Ensuring Subcontractors Follow PF Rules: How Do You Verify Employee Coverage?

Is there any firm and logical way to ensure that subcontractors comply with PF formalities? Consider the case of a company that hires machines, engaging 9 employees on a contract basis. The monthly EPF challan provided by the subcontractor includes all the manpower with them. How can we ensure that the said 9 employees are covered under the PF challan?

One way is to ask for a copy of Form 6A (Annual Return) and monthly returns on Form 5 and 10. But what if the contract is awarded after the current period, for example, from April? Form 3A is typically filled out at the end of the period because only good companies update them monthly. However, small contractors may not even submit "NIL" returns.

Hi Aby,

Apart from the annual returns in Form 6A, the employer is required to submit Form 12 within 25 days from the close of the month showing the aggregate of recoveries made. Form 12 contains the name of the subscriber (employee) and the PF account number. Form 3A is again an annual statement and will not suffice for your purpose.

So, you can insist on Form 12 along with the PF challan to track PF compliance by your subcontractor.

Regards,
Gautam

Dear Abby,

Is there any firm and logical way to ensure that a sub-contractor complies with PF formalities?

The answer to the above is that if your total employee strength in the establishment exceeds 20, you need PF. Similarly, if the sub-contractor has more than 20 workers under their roll, irrespective of whether they are working jointly or in different establishments, PF applies.

For checking PF compliance, we request self-declarations from our contractors every month. In these declarations, they are asked to provide the name, PF number, gross pay, pay on which PF is calculated, PF contribution, and finally, the total contribution paid by the contractor. This information is to be submitted with their bill.

Regards, SC

Dear Aby,

The rule is that the number 20 is for an establishment; it does not matter whether the number 20 consists of regular, temporary, contractor, badli, or other workers. Let me elucidate with an example: Suppose a factory has a total number of workers = 100. The breakup is as follows: Regular Employees: 9, Contractor Employees = 91, divided as follows: 5 each for 17 Contractors and 6 for one Contractor. As per the above, none of the Contractors as well as the Company needs to be covered under compulsory PF as the number of workers in all cases is less than 20. This is a case of PF evasion, so to stop this, as per PF, the strength will be taken as 100 and how you are going to register depends on the Management and Contractors.

Regards,
SC

Dear SC,

The thing you mentioned is feasible mostly only theoretically since you also know the complexities involved. But take into account the NATURE of work performed. The mentioned Sub-Contractors are not being paid for manpower but instead for the manufacture of certain goods, where the raw material is made available to the Sub-Contractor, and they only provide services on it. Furthermore, the number of manpower deployed also changes frequently.

NOT POSSIBLE

Aby

Dear Aby,

Yes, it is purely theoretical. I just provided it to explain the law to you. If your subcontractors are working outside your premises, somewhere else on a job contract basis, then PF is not required. However, PF is necessary in the case where the subcontractor is supplying manpower or working on your premises and has a site office.

Let's say you have a logistics company and have an arrangement with a service center to service your vehicles. In this scenario, the coverage of PF for service center employees does not fall under your purview. But if you have a service cum repair workshop within your establishment and have outsourced this job to a contractor, then the engaged employees will be covered under PF, and you, as the Principal Employer, will be responsible.

In the first case, the employees of the service center are not specifically engaged for your job only but for many such companies. The test is whether employer-employee relations exist under the Contract Labour (Regulation and Abolition) Act, 1970. If the answer is "Yes," then PF coverage will be attracted; if "No," PF coverage is not under your purview.

Regards,

SC

I believe what he has answered is right, and we do follow the same. The number of contract employees in your establishment can be below 20 if the total number of employees on the contractor's payroll is 20 or more, including all other employees in other establishments by the same contractor. Great response.

Suresh Deshpande.

Dear Aby,

For checking the PF details, you may ask the contractor to submit the wage sheet showing the PF number and deductions. This can be verified with challans.

As per the CL Act, he should prepare the Register of Wages and Muster Roll in Form XVIII. In this form, you may ask the contractor to add one column after Sl. No. for showing the PF numbers and ask him to show the PF deductions in the deduction column.

Verify the wage sheet before the disbursement of wages. Wage disbursement must be witnessed by the Principal Employer.

N. N. Tiwari

Dear sir,

I worked for a company for the last 10 months but do not have a PF number. Please let me know how I can get PF details.

Regards,
Varun Gugnani

When a contractor has fewer than 20 workmen and an establishment is under P.F. coverage, may a contractor submit a declaration, challans, and compliance in the code of another contractor, or is it compulsory to comply under the employer's P.F. & ESI code.