Liability of Principal employer under EPF/ESI Acts - basic pay
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Liability of Principal employer under EPF/ESI Acts

bpugazhendhi Started The Discussion:

If the contractor fails to comply with the provisions of the EPF Act, ESI Act or the Minimum Wages Act, will the Principal employer be liable for penalty for such non-compliance? Suppose the Principal employer is registered under the Contract Labour Act, will that provide any immunity to the Principal employer in such cases?

rajanassociates - Contributing Member
Dear

The Law requires either one of them to comply and on failure the penal provisions are attracted.


With Regards


VS Rajan Associates,
Advocates & Notaries & Legal Consultants[HR]
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9025792684.

ABCM.DGM - 
What is the status of liability of employer, if his staff is getting salary of Rs.6500 or above and wish to go for contributory epf. Do he also need to contribute his share, or epf could only be carried by the staff?
Kindly clarify pl.

essykkr - Contributing Member
It is the prime laiblity of the principal employer to ensure all labour laws complainces of all contractors deployed by him in his establishment. In case of any violation then the principal employer shall be responsible for this. it is well settled law.

ESIC & PF Act both cast responsiblity to contribute the contribution of their core employees and contractual employees either hire directly of through contractors. Even if contractors does not have their own ESI and PF code then principal employer can deduct and deposit the contribution in his code.

K.SYadav - Contributing Member
Hi

The employees who are drawing the Basic+DA upto 6500/- are eligible to become a member. He will continue to be a member even when his pay exceeds Rs. 6500/-. However, his contribution Fund will be restricted to Rs 6500/-. The employer is also required to pay his matching contribution upto rs. 6500/-.
It is principal employer's duty to check & assure that the contractor is depositing ESI/PF contribution or not. Other wise idefalt in payment of dues to be paid by principal with damage & interest accordingly. So prepare the check points to compliance under ESI/PF Act and other labour labour laws.

Dear Seniors

I have small doubt in PF. Our consultant says if the basic is less than Rs. 6500/- than the basic should be 60% of the net home take as per PF ACT. Could anyone kindly inform under what proviso we need to comply them .

With Warm Regards

R. Swaminathan

sohashiven - Contributing Member
Dear Mr. Swaminathan,
My opinion is totally differ from your consultant on the basis of below said grounds,

The Section 6 of The Employees Provident Fund and Miscellaneous Provisions Act 1952, the contribution which shall be paid by the employer to the fund shall be of the basic wages and dearness allowance and retaining allowance. The law is silent in matter relevance with the minimum wages act’s basic amount and also silent on the fact the basic should be as per minimum wages act because the central act never refers the state act on the other hand state act or rules may refers to the central act.

With Warm Regards,

Ashish K Sharma
Sr. Manager-IR/Admn

suyoglabourconsultants - Contributing Member
Quote:
Originally Posted by ramuswaminathan View Post
Dear Seniors

I have small doubt in PF. Our consultant says if the basic is less than Rs. 6500/- than the basic should be 60% of the net home take as per PF ACT. Could anyone kindly inform under what proviso we need to comply them .

With Warm Regards

R. Swaminathan
Dear Swaminathan,
I do agree with Ashish Sharma, percentage doesn't make any difference when act of EPF Itself thrown light by virtue of Sec.2(b) what are basic wages and what doesn't include in basic pay. pls. refer the act and its corners.
Suppose, as per minimum wages basic pay is rs. 3130 and in addition to that dearness allowance is Rs. 1394 totalling Rs. 4526/- by this analogy a basic pay should be 2716/-which is less than the basic specified under M.W.Act and on the contrary when D.A. goes up at 2500/- then basic pay shall be Rs.3378/- so, this is not a criterion method at all.
Regards,
KIRAN KALE

suyoglabourconsultants - Contributing Member
Quote:
Originally Posted by bpugazhendhi View Post
If the contractor fails to comply with the provisions of the EPF Act, ESI Act or the Minimum Wages Act, will the Principal employer be liable for penalty for such non-compliance? Suppose the Principal employer is registered under the Contract Labour Act, will that provide any immunity to the Principal employer in such cases?
Dear,
During reference in between Malwa Vanaspati v. R.P.F.C.(1976)1 LLJ 307 (MP)
H'ble court decided that "The employer has been empowered by the provision (Sec.8 A) to recover the amount from the contractor either from the moneys payable to the contractor or even as a debt, and therefore, and employer cannot raise any difficulty on the ground that he cannot realise the amount from the contractor and as he does not pay wages directly to the workers he cannot deduct it from their wages either".
I think it is sufficient to realize that the principal employer is responsible for unpaid contribution of workers of contractor in to to.
Regards,

KIRAN KALE

Dear Seniors,

Thanks for your input. I totally agree that the Central Act never refers to the Local Act.

What my consultant says is that in order to reduce the employer contribution, most of the employers are resorting to split the salary component into small portion for PF deductable and larger portion as non PF deductable way. In order to avoid this only the PF office is implementing this 60% basis he says.


For eg if a guy's salary is 12,000/- is PF deductable portion is Rs. 2500/- and non PF deductable amount is Rs. 9500/-. Is it the correct way of showing.

Pls.suggest.

Regards, Swaminathan

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