Dear seniors
Regarding deduction of ESI / PF deduction , I have a few things which are not clear to me. May I request your guidance on these points
In a situation where an organization ABC has outsourced any services say transport of some senior staff to a company EFG. EFG gain has outsourced it to 35 different vehicle owners cum drivers
The contractor has not hired any manpower, they have engaged vehicle with driver to deliver certain services, similarly ABC has also hired company EFG for delivery of services not man-power.
what are the liability of contractor? should ESI / PF be deducted for these vehicle owners / drivers
In such situation what are obligations on part of company ABC and contractor EFG?
Please advise
Super Shuttle logistics
Ph: 99419-07915

From India, Madras
Industrial Relations And Labour Laws
Asst. Manager - Hr
Human Resources
+1 Other


It is a difficult situation. In the case of ABC, since they have entered into a contract for service, there exists no employee- employer relationship between ABC and the drivers. As such, no payment under the head "wages" is being paid. In the absence of labour element involved in a payment voucher, I don't think that ESI or EPF will be attracted. Now, as far as EPG is concerned, they are also in the same contract with 35 independent contractors for service. Since it is not a contract of service but only a contract for service, payment is not made for labour but for service just like payment made for purchase of any article. Therefore, I feel that no ESI/PF is applicable on the payments made either by ABC or EFG.

Similarly, ABC does not have any control over the drivers/ owners of the vehicles. In the absence of control over the persons engaged it is not possible to establish that they are "employed" and they can only be treated as persons "engaged". And the rate of service will always be depended on the kilometer traveled and not on how many labour cost is involved. The Punjab and Haryana High Court in Employees State Insurance Corporation v. Malhotra and Co., Chandigarh, (1981 Lab I.C. 475),has made a distinction between persons employed and persons engaged and the latter are persons engaged for a particular service on whom the employer has no control of supervision or right to take disciplinary action and as such they shall be excluded from ESI.

The Kerala High Court in the case of Regional Director, E.S.I. Corporation v. P. R. Narahari Rao, (1986 Lab I.C. 1981) has also held that there exists clear distinction between persons engaged and person employed and the former being persons on whom no specific rules of the company is applicable, is not coming under the ESI of the company.

Therefore, the way in which the bill is prepared will tell you whether the drivers will come under ESI/EPF or not.

More inputs from others is expected.



From India, Kannur
Satish B

Reg; Deduction of ESI/PF for owner cum driver for transport service
The key element of labour is wages which is not existing, I agree with view of Mr Madhu T K opinion, that it is not a contract of service but only a contract for service
Its my view that they are not eligible for ESI or PF

From India, Bangalore
DET Planning

i totally agree with satish sir.I think drivers cum owner working on lease with some company who himself is engaged in agreement with some others, will not attract any amount towards the EPF/ESI
From India, Patiala

I agree with madhu, it clear from the judgemnt of karela & Punjab and haryana High court that there is difference between persons employed and persons engagged.
In your case it is clear that persons are engagged not employed so no liability for PF/ESI, as per the judgemnt given by high court

From India, Mumbai

Dear team, I would like to add, if Iam right. As explained by Mr Madhu Ji it is 100% true. However, if any driver raises complaint I feel that the onus lies on the ABC and EFG that they have to establish and prove that they do not have control over their staff or else they have to comply with applicable laws. As per motor vehicles act, 1961, the ABC or EFG have to get registered with RTO either as public transport or private transport and definetely there will exist agent and master relationship and need to comply with applicable laws like MWA, PF etc...
From India
nilesh mohite

yes, I agree with S.VIJAYASIMHARAO,
All the labour officers are demanding drivers compliance under respective acts at the time of inspections (PUNE), as well as we have to enrolled the travelling vendor's under labour contract license and RC. for both CAB as well as BUS contractors.
nilesh mohite

From India, Pune

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