Dear Subject Matter experts,

An organization is going for a complete automation process wherein large contract labour is engaged. The attendance process is already automated. All the contract labour is supposed to mark their attendance through this system of Principal Employer. The contractor is reimbursed based on the actual attendance + his service charges of 10%.

Now the Principal Employer is in the process of automatization the bill of the contractors wherein bills of every contractor will be automatically generated based on the attendance marked in the system, with the name and other details of their firm on the bill and the contractor can download it and sign it through their system and send it to the Principal Employer for reimbursement. This saves lots of time as well as effort in checking the bill.

Whether is it advisable. What precautions are to be taken so that it is not treated as a Sham contract in the eyes of law? Shall be grateful if any case law is cited.

From India, Delhi
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The key test of whether the contract is genuine or sham is who appointed the labourers, who pays them and most importantly who supervises them. Where the contractor is paid on the basis of attendance + 10%, it has the features of a sham contract, ex facie.
From India, Mumbai

The fact is that, there are contract labourers deployed in the premises of Principal employer. For that purpose we should follow some golden principles of Contract Labour(CL) .

1) We should not keep direct relationship with CL . We may supervise the work rather than CL. For day to day instruction we must depend upon the authorized representatives of the agency like supervisor of the contractor.
2) The should not engage in the permeant and perianal work of the establishment.
3) The CL should not work the same and similar work as the regular employees are doing .
4) All the statutory records under the Acts & Rules should be maintained by the agency or his authorized representative.

From India, Bhubaneswar
indu 182

Dear Questioner

Principal employer can't generate the bill on behalf of contractor because what bill no PE will mark on the bill. One thing can be done let the PE to generate the bill to save there checking effort. Contractor need to generate his bill as per the detail provided by PE and attached the calculation provided by the PE with his bill so that there should not be any confusion.

From India, New Delhi

Your fear is very much justified.
As soon as it is proved that the company does the work of even making the bill and letting the contractor just sign and send it back, the courts will, in most probability, declare that the contract is a sham.

If your company wants to automate it, let the contractors enter the bill into a bill passing system by putting the amounts of various fields and let an AI based engine verify that with the attendance records to automatically approve or reject the vendor's invoice.

I am attaching a screen shot of a similar system of vendor bill entry for your understanding.

From India, Mumbai

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indu 182

Mr. Banerjee
In my last 15 years I never saw any PE is generating bill on behalf of contractor as my company is also working as contractor and we are providing our services to companies who all are having automate system.
If the contract is sham than no answer for that. we can only discuss legal things not support illegal matter. or provide solution for illegal work.

From India, New Delhi

Hi Indu
I was not the one who said PE should do the billing. that was the suggestion of the original post.
But the company wants to automate the process of passing the bills and therefore thought of this (really stupid, from legal perspective) process.

My suggestion is that they should have a Vendor Invoice Portal where the vendors can put up their invoices with the proper fields which apply and attach the actual invoice as a pdf. Many large companies do it. we are asked to do it also for our audit invoices. Their system automatically checks the information we put on the portal with their PO system and then the process of invoice processing is automated. All manual entries in vouchers are avoided.

SAP has it. and many others have it. I attached one I found on the net as an example to the company y as to how they can achieve it. Hope my point is clear?

From India, Mumbai

Hello All;

This the era of digitalisation. Until 5 years ago we did not dream of so much digitalisation. It is only generating bill. Attendance is computarised. It was a time that Factory Inspector did not accept computarised attendance.

Further, the Contractor will submit the bill, WHICH WILL BE CHECKED BY PRINCIPAL EMPLOYER. That is some work. There can be mistakes and corruption. Hence generating bill through system is better and mostly foolproof. The Contractor is signing the bill means he is taking the responsibility. Who prepares the bill, Contractor's employee or Principal Emloyer's employee or computer is immaterial.

Friends, go ahead with technology. Dont be afraid of legal threats. So long as you are clear, you need not worry.

Vibhakar Ramtirthkar.

From India, Pune

Even if the documents prepared by the systems it will be endorsed by the Contact Agency with his signature and seal to the principal employer. Hence there is no harm for such system generated documents for the billing purpose. But we have to follow all the golden principle for the Contact Labour to justify the deployment of Contractor which I have clarified in my earlier post.
From India, Bhubaneswar

Mr. Vibhakar,

I truly appreciate your confidence.
All the best to whoever is following your advice.
Because the courts do not share your exuberance on digitalisation or consider the process of invoices generated by the PE as valid for the purpose of a real contract. Still, you are entitled to your opinion and all the best with your tryst in the courts

From India, Mumbai

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