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rkn61If the personnel are working for your company and on company’s rolls, definitely, PF, ESI and other applicable statutory acts are also applicable.
From India, Aizawl
Madhu.T.KIf the nature of work of the establishment is manufacturing furniture and fittings, construction materials etc for which engagement of carpenter is required, then the person so engaged will come under the definition of employee.
Section 2(f) of the Employees Provident Fund and Misc. Provisions Act says that an employee means any person who is employed "in connection with the work of an establishment". It also says that such engagement shall be either directly or indirectly.
In a furniture making establishment, carpentry work is something which is connected with the work of the establishment. In such scenario the carpenter engaged will be an employee and the payment of wages paid to him will attract PF (also ESI) subject to the restrictions with regard to wages. Similar is the case with electrician and painter. If you manufacture electrical panel boards, naturally, an electrician would be required regularly to do the work. if the product moving out of the factory is required to be painted, then a painter is required to be deployed on a regular basis. They are employee whose salary would attract PF.
On the other hand, if you are not engaged in making of furniture but you engage one carpenter to repair a few chairs or the windows/ doors etc, then the amount paid to such carpenters will not attract PF because he is not an employee. If you engage an electrician to repair an electrical issue, he is engaged for that job and once the work is over, he can go. If you engage a painter to paint your building, the person so engaged is not an employee because he is not employed in an activity connected with the work of the establishment. Such persons are commonly called independent contractors and the payment made to them will not attract PF or ESI.
A variant of the above is lawyers, Chartered Accountants, HR/IR consultants who are engaged for different services. The same lawyer will be an employee in a law house, the same Chartered Accountant will be an employee in a CA firm.
From India, Kannur
saswatabanerjeeDear Madhu Will your answer change if the person is engaged through a contractor?
From India, Mumbai
Madhu.T.KThe basic thing is that in order to be covered by EPF the person engaged either directly or indirectly (through a contractor) should be engaged in an activity connected with the work of the establishment. Therefore, if your nature of operation is, say, automobile parts manufacturing and have some carpentry work to be carried out and for that you engage a contractor and he deploys a few carpenters to do it, then the payment made to that contractor or to that carpenters will not attract PF. This is my understanding.
From India, Kannur
That clarification will help me as this matter keeps coming up all the time, specially for ESIC.
Many large factories we do work for have this problem about PF for employees of contractors who are there in the plant on and off but regularly through the year, like for AC AMC, or IT Maintenance, Trouble Shooting, etc. Some of them are avoiding taking any contracts who don't have PF & EISC. ESIC they sometimes pay out of their own code, which I think is wrong.
Thanks for the update
From India, Mumbai
nanu1953My personal experience in my organization as well as other organizations are different. In my organization we are out sourcing 160 employees through our pay roll and we have 6 employees at our office. We have faced both PF authority and ESIC authority regarding the captioned subject. We have PF & ESIC code. When PF Inspector visited our office, checked pay roll, muster roll and found every thing was ok, Then checked the balance sheet and ledger where in ledger the inspector noticed repair and maintenance booking was about 1.5k in the year 2013. We clarified that the cost was related to AC machine repair ( parts and labor charge) and few hours work. He advised to pay PF for the employee.
We explained the logic behind payment for one day and the employee has not any PF Code. Now it is much more complicated for UAN and other formalities. The concerned Inspect then suggested unofficially that book the amount in any other item or do not book it as our organization is Proprietary organization and the amount is less. He did not initiate any action.
In case ESIC , the inspector serve a notice to pay both employer and employee amount in a misc. challan which we were paid. He also said to induct people through contractor. He mentioned one very valid point that in case of any accident PE will be solely responsible in absence of ESIC coverage of the person.
Today we are not booking such cost ( AC m/c repairing or service, Plumber, Carpenter etc.) maximum 10k per year in our accounts. It is possible because the amount is less.
The same problem is faced by many organizations including some of my clients as also mentioned by Mr. Banerjee.
My personal opinion is always better to engage any person through contractor if possible. In case of single person with specialized job better to enroll under ESIC in PE's code and for one/ two days work. But risk may be taken not to comply PF as I have noticed in some other organizations for 1/2 days work PF authority is not forcing for compliance.
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From India, New Delhi
Madhu.T.KTrue, the ESIC and EPF shall issue notices. I have even received similar notices and when I explained that the work was not connected with the work of the establishment, the enquiry (u/s7A) was closed. here the basic issue is that for coverage of any labour law the person engaged (and not employed) either directly or indirectly should be engaged to do a work of the establishment. Painting the wall, repairing a few panel board or furniture are not connected with the business of the establishment. We can take a mechanical apparatus to a service centre outside our factory for repairing. The service centre will charge a service bill and will that be booked as omitted wages? No. In the similar way, as against a small mechanical apparatus suppose if we have to repair a huge machinery we cannot take it out to get it repaired, then we will engage a technician and certainly, the payment made to him should not attract ESI or PF.
With regard to AMC anyway, there exists a circular that in respect of AMC holders, neither the PF nor ESI will be applicable.
From India, Kannur
umakanthan53From the observations of our learned friends contributing to the discussion, I understand that employment of persons creating a direct relationship of employer - employee or the engagement of persons through any third-party in any operation or work directly connected with the work of the establishment would attract the application of the ESI Act,1948, EPF Act,1952.
However, may I presume that in the case of engagement of people through third party for any work of the establishment, the principal employer should insist on the coverage of insurance under ESI Act or the EC Act,1923 in view of the vicarious liability fastened on him?
From India, Salem
Madhu.T.KCertainly, it is due to vicarious liability that we all insist that the contractor be a registered establishment. There is no confusion with regard to persons employed through a third party for carrying out a work of the establishment. And in such scenario the ESI and EPF will be applicable and if the third party is not a registered establishment, the principal employer is expected to cover them under his own registration. The issue is with respect to workers engaged either directly or through a third party to do a work which is not connected with the work of the establishment.
From India, Kannur