Industrial Relations And Labour Laws
Harsh Kumar Mehta
Consultant In Labour Laws/hr

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One of the Central Government department issued an order awarding the contract for supply of labour. In the order, it is put condition that they should recover Rs. 5/- per day towards PF and Rs. 2/- per day per head towards Insurance from the contract workers. Is it in order?
1. Dear member, employees' share of contribution under ESI Act, 1948 is 1.75% of the wages as defined under said Act. There is no formula of Rs.2/- (as mentioned by you) per day.Employers' share of contribution is 4.75% of wages, thus total contribution rate under said Act is 6.5% of wages.
2. In case you feel, that the order of the said Central Govt. Department is not in order, and if you are also affected by said order, you can take up the issue with the appropriate authorities of ESIC.

The outsourcing of labour will turn to be wrong because of the following reasons.
1. On a daily wages of rs 100, the ESI contribution will be Rs 2 (Rs.1.75 rounded to Rs 2) but the PF contribution should not be Rs 5 but it should be Rs 12 (12% of wages)
2. If the daily wages is Rs 100, there will not be any employee's contribution to ESI but only employer shall contribute his share.
3. There cannot be a any rate like that of Rs 100 per day under the Minimum Wages Act for any scheduled employment, and therefore, you will be deviating from the provisions of Contract labour (Regulation and Abolition)Act as a principal employer.

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