahmadabad
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Hello Amit,
As I know:
PF is mandatory if there are more than 20 employees drawing below ₹6500 Basic + DA.
ESI is mandatory if there are more than 10 employees drawing below ₹10000 Gross (includes all pay components).
If there are 50 people in the organization and all are drawing more than ₹10000, then neither PF nor ESI would be applicable.
In the above case, there are only 2 people drawing around ₹4000, so PF and ESI would not be applicable. Health Cards are a very good option in this case.
Regards,
Girish
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As I know:
PF is mandatory if there are more than 20 employees drawing below ₹6500 Basic + DA.
ESI is mandatory if there are more than 10 employees drawing below ₹10000 Gross (includes all pay components).
If there are 50 people in the organization and all are drawing more than ₹10000, then neither PF nor ESI would be applicable.
In the above case, there are only 2 people drawing around ₹4000, so PF and ESI would not be applicable. Health Cards are a very good option in this case.
Regards,
Girish
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Thank you, Amit and Girish, for your assistance.
The option of a health card is really good. Could you please suggest to me from which company we can obtain these health cards at a premium of Rs. 400 per annum? Should we reach out to insurance companies like Bajaj Allianz or ICICI Prudential, etc.?
Regards,
Priyanka
From India, Mumbai
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The option of a health card is really good. Could you please suggest to me from which company we can obtain these health cards at a premium of Rs. 400 per annum? Should we reach out to insurance companies like Bajaj Allianz or ICICI Prudential, etc.?
Regards,
Priyanka
From India, Mumbai
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Hi Priyanka,
Please find below the definition of the applicability of ESI/PF. If your company has more than 20 employees on any day in a calendar year, then your company has to be covered under the ESI/PF. If your numbers are less than 20 and you still want to cover the contract labor, it is better to engage a contractor who is registered with the above provisions and transfer your contract labor.
(3) Subject to the provisions contained in section 16, it applies:
(a) to every establishment that is a factory engaged in any industry specified in Schedule I and in which [twenty] or more persons are employed, and
(b) to any other establishment employing [twenty] or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this regard:
PROVIDED that the Central Government may, after giving not less than two months' notice of its intention to do so, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such a number of persons less than [twenty] as may be specified in the notification.
(4) Notwithstanding anything contained in subsection (3) of this section or subsection (1) of section 16, where it appears to the Central Provident Fund Commissioner, whether on an application made to him in this regard or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment, he may, by notification in the official Gazette, apply the provisions of this Act to the Establishment on and from the date of such agreement or from any subsequent date specified in such agreement.
(5) An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.
Regards,
Suresh Ramalingam
From India, Mumbai
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Please find below the definition of the applicability of ESI/PF. If your company has more than 20 employees on any day in a calendar year, then your company has to be covered under the ESI/PF. If your numbers are less than 20 and you still want to cover the contract labor, it is better to engage a contractor who is registered with the above provisions and transfer your contract labor.
(3) Subject to the provisions contained in section 16, it applies:
(a) to every establishment that is a factory engaged in any industry specified in Schedule I and in which [twenty] or more persons are employed, and
(b) to any other establishment employing [twenty] or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this regard:
PROVIDED that the Central Government may, after giving not less than two months' notice of its intention to do so, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such a number of persons less than [twenty] as may be specified in the notification.
(4) Notwithstanding anything contained in subsection (3) of this section or subsection (1) of section 16, where it appears to the Central Provident Fund Commissioner, whether on an application made to him in this regard or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment, he may, by notification in the official Gazette, apply the provisions of this Act to the Establishment on and from the date of such agreement or from any subsequent date specified in such agreement.
(5) An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.
Regards,
Suresh Ramalingam
From India, Mumbai
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Hi Priyanka,
Most welcome. You can get that health card from New India Insurance. They are providing the same at this rate. Allianz Bajaj is charging approximately 1600/- annually for Rs. 1,00,000/- (one lakh).
Regards,
Amit Seth
From India, Ahmadabad
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Most welcome. You can get that health card from New India Insurance. They are providing the same at this rate. Allianz Bajaj is charging approximately 1600/- annually for Rs. 1,00,000/- (one lakh).
Regards,
Amit Seth
From India, Ahmadabad
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Hi,
In the case of contract labor, the best option is to go for outsourcing by paying minimum service charges to the agency. I would suggest you put the two contracted persons into an external agency's role which has proper ESI and PF registration. By doing that, you will be safe from any mishappenings in the future.
If you keep them on a contractual role and make payments to them by voucher, then your company is liable to pay for any mishappenings.
Thanks,
Kapil Khera
email: kapil@kirby-india.com
From India, Delhi
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In the case of contract labor, the best option is to go for outsourcing by paying minimum service charges to the agency. I would suggest you put the two contracted persons into an external agency's role which has proper ESI and PF registration. By doing that, you will be safe from any mishappenings in the future.
If you keep them on a contractual role and make payments to them by voucher, then your company is liable to pay for any mishappenings.
Thanks,
Kapil Khera
email: kapil@kirby-india.com
From India, Delhi
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Hi, Amit. Thank you for your input.
Hi, Kapil. You are correct. We should only consider taking two persons from an outside contractor. However, the issue here is that the contractor can provide a driver, but they are not reliable. We have our own driver who is performing well and is much more reliable. We do not want to hire any driver from an outside contractor. Additionally, we do not want our driver to be registered with the outside contractor as they pay much less than what is indicated on paper. For other positions such as office boys or housekeeping jobs, we will definitely opt for an outside contract.
