Understanding PF Contributions for Contract Labor: How Are They Calculated Without a Basic Wage?

Hi,

Could anybody suggest to me if PF contributions will be recovered from the total wages in respect of contract labor, given that there is no basic wage?

Thanks,
mantu71

Hi Manu,

It can happen if the Principal Employer pays the PF contributions of the contract employees to the PF authority from their account. In that case, the principal employer can recover the same from the Contractor because all payments such as PF, ESIC, PT, MLWF, etc., should be paid by the contractor. It is the contractor's responsibility.

However, if the Contractor has not made any payments to the social securities authority, then all liabilities fall on the principal employer. The principal employer has to pay the same with interest charges and damage charges (if applicable), which can be recovered from the Contractor.

Regards,

Hi Mantu,

If the contractor is paying consolidated wages, you have to deduct PF on the entire wage. However, you need to check if the consolidated wage is equivalent to the prevailing minimum wage prescribed by the labor department or not. It's better to be on the safe side. Otherwise, if the contractor gives a breakup of the salary where basic + DA is equivalent to the minimum wage, then PF can be deducted on that amount.