An organization is facing challenges from our contractors that, they are not remitting PF/ESI for their employees due to less head count. Approx 20-25 contractors are working under an organization. But every contractor is holding 5-8 employees on their payroll. So as per the respective act, they are not eligible to remitt PF & ESIC for their employees. Kindly suggest, how to make organization compliant on PF/ESI Act.
From India, New Delhi
From India, New Delhi
Dear Mr Ashishsah,
Pls elaborate what kind of challenges you are facing?
What type of contracts awarded?
Whether they are complying MW Act?
What is your role / designation in scrutiny of the contracts/challans?
Whether the compliance have been challenged by any employee / labour office?
Generally it is our mind set to ask the contractor for PF-ESI challans alongwith the bills. But actually it is not a legal requirement. If the vendor is not registered how challans can be submitted.
First of all while awarding any contract (specially related to manpower deployment), we have to ensure whether the contractor is covered under PF-ESI or not. Generally if the PE is registered under PF-ESI than the contractor’s personnel should also covered under social security system.
From my point of view, the most important point is that if the contractor has include PF-ESI and other benefits costing in the commerical rate, than you can deduct such amount from the monthly bill. Pls drag out the commercial documents and ask the person who awarded the contract, on which basis the contract awarded. There should be an internal committee who approve such contracts. In your organization this happended for 20-25 cases which shows it happened intentionally.
If the management want to correct the same, first of all take an undertaking from the contractors duly showing "In future if there will be any query / claim for the non-compliance related to their contract period, they will be responsible for the same.
Than you can terminate the contract (with adequate notice period as provided in the commercial agreement) and award new contract to PF-ESI Registered vendor.
I strongly recommend to recover the amount of statutory benefits from all the contractors (if they have include in their costing). Because it is your organization’s fund which they claimed / earned without making any compliance.
Hope the above will serve your purpose, for more pls clarify my above mentioned points. Fellow members can throw more light on the matter.
From India, Delhi
225Pls elaborate what kind of challenges you are facing?
What type of contracts awarded?
Whether they are complying MW Act?
What is your role / designation in scrutiny of the contracts/challans?
Whether the compliance have been challenged by any employee / labour office?
Generally it is our mind set to ask the contractor for PF-ESI challans alongwith the bills. But actually it is not a legal requirement. If the vendor is not registered how challans can be submitted.
First of all while awarding any contract (specially related to manpower deployment), we have to ensure whether the contractor is covered under PF-ESI or not. Generally if the PE is registered under PF-ESI than the contractor’s personnel should also covered under social security system.
From my point of view, the most important point is that if the contractor has include PF-ESI and other benefits costing in the commerical rate, than you can deduct such amount from the monthly bill. Pls drag out the commercial documents and ask the person who awarded the contract, on which basis the contract awarded. There should be an internal committee who approve such contracts. In your organization this happended for 20-25 cases which shows it happened intentionally.
If the management want to correct the same, first of all take an undertaking from the contractors duly showing "In future if there will be any query / claim for the non-compliance related to their contract period, they will be responsible for the same.
Than you can terminate the contract (with adequate notice period as provided in the commercial agreement) and award new contract to PF-ESI Registered vendor.
I strongly recommend to recover the amount of statutory benefits from all the contractors (if they have include in their costing). Because it is your organization’s fund which they claimed / earned without making any compliance.
Hope the above will serve your purpose, for more pls clarify my above mentioned points. Fellow members can throw more light on the matter.
From India, Delhi
A contractor is an official contractor when the principal get registered with state labor department and awards the contract to the contractor vide form 5 and the contractor submits form 7, produce the form 13 and form 14 CLRA act, otherwise the contract is void and such employees are to be treated at par of the principal employer, and he is liable to meet the requisitions of ESIC / EPF / Profession tax and other statuary liabilities related to labor laws
mere verbal talks about contract and separate salary sheets retained with the principal is to be treated willful intention to evade the ESIC /EPFO and the whole liability will be enforced to the principal by the department.
mere verbal talks about contract and separate salary sheets retained with the principal is to be treated willful intention to evade the ESIC /EPFO and the whole liability will be enforced to the principal by the department.
