Dear Seniors,
We have our factory situated in Maharashtra and are producing engineering products. Due to our requirements, we have now outsourced the production of certain components of our final product to various vendors. To monitor the work and ensure the quality, we provide the working space and required equipment to these vendors within our factory, and we pay the vendors based on the components produced. We have no control over the number of employees involved in the manufacturing process by the vendors as our contract is specific to the components. The payment is also made based on the number of components produced, but we ensure the safety of these employees. We have our permanent workmen, staff, and temporary workmen and staff working on the same floor.
My query is, are we liable for the statutory payments of these employees who are employed by the vendors, such as bonuses, ESIC, PF, etc.? Additionally, can you suggest some statutory and other complications that we may face in the future with this type of work arrangement?
Thank you.
From India, Mumbai
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10We have our factory situated in Maharashtra and are producing engineering products. Due to our requirements, we have now outsourced the production of certain components of our final product to various vendors. To monitor the work and ensure the quality, we provide the working space and required equipment to these vendors within our factory, and we pay the vendors based on the components produced. We have no control over the number of employees involved in the manufacturing process by the vendors as our contract is specific to the components. The payment is also made based on the number of components produced, but we ensure the safety of these employees. We have our permanent workmen, staff, and temporary workmen and staff working on the same floor.
My query is, are we liable for the statutory payments of these employees who are employed by the vendors, such as bonuses, ESIC, PF, etc.? Additionally, can you suggest some statutory and other complications that we may face in the future with this type of work arrangement?
Thank you.
From India, Mumbai
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Hi,
Consultancy Name –Aargee staffing services
email id-
/9677090220
The scope of our service offerings are below:
1.1 Managed Payroll Processing
• Monthly Salary Processing
• Quarterly & Year-end Tax Processing
• Pay Slip generation that is subsequently made available either through the Employee Self Service portal or as hardcopies
• Full and Final Settlement
• Standard Reports (e.g. Bank Advice Report, Statutory reports, TDS report) Customized MIS reporting.
• Form 16
1.2 Statutory Compliance Management
• Statutory Compliance Audit
• PF/Gratuity/Pension/Superannuation)
• CLRA Compliance Management
• Payroll Compliance Management - Filing of all periodical returns for the employer related to payroll
• PT/EPF/LWF/ESI
1.3 Online Employee Self Service Portal
- A dedicated portal for client employees with features such as
View / Download of Pay slip, Tax Computation Sheet, Reimbursement Slip, Form 16 and other documents
• View / Edit / Download of Investment Declarations
Regards,
Caroline.S
9677090220
From India, Chennai
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Consultancy Name –Aargee staffing services
email id-
The scope of our service offerings are below:
1.1 Managed Payroll Processing
• Monthly Salary Processing
• Quarterly & Year-end Tax Processing
• Pay Slip generation that is subsequently made available either through the Employee Self Service portal or as hardcopies
• Full and Final Settlement
• Standard Reports (e.g. Bank Advice Report, Statutory reports, TDS report) Customized MIS reporting.
• Form 16
1.2 Statutory Compliance Management
• Statutory Compliance Audit
• PF/Gratuity/Pension/Superannuation)
• CLRA Compliance Management
• Payroll Compliance Management - Filing of all periodical returns for the employer related to payroll
• PT/EPF/LWF/ESI
1.3 Online Employee Self Service Portal
- A dedicated portal for client employees with features such as
View / Download of Pay slip, Tax Computation Sheet, Reimbursement Slip, Form 16 and other documents
• View / Edit / Download of Investment Declarations
Regards,
Caroline.S
9677090220
From India, Chennai
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In an arrangement like this wherein you have your vendors working in your factory premises, it is very difficult to establish that the contract with the vendors is contract FOR service and not contract OF service. It is eventually a contract of service because you are obtaining the service of an outside party for getting some components manufactured. For that you supply the materials and have provided the equipment also. It is true that you pay for the number but that does not mean that there is no in process supervision. It can be seen that the basic objective of placing them under your own roof is that you can check the quality of the products before they become final. The fact that you do not have any control over the number of workers engaged will not hold good here.
In order to make the workers of the contractor independent you should have a buyer and seller arrangement with the contractor. Here, since the product is manufactured within your factory the contractor cannot be considered as an independent manufacturer having separate sales tax and central excise registration numbers. These obviously require an address and that cannot be the address of a premise which is already having sales tax and central excise registration. Under normal circumstances the scrap which is generated during the process of production will be property of the principal organisation because they only have supplied the raw materials. In such case, again, the buyer seller relationship cannot be established.
The security measures that you have taken to ensure safe working of the contractors’ workers are other important factors which establish that there exists master servant relationship. Therefore, such an arrangement will come under the purview of Contract Labour (Regulation and Abolition) Act and accordingly, you being the principal employer have to ensure that the workers engaged by the contractors get wages at the rate not below minimum wages and in time as per payment of Wages Act. You have also to ensure that ESI and EPF are remitted in time by the contractor.
Madhu.T.K
From India, Kannur
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In order to make the workers of the contractor independent you should have a buyer and seller arrangement with the contractor. Here, since the product is manufactured within your factory the contractor cannot be considered as an independent manufacturer having separate sales tax and central excise registration numbers. These obviously require an address and that cannot be the address of a premise which is already having sales tax and central excise registration. Under normal circumstances the scrap which is generated during the process of production will be property of the principal organisation because they only have supplied the raw materials. In such case, again, the buyer seller relationship cannot be established.
The security measures that you have taken to ensure safe working of the contractors’ workers are other important factors which establish that there exists master servant relationship. Therefore, such an arrangement will come under the purview of Contract Labour (Regulation and Abolition) Act and accordingly, you being the principal employer have to ensure that the workers engaged by the contractors get wages at the rate not below minimum wages and in time as per payment of Wages Act. You have also to ensure that ESI and EPF are remitted in time by the contractor.
Madhu.T.K
From India, Kannur
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