If we hire a person as an office attendant or driver purely on our company's contract basis and pay them a consolidated amount per month by cheque, and if both of them are interested in PF & ESIC, can we deduct the same from their pay? Is it necessary for us to get registered with the PF Authority, or can't we handle it on our own?
Thanks and regards,
Priyanka
From India, Mumbai
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Hi, Kapil. You are correct. We should only consider taking two persons from an outside contractor. However, the issue here is that the contractor can provide a driver, but they are not reliable. We have our own driver who is performing well and is much more reliable. We do not want to hire any driver from an outside contractor. Additionally, we do not want our driver to be registered with the outside contractor as they pay much less than what is indicated on paper. For other positions such as office boys or housekeeping jobs, we will definitely opt for an outside contract.
If we hire a person as an office attendant or driver purely on our company's contract basis and pay them a consolidated amount per month by cheque, and if both of them are interested in PF & ESIC, can we deduct the same from their pay? Is it necessary for us to get registered with the PF Authority, or can't we handle it on our own?
Thanks and regards,
Priyanka
From India, Mumbai
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Hi,
Your concern is valid, but there are some good agencies you can tie up with. What you can do is ask the agency to pay the same salary that you are paying to the driver and charge some service fees on the salary amount.
Regarding the PF and ESI issue, it is not correct to deduct PF and ESI from the salary unless you are registered; this could lead to legal issues against your company.
I would still suggest that you contact a reputable agency and discuss the current salary with them, asking them to make a proposal based on the same salary.
Thanks,
Kapil Khera
kapil@kirby-india.com
From India, Delhi
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Your concern is valid, but there are some good agencies you can tie up with. What you can do is ask the agency to pay the same salary that you are paying to the driver and charge some service fees on the salary amount.
Regarding the PF and ESI issue, it is not correct to deduct PF and ESI from the salary unless you are registered; this could lead to legal issues against your company.
I would still suggest that you contact a reputable agency and discuss the current salary with them, asking them to make a proposal based on the same salary.
Thanks,
Kapil Khera
kapil@kirby-india.com
From India, Delhi
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Hi Priyanka.. One more thing you can do.. Do consult with any of the Legal Consult who is taking care of ESI and PF activities.. Hope they will also give a good advice.. Regards, Amit Seth.
From India, Ahmadabad
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From India, Ahmadabad
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Hi Priyanka,
I am from Kelly Services India, established in the year 1946. We are a manpower outsourcing organization based in the US, operating in 33 countries with 2700 branches worldwide.
You can transfer the same driver to our payroll, and we will cover them under ESI and PF. There is no legal disconnect in this process.
If you have any clarifications, feel free to reach me at ramesh_s@kellyservices.co.in.
Looking forward...
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I am from Kelly Services India, established in the year 1946. We are a manpower outsourcing organization based in the US, operating in 33 countries with 2700 branches worldwide.
You can transfer the same driver to our payroll, and we will cover them under ESI and PF. There is no legal disconnect in this process.
If you have any clarifications, feel free to reach me at ramesh_s@kellyservices.co.in.
Looking forward...
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ESI provides medical benefits to employees' dependent parents, spouse, and children. It's a good option. However, if you don't want to opt for it voluntarily, you can choose family cards that cover and provide health benefits to dependent parents, spouse, and children. Tata AIG and ICICI are well-known names for this. Alternatively, from the company's side, you can offer personal accident benefits through a Group Personal Accident policy. I believe your company must have this policy. National Insurance and ICICI are reputable choices for GPA.
Have a great weekend,
Umesh Chaudhary
(welcomeumesh@yahoo.com)
From India, Delhi
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Have a great weekend,
Umesh Chaudhary
(welcomeumesh@yahoo.com)
From India, Delhi
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Priyanka,
"4 temps of 3 months each make a full-time job." Remember this in the long run, so you will have a hard time after a year explaining to authorities as to why the said position should not be regularized. Think of all the reasons why people insure themselves/assets? i.e., it makes sense to give statutory benefits to an employee. Normally, owners/management feel otherwise due to the "Deep Pocket theory." If you can offer a long-term career to a person, offer him employment on the company's rolls; otherwise, outsource. For example, it is difficult to promote/motivate IT staff in a non-IT company. Another example would be security staff; a guard would have a better career at a security organization than on the company's rolls. Feel free to raise doubts.
Suryavrat
From India, Delhi
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"4 temps of 3 months each make a full-time job." Remember this in the long run, so you will have a hard time after a year explaining to authorities as to why the said position should not be regularized. Think of all the reasons why people insure themselves/assets? i.e., it makes sense to give statutory benefits to an employee. Normally, owners/management feel otherwise due to the "Deep Pocket theory." If you can offer a long-term career to a person, offer him employment on the company's rolls; otherwise, outsource. For example, it is difficult to promote/motivate IT staff in a non-IT company. Another example would be security staff; a guard would have a better career at a security organization than on the company's rolls. Feel free to raise doubts.
Suryavrat
From India, Delhi
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Hi,
Adding a new angle. We are a big company with more than 1000 staff. We intend to get into a straightforward contract where we draw up an agreement and pay him 6500/- per month. Do we have to involve PF and ESI? Can't we just make a cheque payment of 6500/- every month?
Thanks in advance,
Govind Prasad
From India, Bangalore
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Adding a new angle. We are a big company with more than 1000 staff. We intend to get into a straightforward contract where we draw up an agreement and pay him 6500/- per month. Do we have to involve PF and ESI? Can't we just make a cheque payment of 6500/- every month?
Thanks in advance,
Govind Prasad
From India, Bangalore
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PF for foreign employees 1.10.08.pdf
PF & ESI.zip