We work in the PWD electrical department for specialized products like Fire Alarm, PA System, Networking, and Security Requirements. We have our technical manpower who do installation work. We outsource our cabling work to individual persons and deduct TDS on payments made to them. We don't have 10 people in our organization but to fulfill the tender conditions, we are registered under ESI/EPF. The inspector inspected our balance sheet and told us to pay ESI and EPF on the following heads:
1. Repair and Maintenance
2. Installation Charges
3. Freight Charges both to and from
4. Consultancy Charges.
Please advise.
From India, Chandigarh
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1. Repair and Maintenance
2. Installation Charges
3. Freight Charges both to and from
4. Consultancy Charges.
Please advise.
From India, Chandigarh
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Of these payments, freight charges do not come under the definition of wages in either Act, but the other payments will attract ESI and EPF subject to certain conditions.
Repairs and maintenance: Who carries out this work? You should have engaged somebody to do it and you should have paid wages or fees, whatever is demanded by the latter. Then that is a payment in which labor is involved. If you have outsourced the repairs and maintenance work to somebody else, you have to prove that the person working for you gets a salary from his organization after deducting ESI and/or EPF. Simply put, the establishment should be registered under ESI and EPF. Then you need not cover them again, but you can submit to the ESI/EPF that the person who does repairs work is under the payroll of XXXX company, which is an establishment registered under ESI/EPF.
Installation Charges: It is an amount you have collected from the customers and is presumed to be paid to the person who does the work. Obviously, this should be an amount over and above the monthly salary that he gets. This can also be an amount to reimburse the traveling expenses payable to the technician. If so, you should produce relevant documents in support that whatever is paid to the technician is to meet his expenses in the field and site and whatever is collected from the customer is paid to the technician separately. This payment will not attract EPF contribution because this is not a payment made universally to all the employees of your establishment and hence does not form part of basic wages under EPF Act.
Freight Charges are payments to transporters, and the payment is made per kilometer and no way it is a labor-involved payment.
Consultancy charges: This is an amount paid to your consultants. Who is a consultant? Do you have any technical consultants? Or do you have anybody who guides you on matters relating to your HR and IR matters? Then that payment shall be professional fees and not wages. However, simply saying that one person is a consultant will not serve the purpose. You cannot engage a consultant who will come to your office every day at 10 am and remain there in the office till 5 pm, takes approval for taking leave, follows all HR policies relating to office timing, leave, dress code, etc. To be a genuine consultant, you have to produce the agreement with him and show that he is a professional in all meanings. Otherwise, these payments are equally wages only.
Expecting your further comments and clarifications so that we can take it forward.
From India, Kannur
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4491Repairs and maintenance: Who carries out this work? You should have engaged somebody to do it and you should have paid wages or fees, whatever is demanded by the latter. Then that is a payment in which labor is involved. If you have outsourced the repairs and maintenance work to somebody else, you have to prove that the person working for you gets a salary from his organization after deducting ESI and/or EPF. Simply put, the establishment should be registered under ESI and EPF. Then you need not cover them again, but you can submit to the ESI/EPF that the person who does repairs work is under the payroll of XXXX company, which is an establishment registered under ESI/EPF.
Installation Charges: It is an amount you have collected from the customers and is presumed to be paid to the person who does the work. Obviously, this should be an amount over and above the monthly salary that he gets. This can also be an amount to reimburse the traveling expenses payable to the technician. If so, you should produce relevant documents in support that whatever is paid to the technician is to meet his expenses in the field and site and whatever is collected from the customer is paid to the technician separately. This payment will not attract EPF contribution because this is not a payment made universally to all the employees of your establishment and hence does not form part of basic wages under EPF Act.
Freight Charges are payments to transporters, and the payment is made per kilometer and no way it is a labor-involved payment.
Consultancy charges: This is an amount paid to your consultants. Who is a consultant? Do you have any technical consultants? Or do you have anybody who guides you on matters relating to your HR and IR matters? Then that payment shall be professional fees and not wages. However, simply saying that one person is a consultant will not serve the purpose. You cannot engage a consultant who will come to your office every day at 10 am and remain there in the office till 5 pm, takes approval for taking leave, follows all HR policies relating to office timing, leave, dress code, etc. To be a genuine consultant, you have to produce the agreement with him and show that he is a professional in all meanings. Otherwise, these payments are equally wages only.
Expecting your further comments and clarifications so that we can take it forward.
From India, Kannur
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Payments not to be treated as wages under esi.doc
ESI & EPF.xls