Nathrao
Insolvency N Gst Professional
Suresh2511
Labour Consultant

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Dear Friends,

Need experts advice on the below case:

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PF deduction of workers of petty contractors - appointed by Main contractor or directly by the Principal Employer.

1. The petty contractor engaged daily wage labour (6 in nos.) to perform work (civil). 1 month work.

2. The contractor submitted invoice against the work completed with all due formalities (i.e. work completion report, other checking formalities etc.,) except PF paid challan of the workers engaged to complete the work.

3. His bill has come for clearance.

Q1. Contractor's eligibility to pay PF to the labourers engaged to complete this work (Yes/No)?

Q2. If the contractor does not pay PF, does the principal contractor / Main contractor has to deduct the PF amount from the said bill?

Q3. What should be the quantum of deduction? (12% or {12%+13.61% }i.e. both employee and employer contribution)?

Q4. How will the Principal Employer remit this deducted amount into beneficiaries PF account?

Look forward to valuable suggestions / directions.

From India
The Employees Provident Fund Organization (“EPFO”) had issued a letter on 2nd February, 2017 clarifying the obligations of Principal Employer for ensuring compliance under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) in respect of employees engaged by or through contractors.

EPFO clarified that as per Para 30 (3) of the EPF Scheme, the Principal Employer has the responsibility to pay both the contribution payable by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor and also administrative charges. EPFO has clarified that the EPF Act does not differentiate between casual, contractual and regular employees.

he Principal Employer must ensure that the contractor is registered with EPFO before awarding any contract. After award of the contract, the contractor details should be entered in the EPFO portal.

Payments due to the contractor should be made only after verifying that the statutory PF payments have been made to EPFO. This can be verified either directly from the EPFO portal or insisting on a payment receipt obtained by the contractor from the EPFO portal while making payment.

If the contractors have separate PF code number, the overall responsibility of ensuring the compliance under the EPF Act, for the employees working through the contractors rests with the Principal Employer.

The Principal Employer is empowered to deduct EPF dues from the contractor’s bill and deposit the same against the contractor’s code number or their own code number.

Also, a provision on the official website of the EPFO, has been added under the “establishment search option” to verify whether the contractors are regularly depositing Provident Fund Contributions in respect of their employees.

This will reasonably clarify your doubts,

From India, Pune
Dear Vijay,

Followings are answers to your query

Q1. Contractor's eligibility to pay PF to the labourers engaged to complete this work (Yes/No)?

Ans.: YES

Q2. If the contractor does not pay PF, does the principal contractor / Main contractor has to deduct the PF amount from the said bill?

Ans. : YES

Q3. What should be the quantum of deduction? (12% or {12%+13.61% }i.e. both employee and employer contribution)?

Ans. : 12 + 12 + 0.5 + 0.5 = 25% (in addition amount of Penal Interest & Damages for late payment from the date of due amount to date of payment)

Q4. How will the Principal Employer remit this deducted amount into beneficiaries PF account?

Look forward to valuable suggestions / directions.

Ans. : It has to be paid under the code no. of Main Contractor as supplement payment (arrears)

Regards,

Suresh

From India, Thane
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