Is Our Contractor Responsible for PF and ESIC for Just 9 Workers? Seeking Senior Advice

Date: 01.10.09

Dear all,

In our unit, a contractor supplies 9 workers daily. Then PF and ESIC liability should not be attracted because the contractor is not supplying more than 20 and 10 workers in a single day, respectively. However, in contrast, our labor consultant guided us that the contractor should pay the PF and ESIC liability for 9 persons. Factory conditions are deemed to be applicable to the contractor, even if only one person is supplied in a single day.

In case the contractor fails to fulfill the liability of PF/ESIC, then ultimately, responsibility falls on the principal employer.

Please clarify the views of seniors.

Thanks,
Anil Jangid

Hi Anil,

It is immaterial whether the contractor is supplying 9 or 20 employees, but if your company has a PF code and is remitting PF/ESI contributions for other employees, then you have to pay for the contractor's employees as well. The same contractor might supply workers to other companies, and the total number of workers supplied by the contractor in a day may exceed 20, bringing him under the purview of PF/ESI. As the principal employer, it is your responsibility to ensure compliance. The best way, according to me, is to engage those contractors who have their own PF code. When entering into an agreement with the contractor for supplying workers, you must mention that the contractor should provide documentary evidence showing a valid PF code in his company's name from RPFC and also submit a xerox copy of the challan every month along with his bill evidencing payment of PF/ESI to the respective authorities. Payment will be withheld if statutory payments are not made within the due dates. You must ensure your company's interest and avoid receiving a show-cause notice from the authorities for non-compliance.