Statutory Liabilities of principal employer - like PF, ESI, gratuity, bonus, leaves etc?

Dear All,

Please let me know the liabilities of the principal employer in terms of statutory obligations such as PF, ESI, gratuity, bonus, leaves, etc. I have searched through the site's options and found several responses, but they are contradictory. Therefore, I am posting this question again.

Kindly reply at the earliest.

The term Principal employer is usually used in relation to an employer who appoints employees through a contractor. Basically, there is no difference between the terms- Employer and Principal employer. When used in the context of contract employees, it becomes principal employer. As all employees (subject to the wages ceiling fixed under the different legislations) whether directly employed or through a contractor are working for the employer, it is his responsibility to implement the labour enactments in his establishment. Accordingly, the employer has to remit the PF dues of his employees in time and recover the employees' share from the salary of the employees. Similar is the case of ESI. At the same time, it becomes the responsibility of the Principal employer (for whom the contracted employees work) to remit the EPF, ESI, etc., of the employees employed through a contractor and certainly he can deduct the same - both shares - from the payment to be made to the contractor. That means though contracted employees are employees of the contractor but are working for another and that another person, the principal employer, is responsible for the initial payment of dues and they are recoverable from the contractor as if he had made the payment of ESI or PF on behalf of the contractor.

The word "occupier" is also used in certain Acts such as Factories Act, Payment of Bonus Act, etc., which has the scope of Principal employer.

The Principal employer is responsible for the implementation of labor welfare and social security measures provided under different labor and factory enactments.

Regards,

Madhu.T.K

Thank you, sir, for your reply. Now, it is very clear to me. Kindly also explain if there are any other statutory liabilities in terms of money for which the contractor should charge the principal employer through monthly bills. Kindly clarify.

Best regards,
Priyanka

In fact, there can be a Labour Welfare Fund which is administered by the respective State Govt. I am not sure whether you have it in your State. The contribution is very less and is payable half-yearly. The amount is to be paid by the Principal employer and recovered from the contractor.

Similarly, the Profession Tax, which is a subject of local self-government, is to be paid in respect of employees employed through a contractor. This is because the source of earning is the place where the profession tax becomes due and since the contracted employees are working on the premises of the principal employer, it becomes the duty of the principal employer to pay the profession tax but can recover it from the contractor.

Under the Payment of Bonus Act, there is no specific provision to bear the bonus by the principal employer. In fact, the bonus is primarily based on the profit of the company, and it may not match with the profit of the contractor.

There is no provision in the Payment of Gratuity Act also to pay gratuity to employees employed through a contractor. Here also, gratuity is payable only to those who have a minimum of 5 years of 'continuous service,' which is normally impossible for employees employed through a contractor.

Regards,

Madhu.T.K

Dear All,

Is there any liability on the Principal employer in case of any accident of a contract employee, and if so, what is the extent of such liability?

Regards,
Vandana

Hey, I hope the attached document is helpful to you in some way. :)

Regards,
r o u l e t t e

I need statutory compliance details for every month, quarterly, half-yearly, and yearly.

Thank you.

Dear All,

In our organization, we have more than 10 employees on regular payroll. We have implemented the 'Employer-Employee Insurance scheme of LIC' where the employer pays the entire insurance premium (and claims deduction under section 37(1) of the IT Act as a legitimate business expenditure and pays FBT), but the beneficiary of the insurance claim is the employee or his/her nominee. Upon leaving the organization, an individual policy is to be assigned to the employee as a terminal benefit where the maturity proceeds are tax-free under section 10(10D) in the hands of the employee.

Do we still have to subscribe to the ESI scheme? Does this provision that we have made fulfill any of our other statutory obligations towards employees?

Regards,
Sanjeev

Dear Sir,

Please tell me the procedure of the notice period for both the employer and employee.

Kindly revert back to this email.

Regards,

Anandhi Hariharan

Chennai

Hi,

I need to understand the HR practices followed in pharmaceutical companies that we can replicate. I am currently working in a pharmaceutical company that was established 3 years ago. I am unsure if our company is subject to the Payment of Bonus Act. If not, I would like to know the reason why.

Hi,

I need to know what PF practices are followed in pharmaceutical companies that can be replicated. I am working in a pharma company that was established 3 years ago. I want to determine if our company is applicable to the Payment of Bonus Act. If not, I need to understand the reasons why.

Thank you for sending the .ppt. I appreciate the effort you put into preparing it. Well done.