Partner - Risk Management
Harsh Kumar Mehta
Consultant In Labour Laws/hr

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Dear All,
I am a Electrical Contractor working on Project Lump Sum Basis in setting up factories and sometimes in temporary repair/upgrade work at running factories. I employ less than 20 people and the work is always of temporary nature at a site.
a) Am I supposed to register under ESI or PF Acts and pay ESI/PF?
b) Does my client have any right to deduct any amount towards ESI / PF? (given the work is project sites and temporary)
Thank you,
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Dear All,
I Am A Electrical Contractor Working On Project Lump Sum Basis In Setting Up Factories And Sometimes In Temporary Repair/Upgrade Work At Running Factories. I Employ Less Than 20 People And The Work Is Always Of Temporary Nature At A Site.
A) Am I Supposed To Register Under ESI Or PF Acts And Pay ESI/PF?
B) Does My Client Have Any Right To Deduct Any Amount Towards ESI / PF? (Given The Work Is Project Sites And Temporary)
Thank You,
1. Sir,both ESI Act, 1948 as well as EPF & MPs Act, 1948 defines the term "employee" by including the persons engaged through contractors or immediate employers and these enactments also empower the principal employers to deduct the contributions due from the payments due to said contractors/employers.

2. Under ESI Act, 1948 you can get separate registration (code number) if you have at least minimum number of persons employed as required under section 1(5) of said Act. The minimum number of such requirement may be different in some of States like Maharashtra etc. However, even if you have less than minimum number of employees, even then the compliance is required to be made.

3. Though PF is applicable at all places,depending upon the nature of factory/establishment as prescribed under section 1 of said Act, but the coverage of ESI Act, 1948 is restricted to "implemented" areas only under section 1(3) of said Act. You can seek the detail of such implemented areas from nearest office of ESIC.
Under the existing laws, every principal employer is responsible to ensure that PF and ESIC is paid for all employees, including contract workers. Therefore, irrespective of the number of employees working for you, they need that you pay the PF and ESIC.
So, they have 2 options. Either you get a registration voluntarily, or they deduct the amount and pay for your employees on their code. So they would be right in deducting the same from your bill.
When you negotiate your contacts, you should make it clear that the company should pay the PF in addition to your lump sum fees and not deduct from it. Or you increase the lump sum to account for the difference. Registering for PF and the subsequent compliance is a big pain and best avoided

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