Saswatabanerjee
Partner - Risk Management
Kannanmv
Hr & Administration
Satish Kumar Bhargava
Social Security, Training, Vigilance &
Karamv
Hr & Admin
Ravi12345
Licensing Of All Acts Across Pan India &
ManojKuma_yadav
Private Service
+3 Others

Dear All,
One of my friend company,they have 4 contractor and each contractor having 3 employee under them.
They don't have ESIC,PF number and no license.
Total 12 employee working under 4 contractor.
If we go through ESIC and PF then how can we deduct the PF and how it to be submitted to PF & ESIC authorities.
THis is on the needly basis,senior pls give your valuable inputs.
19th November 2010 From India, Jhajjar
Kindly check Each contractor has got how many Employees in there Roll's where they would be providing similar service to different organization then Automatically they wud be having above 20 Employee's .
19th November 2010 From India, Mumbai
Dear Ravi, They dont have any other contract and having only 3 employees on the roll for each. Then what should be sir...................?
19th November 2010 From India, Jhajjar
Sir,
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We are growing company in Manpower Outsourcing and Consultancy, We willing to have business association with your esteemed organization and look forward for personal meeting for the same. We have online software with Employee user login ID to have transparent operation. Currently we are associate with Goodyear Tyre for North and West Region, Reliance on pan india
Looking forward for your positive response
19th November 2010 From India, Gurgaon
You are required to deduct the pf and esic from the payment to contractors and pay the same to the department on your own pf code. / esic code. There is a procedure for it under pf and esic rules. You can do it without making them your emploupyees. You need to fill the correct form, naturally
21st November 2010 From India, Mumbai
It is the Principal Employer's liability to ensure all Social Security benefits are available to the employees even engaged thro Contractors despite of individual contractor's numerical strength. It has to be either by the Contractor if he is independently covered otherwise thro the Principal Employer.
21st November 2010 From India, Jaipur
Eeach contractor must get hinself registered with the concerned authorities. In your case they should get themselves Code No.s under ESI & PF Acts, if they are eligible for coverage under the two statutes.



In any case if each contractor has only thre eemployees on their rolls, then they are not liable for coverage under both Acts....ESI & PF.



Therefore there is no question of any deduction under ESI & PF.



However whenver you engage employees through a contractor you MUST ensure that the following stipulations are incorporated in your contract with them:



That every month they will give to you copies of the following alongwith the originals which shall be returned after verification by you:



1. Attendance sheet for the month which shall include employee working for you.

2. Payroll, again with names and wage details of employees working for you.

3. ESI & PF Challans. In your case obtain a decaration by the contractors on their Letter Heads stating that they have ONLY three employees on rolls of thier firm and that therefore they are NOT liable for coverage under the two statutes.



These basic documents should be submitted by the contractors alongwith their bills, each month.



Pay them their due money after due verification of the relevant facts.



In case you have any further clarifications please feel free to contact me on 09717726667 or on my emial



Vasant Nair








21st November 2010 From India, Mumbai
Dear Vasanth,
Do you suggest if the contractor is not covered under the relevant acts they need not be covered under PF and ESI?
If so what happens if the employee is injured or meets with a fatal accident while working in the company?
In this context, I agree with Saswata Banerjee's view that PF and ESI has to be deducted from the contractor's bill and remitted to the respective authorities by way of a separate challan and explained to the respective inspectors when being audited.
This suggestion is given considering the practical problems that might arise while we deal with certain eventualities.
Regards
M.V.KANNAN
22nd November 2010 From India, Madras
Dear Kannan
U R 100% right. Please go thro s2 (f) of the EPF Act 1952. It shows that the employees engaged thro contractors are also your ees for all practical purposed as far as statutory benefits and protections are concerned.
The Esic provides for insurance protection against the huge liability in case of accident under workmen's compensation Act. besides non payment of contribution on both accounts of ESIC & EPF the liability may go the extend of 400-500% of the statutory liability besides disalowance from I Tax.
I totally disagree with the views expressed by Mr Vasant Nair.These are contrary to Legal Position.
22nd November 2010 From India, Jaipur
My Dear Friend,

Each contractor should get himself an ESI Code and PF Code No. This requirement is a MUST when you think of engaging a Contractor.

If one is NOT eligible for coverage then the concerned party will not be given a Code No. by the concerned authorities.

