How Can We Exclude Supplied Labor from PF Contributions When Contractors Resist?

Hi,

Can anyone give me an idea of how to exclude supplied labor from PF contributions? As the laborers don't work for long, and the contractor is not ready to register for PF. Is there any way our company can allow the contractor to proceed without PF for the supplied laborers?

Please suggest.

Regards,
ChittaBrat Dhal

Dear Mr Dhal,

With reference to your queries pls find below the PF applicability and eligibility for PF membership :

Applicability i) Every establishment which is a factory engaged in any industry specified in Schedule 1 and in which 20 or more persons are employed and

ii) Any other establishment employing 20 or more persons which entral Government may, by notification, specify in this behalf.(Infancy period of 3 years has been withdrawn by ordinance w.e.f.22-9-97)

iii) any establishment employing even less than 20 persons can becovered voluntarily u/s 1(4) of the Act.

PF Eligibilty :

Any person who is employed for work of an establishment or employed through contractor in or in connection with the work of an establishment.

Therefore the contractor must have to provide the minimum statutory benefits i.e. PF, ESI etc which are mandate by labour law. Infact if the contractor is not providing these minimum statutory benefits to the contract employees then both the employer and contrctor would be in trouble during the inspection by the concrn authority.

Regards

Sidharth Sahu

- Applicability is rightly explained by Mr. Siddharth.

In your case, deduct the PF component of contract laborers, i.e., employee + employer contribution + admin charges, from the bills of the labor contractor on the wages paid (Basic + DA) and deposit it to the PF Authorities under Principal Employer Code.

In case of default in PF payment, the principal employer will be held responsible and may be imposed a penalty/damages at the following rates:
- Less than 2 Months - 17%
- 2 to 4 Months - 22%
- 4 to 6 Months - 27%
- 6 months and above - 37%

Thanks & Regards,
Nishi

Hi,

Any amount paid towards any services of the establishment/organization/factory, even for an hour or a day, results in PF and ESI deductions, whether the individuals are on NMR, regular, or contract labor. All other conditions are explained well by the friends above.

Mohan Rao Manager HR

Hi Nishi,

The PF amount can't be remitted through the principal employee's code for the contract employees. Since the principal employer has to maintain certain registers to comply with the PF authority. Another issue is that contract employees' salaries can't be processed on the same payroll as the regular employees. This would, in turn, affect the accounting books of the company. In fact, the principal employer has to maintain relevant registers on behalf of contract employees, and it is the prime responsibility of the principal employer to ensure that the contractor is providing the minimum statutory benefits.

Regards,
Sidharth

Dear Sidharth,

In my case, the contractors are not willing to comply with any PF regulations. In order to deposit the PF contributions for the supply laborers, we need to use the Contractor's name, although we will be using our company's PF code. However, the contractors are not willing to agree to this arrangement. Therefore, we are planning to appoint a new contractor who will comply with PF laws and regulations.

With reference to your queries, please find below the PF applicability and eligibility for PF membership:

Applicability:
i) Every establishment that is a factory engaged in any industry specified in Schedule 1 and employs 20 or more persons.
ii) Any other establishment employing 20 or more persons as specified by the Central Government through notification. (The infancy period of 3 years has been withdrawn by ordinance w.e.f. 22-9-97)
iii) Any establishment employing even fewer than 20 persons can be voluntarily covered under Section 1(4) of the Act.

PF Eligibility:
Any person employed for work in an establishment or through a contractor in connection with the work of an establishment must be eligible for PF membership. Therefore, the contractor must provide the minimum statutory benefits such as PF, ESI, etc., mandated by labor law. In fact, if the contractor fails to provide these minimum statutory benefits to the contract employees, both the employer and contractor could face trouble during inspections by the concerned authorities.

Regards,
Sidharth Sahu

Dear Nishi,

Contract employees can't claim any kind of statutory benefits from the principal employer. It is the duty of the principal employer to audit the compliance made by the contractor. In no way will the contract employees' salary be reflected in the principal employer's ledger. In contention to your view, could you please let me know where the nomination of contract employees will be reflected after the remittance of the PF through the PF code of the principal employer? Since you cannot maintain two Form-9s, one for regular employees and one for contract employees. In fact, the contractor cannot maintain the same as the remittance is made through the employer's code.

Regards,
Sidharth