Dear All,
Our company is covered under EPF & ESI Scheme. Recently due to an increase in the work load we had to outsource our Engineering / CAD projects to other companies (proprietorship Concerns). Now this company is having 2 -3 employees and is doing this work for us. They also do similar engineering work for various others in India. They are not covered under PF nor ESIC as they are below the numbers required. With every project that they do for us , they raise a monthly invoice for the same.
Am i liable to PF or ESIC in this case. Please advise. We are showing this as work sub contracted. Is it the right way? Or should we show it some other way. I do not want to unnecessarily pay ESIC / PF for someone whose service i may not take continuously for 12 months.
1Our company is covered under EPF & ESI Scheme. Recently due to an increase in the work load we had to outsource our Engineering / CAD projects to other companies (proprietorship Concerns). Now this company is having 2 -3 employees and is doing this work for us. They also do similar engineering work for various others in India. They are not covered under PF nor ESIC as they are below the numbers required. With every project that they do for us , they raise a monthly invoice for the same.
Am i liable to PF or ESIC in this case. Please advise. We are showing this as work sub contracted. Is it the right way? Or should we show it some other way. I do not want to unnecessarily pay ESIC / PF for someone whose service i may not take continuously for 12 months.
It depends on how the contract is made. If the outsourcing is like getting some thing done in complete and the making of the same is not carried out in your premises or premises under your direct control, then they may be excluded from ESI and EPF. In such cases the contract should be "for service" they render for you. Here there can not be established any employer employee relationship between you and the employees doing the work. You may not be knowing who has done it for you. The contractor will be raising a bill which should describe the service as sold to you and should not contain a word like, labour charges for doing so and so work. If the arrangement is for doing the labour side then the picture will be different and it will be presumed that you have control over the workers and the manner in which the workers should work is as per your instructions and ultimately specific control can be easily established.
In the case of projects connected with Engineering or CAD, the arrangement seems to be like giving order for a complete/ finished product and the vendor will do it at his office according to the drawings supplied. This is usually a contract for service in which no employer employee relationship will exist between the person giving the job and the persons who do it. On the other hand, if you engage people to work for you and complete it even outside your office/ factory premise, then the contract with the workers will be contract of service, since they are engaged to do a certain thing and the workers are expected to do that only. In the former case no ESI/PF will have to be contributed whereas in the latter case you have to.
Madhu.T.K
From India, Kannur
In the case of projects connected with Engineering or CAD, the arrangement seems to be like giving order for a complete/ finished product and the vendor will do it at his office according to the drawings supplied. This is usually a contract for service in which no employer employee relationship will exist between the person giving the job and the persons who do it. On the other hand, if you engage people to work for you and complete it even outside your office/ factory premise, then the contract with the workers will be contract of service, since they are engaged to do a certain thing and the workers are expected to do that only. In the former case no ESI/PF will have to be contributed whereas in the latter case you have to.
Madhu.T.K
From India, Kannur
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