If the Contractor does NOT have an ESI & PF Code No. where is he going to deposit the money deducted from his employees' wages against ESI & PF?

AS the Principal, please appreciate the practicality of the issue.

The employees under a Contractor are his employees. Therefore the Contractor will be responsible for preparing their Payroll and compliance of all applicable labour laws.

If you as the Principal Employer you decide to do all this, then you might as well take such employees on your own Company's Payroll instead of engaging them through a Contractor.

Under the present circumstances the employees engaged through each respective contractor are NOT eligible for coverage under the ESI & PF since the concerned Contractor is NOT eligible for coverage under the said Statutes.

In case of an employment injury or death, the concerned worker will be entiled to benefits under the Workmen's Compensation Act.

As a measure of abundant caution you may ask the Contrator to get a Personal Accident & Mediclaim Policy for his employees to take care of any such unfortunate mishaps.

Your suggestion, I am sure, is well intended, but not quite the right one.

Best Wishes,

Vasant Nair


23rd November 2010 From India, Mumbai
Dear Satish,
Your views are well appreciated but such an approach will defeat the very purpose of engaing employees through a Contractor.
Yes, if the Contractor fails to comply with the applicable laws, then the liability automatically shifts to the Co. being the Principal Employer.
Also, you seemto be a little confused about the ESI Scheme and the Workmen's Compensation Act. Please understand that both are independent of each other.
Vasant Nair

23rd November 2010 From India, Mumbai
In case of a fatal accident or even disablement cause through an injury arising out of an accident, the concerned worker will be entitled to benefits under the Workmen's Compensation Act.
Vasant Nair

23rd November 2010 From India, Mumbai
Dear Vasant Sir,
We can have on the roll no doubt but main situation is that they work on the piece rate.
Suppose today we are offering 200 per day next day any company hire them more than 200,so this is the main problem.
So we have the some one who work like as a contractor and have under him some worker which is paid on every day basis.
so how can deduct pf,esic etc
Seeking for the right information.
23rd November 2010 From India, Jhajjar
Dear Vasant,

To my knowledge there are many companies engaging contractors who do not have a PF or ESI code owing to various factors.

These employees are covered for PF and ESI by the Principal employer. By merely covering them does not mean they are taken on the rolls of the Principal employer as you have stated.

The statutory deductions are remitted by the Principal employer by way of a separate challan and statutory inspectors do conduct audits and agree this fact.

You have stated that in the event of an accident the workmen will get paid under the Workmen compensation Act but who will pay the compensation. Obviously the Principal Employer, he has the right to recover it from the contractor. But the real fact is, invariably the contractor either absconds or the compensation amount awarded is beyond the financial capacity of the contractor.

Our principal aim is to safeguard the interests of the organisation. Please note that you will be questioned by the statutory inspectors when they come for inspection if you engage employees without PF & ESI coverage and your statement that the contractor does not have a PF or ESI code will not hold good.

Regards

M.V.KANNAN
24th November 2010 From India, Madras
To my knowledge there are many companies engaging contractors who do not have a PF or ESI code owing to various factors.



These employees are covered for PF and ESI by the Principal employer. By merely covering them does not mean they are taken on the rolls of the Principal employer as you have stated.



This is a very weak and an avoidable practice. It defeats the very objective of engaging employees through a Contractor. Such practice will put the principla employer in a very vulnerable position in case of an Industrial Dispute.





The statutory deductions are remitted by the Principal employer by way of a separate challan and statutory inspectors do conduct audits and agree this fact.



If the documentation is proper, statutory inpections can also be very easily handled satisfactorily.



You have stated that in the event of an accident the workmen will get paid under the Workmen compensation Act but who will pay the compensation. Obviously the Principal Employer, he has the right to recover it from the contractor. But the real fact is, invariably the contractor either absconds or the compensation amount awarded is beyond the financial capacity of the contractor.



Ideally, the Contarctor being the immediate employer of his employees, is liable to pay the compensation. You are very right in your observation that in such situations, the Contractor just vanishes and the Principal Employer is left saddled with the burden.





Our principal aim is to safeguard the interests of the organisation. Please note that you will be questioned by the statutory inspectors when they come for inspection if you engage employees without PF & ESI coverage and your statement that the contractor does not have a PF or ESI code will not hold good.



