Labour Law & Hr Consultant
Partner - Risk Management
I think it will not be possible to put legal restrictions on the service charges leviable by a contractor. Any work involving manpower can be accomplished by varying the no of workmen and it depends upon the methods of work, effective utilisation of manpower etc. But when the very contract itself is based on the no of contract labour to be engaged and not merely the output of work, if no service charges are levied by the contractor, then there must be something foul. The Principal Employer normally knows the cost of labour of any work out-sourced. Therefore, he should weigh the rates quoted by different prospective contractors for the same work in a proper perspective.
21st October 2015 From India, Salem
23rd October 2015 From India, Bengaluru
24th October 2015 From India, Kolkata
1. Are you present during payment of wages (mandatory)
2. Are you ensuring correct wages are paid ?
3. Check the attendance and days paid. They would be marking people as absent to reduce the salary while keeping the rate charged to you as full.
4. Are they paying PF and ESIC dues as required ? Do all people have PF numbers and ESIC cards ? Also call the contractor and ask him to log into PF portal to check whose names are in the records.
5. Are they working 12 hour shifts and 30 days a month ? Both of which are illegal, but cheaper for contract.
6. Is any money being deducted for uniform etc which is not allowed under payment of wages act.
Incidentally, service tax can not be charged by the contractor. It has to instead be computed and paid by the principal employer as "reverse charges"
8th November 2015 From India, Mumbai
It is a common practice by may contractors to charge on several heads- minimum wage, PF, ESI, Bonus, Leave pay, Gratuity etc. monthly basis but no service charge ( not service tax as per law) for the services provided by them. What they do - pay less to labour, pay less to PF & ESI contribution, Never paid leave pay, gratuity etc. and manage the profit. Saswata Banerjee has already mentioned the control part from PE's side. It is essential to check the every month actual payment to labor and PF & ESI Authority before processing the invoice. Also please keep in mind that Service Tax as per law is now the responsibility of Principal Employer to deposit 100% in case of any manpower service charges invoice. The ideal condition may be :
Actual wage( obviously minimum or above) + Employer's portion of PF & ESIC contribution + service charge ( per labor per month or % basis based on negotiation) less TDS at source 1 or 2% as the case may be. Let suppose the minimum wage 7000/- per month ( break up 6000/- basic & DA + 1000 HRA) + PF employers contribution 13.36% = 802/- + ESIC employers contribution 4.75%= 333/- + Service Charge say 7% of gross = 570/- = Gross Invoice- 8705/- less TDS say 2% = 8531/- net. After paying properly to labor and then depositing proper PF & ESIC Contribution, there will be some profit to contractor.
Trust this will clarify your query.
S K Bandyopadhyay
USD HR Solutions
9th November 2015 From India, New Delhi