Contractor Payment Issues: How Should Companies Handle Missing ESI and PF Challans?

If a contractor runs by clearing his account and payment without submitting his ESI and PF challans, then as a principal employer, what should a company do?

Dear,

With what understanding have you cleared his account? You must be knowing better than us. If the contractor fails to deposit the ESI & PF, then you must be aware that as the principal employer, you are required to deposit the amount and recover it from the contractor's bills or security deposited with you. If none of these options are available, then file a civil case for its recovery. Opinion submitted as requested.

Regards,

R.N.Khola
(Labour Law & Legal Consultants)

As a principal employer, you are liable to pay if the contractor has run away. Ensure that he is found out, or else the company has to pay for the same.

Hey S_dkim,

A common issue with all contractors... they are unreliable. Nevertheless, as per labor laws, the principal employer is liable for all costs, and you should consult a good labor consultant to get things in order.

Also, if you have the contractor's contact information, you can lodge a complaint with the labor office. Although it's unlikely they will take immediate action, I suggest you still do so.

Regards,
Ukmitra

Dear Mr. Khola,

You have given the right suggestion; you are bound to pay the authorities. If you can recover well and good, but you are liable to pay.

Regards,
JS Malik

First of all, do not sanction or pass the bill for him until he submits the last month's ESI/PF challan to you. Always ensure payment to the contract workers before him.

Regards, Youva

Dear Stalwarts,

Good to note this point. My question is when PF/ESI challan, along with the current bill, how to ensure the Contractor is remitted such an amount for his persons employed, particularly in my Factory? Look forward to your clarification, please.

Best Regards,
Sundararaman
HEAD HR & Admn in a Pvt Ltd. (Engg Mfg Unit in Tamil Nadu)

As a principal employer, you have to pay the authorities. Later, when settling the dues of the contractor, you can adjust the same through security deposit and pending running bills.

Dear [Name],

As your company is the principal employer, the agreements drawn between your company and the contractor should be very clear on these statutory issues. You are also advised to collect the copies of Registration Certificates, i.e., relating to PF, ESI, PT, etc., and keep them for records. This will confirm that you have engaged a registered contractor in all matters relating to statutory issues.

By and large, the ultimate onus lies on the principal employer to discharge all such liabilities if notices are issued to contractors and they do not pay. One of the best practices some companies follow is to deduct such amounts and issue drafts favoring statutes, depositing them on behalf of the contractors.

I hope this clarifies your doubts. For any further queries, you are most welcome to ask.

Thank you.

Sincerely

Dear Sundar1959,

First, it's a pain in the *** to deal with these labor officers. Sorry to say, but sometimes it's just difficult to get work done from them. If you don't have the challans, we must demand them from the contractor who is duty-bound to provide all challans of deposits with ESIS and PF offices. If you are not getting the challans, chances are they are defaulting, and as the principal owner, you will have to bear the brunt.

The best solution is to engage a good labor consultant. Their charges are minimal, and we get our work done faster.

Best of luck,
ukmitra