I will repeat, if you have your documentation done properly, you can very easily satisfy the Inspectors.



You are also very right that we as HR practitioners have to protect the Company's interests. For this we should be very correct and proper in our documentation and records.



I have good practical experience of handling contract labour and in case you wish to understand the finer points involved, you are welcome to chat with me on my mobile...09717726667.



Best Wishes,



Vasant Nair









Regards



M.V.KANNAN[/QUOTE]
24th November 2010 From India, Mumbai
We can have on the roll no doubt but main situation is that they work on the piece rate.
Suppose today we are offering 200 per day next day any company hire them more than 200,so this is the main problem.
So we have the some one who work like as a contractor and have under him some worker which is paid on every day basis.
so how can deduct pf,esic etc
The mode of paying wages does not determine the status of the employees. You can pay your regular employees also on piece rate should you find the arrangement a satisfactory one.
This is a most unsatisfactory (but quite commonly found) practice in many organizations.
Call me on my mobile and I will answer all your questions...09717726667
Vasant Nair
Seeking for the right information.[/QUOTE]
24th November 2010 From India, Mumbai
Dear Vasant

I appreciate the effort taken by you in replying to the queries raised by me point by point in bold faced font.

I also recognise that you have wide experience in handling contract labour.

I require your guidance as to how to deal with ESI deductions for employees engaged for carrying out civil work in organisation wherein the mason who is invariably the contractor does not have an ESI code. I trust that this will also be treated as contractual labour. Am I right?

Every time an ESI inspector comes he asks the company to provide the General Ledger and points out that ESI has to be deducted for engaging contract labour for Repairs and Maintenance and if the ESI is not recovered then they advise us to consider 25% of the total contractual amount as labour charges and remit ESI for the same.

Have you come across such instances? If you have got away without remitting ESI contributions could you please send copies of such correspondences or references to enable the HR professionals to deal with such situations.

Thanking you in anticipation.

M.V.KANNAN
25th November 2010 From India, Madras
Dear Kannan,

I appreciate the effort taken by you in replying to the queries raised by me point by point in bold faced font.

Thank you.

I also recognise that you have wide experience in handling contract labour.

Yes, I have.

I require your guidance as to how to deal with ESI deductions for employees engaged for carrying out civil work in organisation wherein the mason who is invariably the contractor does not have an ESI code. I trust that this will also be treated as contractual labour. Am I right?

This is a common practice and it goes on and on. The correct procedure would be to hire workers through an establised Contractor who has the necessary Code No. under ESI & PF. You should also have a properly worded agreement with the Contractor and also comply with the necessary formalities stipulated in the Contract Labour (Regulation & Abolition Act) and only then go ahead with engaging labour through him.

Every time an ESI inspector comes he asks the company to provide the General Ledger and points out that ESI has to be deducted for engaging contract labour for Repairs and Maintenance and if the ESI is not recovered then they advise us to consider 25% of the total contractual amount as labour charges and remit ESI for the same.

Provisions of ESI & PF have to complied with. There is no escaping this necessary legal fomality. All I have tried to impress upon is that if as the Principal Employer you deposit the contributions under these statutes under your Co. Code No. you are in a vulnerable position if there happens to be an industrial dispute and the contract workers claim that they are your employees.

Have you come across such instances? If you have got away without remitting ESI contributions could you please send copies of such correspondences or references to enable the HR professionals to deal with such situations.

The language you have used is not very welcome and tends to be rude. Cant appreciate it. For your information I know of several organizations who actually get away with blatant violation of labour laws and get away with it. But that does not make it a healthy practice. How would you react if I tell you for a fact that there are factories that are running without a Factory Licence.

By adopting short cuts, sooner or later one is bound to get into trouble.

There are several aspects to engaging labour through a Contractor which cannout be discussed in an open forum like the CITE.

Like I had advised you, if you wish carry on this discussion, please call me on my mobile and I will clear any doubts you have.


Vasant Nair


Thanking you in anticipation.

