Employee Benefits Dilemma: Should We Pay PF for Temporary Staff Too?

We have 35 employees in our company, out of which 18 individuals are permanent, and the rest are temporarily appointed.

Please inform me whether PF should be paid for all employees or only for the permanent ones.

Please help me.

With regards,
Kittu :confused:

Your company will be covered under the Provident Fund Act. It is immaterial whether employees are temporary. On any day preceding 12 months, if your company engages 20 or more employees, PF will be applicable.

Temporary employees engaged in work by the company should be considered as employees. Please refer to the definition of an employee under the PF Act.

badlu

Dear,

Yes, as Mr. Badlu said, the PF Act is applicable to you, and you have to deposit PF for temporary employees as well.

Thanks,
J. S. Malik

Dear,

Once the organization is covered under PF/ESI acts, all the people, i.e., Permanent, Temporary, Casual, Contract, etc., except Apprentices, are to be covered under this act and contributions are to be paid. A separate rule applies to employees whose Basic + DoA + VDA is more than Rs. 6500/- per month with respect to PF, and those employees whose monthly wages are over Rs. 10,000/- are exempted under ESI.

Even if the contractor is not remitting the PF amount, as a principal employer, we are responsible for paying the contribution and deducting that amount from the bill payable to the contractor.

With best regards,
Kameswara

Once the organization is covered under PF/ESI acts, all the people, i.e., Permanent, Temporary, Casual, Contract, etc., are included. It is not necessary to wait until there are 20 employees; it is better to pay before reaching 20 employees. There are some exemptions for temporary employees, especially during the training period.

Hi,

Attached is the PF write-up for your reference. I hope it answers all your questions.

Best regards,
Arun

Dear Sir,

Unless the figure of 20 is reached, PF is not mandatory for a company. However, even if the figure is 20 and there are more than 5 persons with a basic salary above 10000, what happens? Please guide.

Regards,
Arunava

Dear Arunava,

It is not a condition for applicability that there should be 20 eligible employees. The condition is 20 employees.

Thanks,
J. S. Malik

This BANIYA MANAGEMENT TRICKs is not helpful in avoiding coverage to PF ACT.

Partho

Considering that there are only 18 permanent employees, there is no need to provide PF to anyone. :icon1:

We have 18 employees in our company, out of which 13 persons are permanent and the remaining are temporarily appointed. Additionally, there are 3 residential marketing persons in centers like Pune, Ahmedabad, and Hyderabad.

Please inform whether PF is applicable.

Please help me.

We have 18 employees in our company, out of which 13 persons are permanent and the rest are temporarily appointed. Additionally, there are 3 residential marketing personnel in centers like Pune, Ahmedabad, and Hyderabad.

Please inform me whether PF is applicable and if I have to pay ESI for the additional marketing personnel.

Please help me.
Kittu

Dear Sir,

Altogether, you have 21 employees (18+3). Therefore, PF as well as ESI act will be applicable for you. Where is the doubt?

Thanks,
J. S. Malik

Hi,

There is an interesting judgment that I would like to share with you. Prior to 1999, the ESI Corporation also used to determine coverage by head count. In M.M. Suri & Associates Pvt Ltd v ESIC (1999 I LLJ 13 SC), the question was whether the ESI Corporation could adopt this crude methodology as the definition of an employee u/s 2(9) uses the phrase "employed for wages." The Hon'ble Supreme Court held in the above case that in light of the above phraseology, the ESI Corporation cannot determine coverage by head count but should rather verify whether the employees within the prescribed wage ceiling, as given in the proviso to Sec 9 of the ESI Act, must be 10/20 to attract coverage for the factory/establishment. Ever since this judgment, the ESI Corporation has used the wage ceiling filter to determine coverage. Given the ratio of this judgment, I am of the considered opinion that the said judgment will apply with equal force to the EPF & MP Act too as the same phraseology "employed for wages" is adopted in the definition of an employee u/s 2(f). The EPF Organization does not take cognizance of this landmark judgment but persists in continuing with the old methodology of headcount. So in the case of any retrospective coverage, one may challenge the coverage based on the above judgment.

Patrick Ryan

Dear Kittu,

I hope the seniors and other members have clarified this topic for you. I would like to add that it is better to cover all employees under the PF act to avoid any legal hassles. Also, it should be noted that the employer's contribution is already a part of the CTC being disclosed to the employee, whether permanent or temporary. It is better not to evade this as it is a statutory requirement and also helps increase employee satisfaction.

Thanks,
Amit Anand Gera 😊

That's an interesting piece by Dr. Ryan, and as he also said, the Supreme Court has indeed held that for coverage of an establishment under the ESI Act, there must be 20 "eligible" employees (ESIC vs MM Suri & Associates (P) Ltd., 1998 LLR 1105 (SC) - eligibility being the criterion for coverage. This analogy may be extended to the EPF Act as well. The present headcount method could be challenged.

As regards Kittu's query on employees located in Pune, Ahmedabad, and Hyderabad, all would be held under the purview of the ESI Act. The Hon'ble Supreme Court has also held that different sales & service outlets will be clubbed for applicability of the ESI Act even when none of these have employed 10 or more employees (Southern Agencies vs Andhra Pradesh ESI Corp, 2001 LLR 191 (SC). The Calcutta High Court has held that the ESI Act will be applicable to employees working in sales depots and offices of Bata India since its factory is covered under the Act (Bata India Ltd., Calcutta vs ESI Corp, 2003 LLR 1018: 2003 (98) FLR 990: 2003 III LLN 1069: 2003 III LLJ 716 (Cal HC). In another case, it has been held that two units will be clubbed together for coverage under the ESI Act when there is common inter-dependability between the two units, and as such, the ESI Court has rightly come to the conclusion that the ESI Act was applicable even as one unit has been dealing with retail class business and the other dealing with textiles. In another case, the Hon'ble SC has held that once a notification is issued by a State Govt. u/s 1(5) of the Act covering the particular establishment of the State, automatically the said notification would take in its sweep all branches of such an establishment situated even outside such State which have complete functional integrity with the main activity of the establishment. (Transport Corp of India vs ESI Corp of India, 2000 LLR 1 (SC). The fact of this case was that Andhra Pradesh State issued a notification u/s 1(5) of the Act covering Road Transport Undertakings. The appellant's head office was situated in Andhra Pradesh. Its undertakings in Maharashtra State were not covered by the ESI Act.

The ESIC has clarified that construction sites of the construction agencies will not be covered under the Act, but only the employees who are posted in the office are to be taken into consideration for coverage under the Act.

ESIC has been known to accord an exception to a lesser coverage by a Company on account of their territorial absence of centers.

The implementation of the ESI scheme is still territorial in nature. New geographical areas are covered from time to time by the State/Central Govt, keeping in view the density of coverage industrial population within a given geographical area termed as a 'center'. Thus, the extension of the Act at selective places will not be violative of the Constitution (Khem Chand Motilal CCJ Patel Tobacco & Kalr-Khan Mohd. Hanif vs Union of India, 1996 LLR 162 (MP HC).

As regards PF coverage, all employees are covered u/s 1(3)(a)/(b), unless the establishment is an exempted establishment u/s17(1)(a)/(b) under the EPF & MP Act. Essentially, by practice, the headcount (20 or more) is still considered for coverage under this enactment instead of the "eligibility" criterion. Even if the number falls below the minimum prescribed for coverage (i.e. 20) subsequently, these Acts will continue to be applicable even to temp. workers (not being apprentices engaged under the Apprentices Act, 1961).

In brief, cover all eligible employees under ESI & PF as a safe option if the criterion of 20 or more employees is satisfied.

Rahul