Social Security Compliances are must , creating awareness for it for better compliance culture - CiteHR

Greetings from Cosmos Group !

Cosmos Group is a HR Power House and is offering various HR services to its clientele. Apart from providing staffing solutions including Blue Collar , Grey Collar & White Collar workforce we do offer Payroll Services as well.

Of late we found that there are many manufacturing companies & logistics companies which are not following social security measures while compensating their workers and the arguement from their HR is that their job scope is a type fo Job Work which they have given to their vendor and who is paid on the basis of the output of the job work and no such HR compliances gets applied . In fact the concerned vendor deploys manpower who is working at concerned customer / principal employer premises only but they are getting paid as per the job work compensation which does not involve any PF / ESIC etc social security compliances.

Question : Does social security measures like PF / ESIC etc is applicable for workers who are performing their work in the principal employer or customer premises which has offered the Job Work ( measurable work ) to the vendor. Kindly elaborate on this subject and provide a suitable answer. This will help to educate customers to follow compliances , it would be great if you can explain by way of providing appropriate legal enclosures in this regard.

Best regards
CS Paliwal - Head Marketing
+91 9825112727

From India, Gandhinagar
Partner - Risk Management
Doctor Siva Global Hr
Content Marketing Strategist
CS Paliwal
Cosmos Manpower Pvt Ltd

Dear Colleague,
This is a big challenge especially in manufacturing sector. The penalty and penal provisions are not much stringent like Income Tax or GST hence a very advantageous call is taken with an attitude that "if any non-compliance notices comes it is the Job of HR to solve" . What is the fact is this is an attitude issue more than any thing else.

In case of any Labour Laws Compliance there are 4 parties involved A) Principal Employer
B) Contractor C) Employee Concerned who are within the threshold of the wages limit given under such Labour Laws C) Government Enforcement Authority. The Principal Employer and Contractors are responsible to comply under most of the Acts like PF, ESI, Gratuity and so on for compliance. Here there is no question of Time Rate Wages, Job Rate etc as if we for example see the definition of employee under PF Act: 2 (f) “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of [an establishment], and who gets his wages directly or indirectly from the employer, [and includes any person— (i) employed by or through a contractor in or in connection with the work of the
establishment;(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act,1961 (52 of 1961), or under the standing orders of the establishment;]. When the Enforcement Authorities are strong enough and inspects and ensures then and there there can not be any lapse.

The provisions of Contract Labour (R&A) Act also discuss abour liability on Principal Employer and on Contractors as below:

20. Liability of principal employer in certain cases.—(1) If any amenity required to be provided
under section 16, section 17, section 18 or section 19 for the benefit of the contract labour employed in an establishment is not provided by the contractor within the time prescribed therefor, such amenity shall be provided by the principal employer within such time as may be prescribed.

(2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

21. Responsibility for payment of wages.—(1) A contractor shall be responsible for payment of
wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed.

(2) Every principal employer shall nominate a representative duly authorised by him to be present at the time of disbursement of wages by the contractor and it shall be the duty of such representative to certify the amounts paid as wages in such manner as may be prescribed.

(3) It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the
authorised representative of the principal employer.

(4) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor

25. Offences by companies.—(1) If the person committing an offence under this Act is a company,
the company as well as every person in charge of, and responsible to, the company for the conduct of its business at the time of the commission of the offence shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any
punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

From my practical experience, it is seen more as an Attitude subject hence only when the Top Management is committed and compliance is taken as a serious aspect by the Board and Directors, the lapse and challenges will continue and it will impact sustenance and reputation of such organizations. Hence kindly try to bring seriousness from Top Management as each Act like PF, ESI, Gratuity, Factories Act and so on has specific mention on the Responsibility aspect.

We had such challenge and when we projected the criticality to the Board and with their support no bill was passed to any such job contract or labour contract or any type of employment without compliance clearance and then all came to order. All the Best!!!

From India, Chennai
Contract labour act applies to every employee who is working in your organisation but employed by someone else.
It does not matter whether his relationship with the you is that of a contractor or a Service Provider. The act applies and therefore it is the duty of the Principal Employer to ensure that the statutory dues are paid, proper wages are paid, hour of work and overtime payment regulations is adhered to, and leaves are given as required.

This is in the definition of contract worker itself.

So saying a person is working with a vendor is not going to cut ice.
If the matter goes to court, the judge will side with the workers unless there is a specific circumstance which supports the employer (which is very rare)

I have seen cases (sorry, can't disclose company due to confidentiality issue) where a vendor of OEM parts had deployed his people in the factory of the main manufacture to ensure proper movement of material (It was on JIT basis) and to ensure quality as well as feed the material where required, and they were working full shift (sometimes 12 hours) and without weekly off. The Factory was held liable for non-compliance with the labour laws and asked to pay the short-paid amount as well as overtime, leave wages, etc

From India, Mumbai

Social security compliance ensures that your employees are protected under various social security laws which are in place to ensure the safety of your employees, and to make sure that their financial needs are met. It includes medical insurance, retirement benefits, life insurance, and accident insurance.

In India, there are multiple social security acts that apply to different sectors and industries. An employer needs to ensure that he/she complies with all the mandatory acts and also registers for other acts that may be applicable to them to enjoy social security benefits. The acts in which a business establishment has to register are:

-Employees' Provident Fund Act 1952

-Employees' State Insurance Act 1948

-Payment of Gratuity Act 1972

-The Maternity Benefit Act 1961

By adhering to social security and compliance laws, you ensure that your company is following ethical business practices. As an employer, you’re responsible for meeting social security requirements for your employees.

From India, Noida

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