I am not impressed with the response received. I am simply asking, if contractors who are working in our projects have 4-5 employee each & not registered under PF/ESIC Act. So, how we make project complied in terms of PF/ESIC. As, total contractual employees deputed at our projects by different contractors are 120-10 in number. Here the query is, whether we need to remit PF/ESIC of contractual employees on contractors behalf or there is no requirement as such.
From India, New Delhi
From India, New Delhi
Dear Mr Ashish,
Here it is immaterial whether you are impressed or not. However, the forum senior members put their suggestion on basis of regulating act and their practical experiences.
Though in my reply I took some assumption at my own and given practical views and suggestions related to cost optimization as well. If the PF-ESI cost included in the contractor’s costing than you should recover the same.
I requested you to describe the matter in detail, which still not clarified by you. Now if I focus only to your words there could be two scenario:-
1) “How we make project complied in terms of PF-ESI”.
In this case you can deposit the PF-ESI contributions under your codes. But the contractor has to deducted employee contribution from the salary which you can recover from the bills, coz you are not paying the wages directly. Than you can deposit both employee and employer’s contributions under your code. But this is not a practical solution,at least I will not advice. Moreover, doing such thing for 20-25 contractors is not feasible. It will increase your work (making deductions from the bills, keeping record of employee contributions and making more records for employer’s contributions and justifying during Inspection, how much related to your employee and how much related to contractor’s personnel etc. etc…. Instead you can hire big contractor/s who are competent to meet statutory compliance.
2) “Whether we need to remit PF/ESIC of contractual employees on contractor’s behalf or there is no requirement as such”.
The answer is “YES”. Under Contract Labour Act the contractual labour should be given same benefits (as provided in the various Acts) as provided to the PE employees. If any employee put case in Labour Court than you may be asked to deposit PF-ESI in respect of all personnel from your pocket.
My conclusive advise is to depute PF-ESI registered contractor who are competent to make compliance of statutory and legal benefits. You just need to keep an eye on the contractor.
Hope this will serve your purpose.
From India, Delhi
Here it is immaterial whether you are impressed or not. However, the forum senior members put their suggestion on basis of regulating act and their practical experiences.
Though in my reply I took some assumption at my own and given practical views and suggestions related to cost optimization as well. If the PF-ESI cost included in the contractor’s costing than you should recover the same.
I requested you to describe the matter in detail, which still not clarified by you. Now if I focus only to your words there could be two scenario:-
1) “How we make project complied in terms of PF-ESI”.
In this case you can deposit the PF-ESI contributions under your codes. But the contractor has to deducted employee contribution from the salary which you can recover from the bills, coz you are not paying the wages directly. Than you can deposit both employee and employer’s contributions under your code. But this is not a practical solution,at least I will not advice. Moreover, doing such thing for 20-25 contractors is not feasible. It will increase your work (making deductions from the bills, keeping record of employee contributions and making more records for employer’s contributions and justifying during Inspection, how much related to your employee and how much related to contractor’s personnel etc. etc…. Instead you can hire big contractor/s who are competent to meet statutory compliance.
2) “Whether we need to remit PF/ESIC of contractual employees on contractor’s behalf or there is no requirement as such”.
The answer is “YES”. Under Contract Labour Act the contractual labour should be given same benefits (as provided in the various Acts) as provided to the PE employees. If any employee put case in Labour Court than you may be asked to deposit PF-ESI in respect of all personnel from your pocket.
My conclusive advise is to depute PF-ESI registered contractor who are competent to make compliance of statutory and legal benefits. You just need to keep an eye on the contractor.
Hope this will serve your purpose.
From India, Delhi
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