Saswatabanerjee
Partner - Risk Management
Kritarth Consulting
Spl Educators Posh Programs; Hr & Ir
Rameshbg_1955@yahoo.com
Retired Chief - Ir

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Dear All,
I require guidance on the following issue.
1. A principle employer ( having his payroll strength @ 2000) wants to hire 9 contract labours. One labour contractor responded the tender without EPF, ESIC and Service Tax. Being a new labour contractor, His manpower strength is less than 10 and hence does not have EPF and ESIC. also his firm does not crossed the threshold limit for Service tax registration. Whether it is legal to accept this offer of labour contractor ?.
2. What is the criteria applied, if principle employer wants to accept or reject his offer as the case may be.
3. if the principle employer rejects his offer, is it a case of discrimination?

From India, Mumbai
Dear Guidance Seeker,

Your Queries :-

1. A Principal Employer ( Having His Payroll Strength @ 2000) Wants To Hire 9 Contract Labours. One Labour Contractor Responded The Tender Without EPF, ESIC And Service Tax. Being A New Labour Contractor, His Manpower Strength Is Less Than 10 And Hence Does Not Have EPF And ESIC. Also His Firm Does Not Crossed The Threshold Limit For Service Tax Registration. Whether It Is Legal To Accept This Offer Of Labour Contractor ?.
2. What Is The Criteria Applied, If Principle Employer Wants To Accept Or Reject His Offer As The Case May Be.
3. If The Principle Employer Rejects His Offer, Is It A Case Of Discrimination?

Team Kritarth's Clarifications:-

The Principal Employer,under the Contract Labour (Abolition & Regulation) Act is liable to comply with all the Provisions of the Act. As such, the PE must first decide that the Job on which the Contract Labour is to be engaged through a Contractor is of Permanent and Perennial Nature otherwise such engagement of CL tantamount to subterfuge, a sham an evasion. PE therefore must desist from such unlawful act.

Further, the PE is liable to make good all payments including M Wages, PF Contribution etc in the event the Contractor fails so to do in respect of those on his/her Muster Roll.

There is No discrimination committed when Legal Obligations are not fulfilled by one of the Contracting Party.

Team Kritarth is always there for PEs who are earnestly on the right side of the Laws of our Land.

Team Kritarth info@kritarth.in
30 March 2016

From India, Delhi
Hi bhavna

Under the laws applicable, the contract workers will be eligible for coverage under pf and ESIC if the company where they are deployed is covered under pf and ESIC irrespective of whether their immediate employer (Contractor) is covered under the act.

If the contractor is not covered, then they employer is liable to pay the amount on his own, under his own code. Both the portals of the statutory dues have a separate section to allow employers to pay PF and ESIC of the contracts.

In alternate you can ask the contractor to opt for voluntary coverage, but the liability remains ultimately with the principal employer to ensure payment of statutory dues.

For service tax on contract employees, the law requires the principal employer (being a Company) to pay the service tax under the reverse charges rules. This is irrespective of whether the contractor has his own service tax number.

Lastly, decision to appoint a contractor or to chose which contractor to employ is a business decision. The decision will be taken to,the best judgement of the company. No law will force him to chose the lowest price or to chose any vendor he does not wish to give the work to. So there is no question of discrimination, unless ofcourse, you are a government owned business.

From India, Mumbai
Well said Saswatabanerjee; I also share the same views as express by Saswatabanerjee. bgramesh, hosur
From India, Vellore
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