Who Handles ESI and EPF for Contract Workers in Manufacturing? Seeking Clarity and Best Practices

Dear Sirs,

I am working as an HR professional in a manufacturing company. We use three types of contractors for various production-oriented tasks. Each contractor provides 15 manpower daily. I have a doubt about who is responsible for their ESI and EPF contributions. Could you please clarify this for me?

Additionally, can we structure the agreement with the condition that the contractor is responsible for their ESI and EPF contributions?

Should contractors register their contract agreements with the Labor Commissioner's office?

Thank you and regards,

Saravana Kumar.T

Dear Saravana,

Your question is not clear, but I am trying to clarify it for you. Always ensure you have an agreement with a registered contractor. Depositing ESI and PF is the responsibility of the contractor. After depositing the challans, they will reimburse the employers without any service charge on that amount.

Secondly, it's better to ask them to issue separate challans for EPF and ESIC to prevent any fraudulent activities.

It is not required for the contractor to register it in the Labor Office.

Dear Saravana Kumar T,

1. If your contractors do not have PF and ESI registration, then your company (as a principal employer) is responsible for PF and ESI. As a principal employer, you should ask your contractors to obtain PF and ESIC registration if they do not have it. Your company holds the responsibility as the principal employer.

2. Yes, you can structure a formal agreement with all contractors. In that agreement, you should specify that every month, contractors must submit monthly PF and ESI challans along with other necessary PF and ESI documents.

3. No, you cannot register their contract agreements in the Labour Commissioner's office. Such registration is solely for internal office use.

Regards,

Kedar

Hi Saravana,

Contractors are responsible for paying ESI or PF. I am also working in a manufacturing company where three contractors are supplying a manpower of 300. At the end of every month, you can ask for proofs of ESI and PF submissions.

Dear Sarvana,

Mr. Kedar has explained things correctly. Being the principal employer, you are responsible for the deduction of ESI/PF. Therefore, you should ensure that ESI/PF is deducted and deposited with the authorities. You can have an agreement with the contractor which is not required to be registered with the labor department.

As you are hiring three contractors of 15 each, you are required to register yourself with the labor department for hiring contract labor.

Thank you.

J.S. Malik

If the contractors engaged by you (Principal Employer) do not have PF and ESI registration, then your Company (Principal Employer) is responsible for the statutory compliance, such as PF and ESI. As a Principal Employer, you shall demand the engaged contractors to obtain PF and ESIC registration. In case the contractor does not have the same, your company can take up this responsibility, and the contribution amount towards ESI & PF can be deducted/adjusted in the contractor's final bill.

Dear Sarvana,

You are responsible for all statutory compliances as a principal employer. You also have a registration certificate provided by the Joint Labour Commissioner, which includes the name of the contractor and the number of manpower involved.

Regards,
Vikas

Dear Mr. Sarvana Kumar T.

As a principal employer, you need to obtain a certificate of Registration from the Registering Officer under the Contract Labour Act (Labour Comm Office).

In your case, contractors are not required to obtain a license since they are providing you with 15 workmen each.

As explained by Mr. Kedar and Mr. Malikjs, it is the responsibility of the principal employer to deposit ESI/PF if contractors are not registered with ESI/PF.

In this case, I request Mr. Malikjs or other senior members to clarify what the procedure is for depositing the ESI/PF of the contractor's workers if the contractors are not registered with ESI/PF. Should the principal employer submit declaration forms of the contractor's workers in ESI? What about the 6-monthly return that we need to submit to ESIC? Or what other records do we need to maintain in this case? Will depositing ESI/PF of the contractor's workers create any employee-employer relationship between the principal employer and the contractor's workers?

Please clarify.

Prasad

Dear All,

What is the procedure for depositing the ESI/PF of the contractor's workers if contractors are not registered with ESI/PF? Shall the principal employer submit declaration forms of contractor's workers in ESI? What about the 6-monthly return which we need to submit to ESIC? Or what other records do we need to maintain in this case? Will depositing ESI/PF of contractor's workers create any employee-employer relationship between the principal employer and contractor's workers?

Please clarify.

Regards,
Janu

Direct Appointment of Contractual Employees

Instead of hiring contractual employees through third-party agencies, the main employee will directly appoint the contractual employees. What is the process for this moving forward? If we provide them with appointment letters, they will fall under our company's roles. Do we need to mention all structured components in the appointment letter or not? Alternatively, if we do not offer them appointment letters, how can we manage their PF & ESI contributions, and through which organization should this be done (dummy)? Could you please clarify this for me?

Thanks,

Dinesh

If the contractor is not registered with ESIC & EPF, there is a system for giving them a sub-code under your registration and adding their employees to your ESIC number. There is a separate option for adding a contractor and giving them a sub-code in the ESIC system.

Regards,
R.K. Panda