M.V.KANNAN[/QUOTE]
25th November 2010 From India, Mumbai
If one follows Mr Vasant Nair's opinion than it will be safer for every company to engage "n" number of contractors with the limited 9 nine employees only in order to save the liability on a/c of ESI & PF. But this is not the design of the Statute. Every Ee has to be covered if the Emp Strength including those engaged throw contractors exceeds 9/19 under ESI/PF. There is no escape. the only escape in case of ESI is non-covered Area and for EPF non-schedule Industry. In the given case since the Factory is already covered under ESI & PF there is no escape. Furthermore by evading the payment of Rs 1 the employer is incurring liability of Rs 4-5 as he will be required to pay both the share of contribution + Interest + Damages. Such payments will also attract Income Tax. This is the choice of the Employer which part is better.
26th November 2010 From India, Jaipur
Dear Mr.Vasanth

It is not my intention either to advise forum members to violate any law of the land and as quoted in my earlier thread we are one of the guardians of the company's interest.

Please note that your suggestion of engaging contractors with PF or ESI code is feasible. But I doubt whether such contractors will be interested to hire a workman to carryout work for just one day. I also doubt that not many civil contractors have PF and ESI codes. Hence it has been the practice in many companies to hire employees, fill up the ESI nomination form as they enter the establishment and then permit them to work. Recovery of ESI is made from the wages payable to him and the employer's share is remitted by the company. These sort of deductions are remitted by way of a separate challan to ESIC under the employer's code. There has been instances wherein the employee meets with a fatal accident on the first day of his employment. In such a case if the company has been a regular contributor of ESI payments while hiring contract workmen then the ESI authorities will certainly consider the claim made by the employer. Please note that merely by remitting ESI contributions for the employee does not mean he is on the rolls of the company.

If you can recall the content of the thread raised by Karamvir, the question was as to how to deduct PF and ESI and remit the same to statutory authorities when the contractor does not have PF or ESI code. To answer this query only I have suggested the above remedy. If the contractor had an PF & ESI code then why should Karamvir raise this thread at all.

"One of my friend company,they have 4 contractor and each contractor having 3 employee under them.

They don't have ESIC,PF number and no license.

Total 12 employee working under 4 contractor.

If we go through ESIC and PF then how can we deduct the PF and how it to be submitted to PF & ESIC authorities.

This is on the needly basis,senior pls give your valuable inputs."

It was not my intention to hurt you in any manner, if I had done this I apologise for the same.

M.V.KANNAN
26th November 2010 From India, Madras
Dear Kannan,
Please read the contents of my response carefully. I have only advised that certain formalities are obligatory on part of the Employer and the Contractor under the relevant law.
I have only stated that in case of an Industrial Dispute the Principal Employer will be on the defensive.
It is therefore necessary to complete the required documentation properly (this is not done most often).
Best Wishes,

Vasant Nair
26th November 2010 From India, Mumbai
Dear Satish,

Please read my posts carefully. I have nowhere made any suggestions as inferred by you.

I am also not offering any advice to escape statutory obligations.

I am only trying to highlight some basic facts:

Complying with the requirements of the Contract Labour (Abolition & Regulation) Act is the first necessary step.

All employees hired through the contractor are HIS employees.

The Contractor as the immediate employer is obliged to maintain all required records under various applicable Labour Laws in respect of all his employees.

Therefore all applicable statutory obligations have to be complied with by him (the Contractor).

Likewise, the Company as the Principal Employer also has certain obligations to ensure that the Contractor actually complies with all applicable statutory obligations from which, there is no escape.

In case of any default/violation, the Principal Employer is held responsible.

It is for the Company's management to decide upon the course of action they would like to adopt.

Best Wishes,

Vasant Nair


26th November 2010 From India, Mumbai
Friends,
We are an architectural/interior designing firm based in Mumbai & executing Interior projects on turnkey basis. Our technical staff strength is 6 nos along with 2 partners.
Are we eligible for ESIC deductions by our clients,especially when we sub-contract the works to different vendor/subcontractor & do not have any labour under our payroll.
Can we forward our subcontractors PF number to avail exemption from the deductions?
Our subcontractor is eligible for PF & not ESIC as he has less than 20 employees under his payroll too.
Your feedback here will be highly appreciated.
Kind regards,
Rohan Kowli
Managing Partner
K+A Urban Fourth
21st April 2011 From India, Mumbai
Dear Sir, If you have need a Contractor who have Registration of EPF ESIC Code. than please contect on 9312828975 Regards.. Pawan Kumar
8th September 2011 From India, Delhi
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