Navigating PF and ESI Exemptions: How to Handle Third-Party Employee Compliance?

Dear All,

We have engaged a service provider (a Chartered Accountant) for audit activities. The agreement is between our company and the M/s. XYZ & Co., (chartered accountant's firm). The chartered accountant has hired 2 employees from a different company (third party) and has made them operate from our premises for audit activities. The chartered accountant claims that those 2 employees are exempted from PF and ESI since their salary is more than Rs. 10,000/- and hence he is not deducting PF and ESI for these 2 employees. Request clarification for the following points:

1. What are the criteria for ESI and PF exemption (Conditions)?
2. If exempted, as claimed by the chartered accountant, what documents can we ask him to submit from HR Statutory compliance viewpoint?
3. We are in no connection with the third party from whom the CA has hired those 2 employees, but the CA is submitting the copies of the third party (PF and ESI challans, Attendance register, wage register). What needs to be done in this regard.

Kindly request you to provide details regarding the above issue in detail.

Thanks and Regards,
Vadiraj Kulkarni

Chartered Accountants attending auditing work are not employees of the establishment. The amount paid to Chartered Accountants is not by way of salary but professional charges/fee. Therefore, ESI and EPF are not required to be deducted from the remuneration paid to Chartered Accountants.

I shall be glad if others could also share their knowledge in this respect.

Regards,
Madhu.T.K

We are going ahead with TDS for the Chartered Accountant, but my query is regarding those 2 employees hired by this CA and deployed in our premises for our activities. There is no confusion with respect to CA's TDS. Request clarification.

Regards,
Vadiraj Kulkarni

Madhu is right, Vadiraj. As they are not employees of the firm:

1) They are exempted from PF.
2) As their salary is more than ₹10,000, which is the maximum limit for ESI, they are also exempted from ESI. They may be receiving Medical Allowances in their CTC.
3) They may not be exempted from PF if they are on the company's payroll.

Regards,
Saurav

We have a contract with a CS, and their employees are working at our premises. These individuals have appointment letters issued by the CS, and their salaries are below 15,000. Our CS claims that for up to 10 employees, they are not required to pay PF/ESIC. Is that correct?

Dear seniors, we are having a contract with a CS, and their people are working at our premises. These individuals have appointment letters issued by the CS, and their salary is below 15,000. Our CS claims that for up to 10 employees, he is not required to pay PF/ESIC. Is that correct?

From the CS's point of view, he is not required to take a PF/ESI Code as he has less than 10 employees. However, from your company's perspective, since they are working in your establishment as contractual employees, you need to submit ESI/PF under your own code.

Although it has been pointed out that CAs/CSs are independent professionals providing services on a retainer basis, from your organization's viewpoint, only service tax is payable, not PF/ESI.