Navigating Contract Staffing Challenges: Seeking Advice on Revenue Models and PF/ESI Contributions

Dear Members,

I am working as a Consultant in a newly established Human Resource Firm and would like to know a few details about Contract Staffing. KINDLY HELP ME REGARDING THIS. I am the only person in the HR department and don't have anybody to guide me and to take this forward.

a) I would like to know the revenue model of contract staffing.
b) Who contributes to the PF/ESI - is it the consultant (us) or the Client Company?
c) Here we are planning to do recruitment for Layman workers like - Housekeeping staff, dishwashers, etc.; many of them say they are not interested in PF/ESI; (in fact, many are not aware of PF/ESI); so what should we do?
d) We keep a profit margin of Rs.500/head. That is, if the Client pays us 4500, we give 4000 as salary. Now if we contribute towards PF/ESI, then our margin gets lowered to say Rs. 20 or so which is very, very low. So, suggest us some good revenue model.

Thanks in advance.

Dear friend,

I would like to know the revenue model of contract staffing. The revenue model is simple - the client recruits through your company. The client pays your company abc% or an agreed amount of the salary every month for employing on a contract.

Who contributes to the PF/ESI - is it the consultant (us) or the Client Company? The client pays the PF/ESI contribution. Your company only acts as a mediator and pays on behalf of the client to the respective labor departments.

Here we are planning to do recruitment for Layman workers like housekeeping staff, dishwashers, etc. Many of them say they are not interested in PF/ESI (in fact, many are not aware of PF/ESI). What should we do? Even if they are not aware of the legal benefits, you have to enlighten them about the benefits and provide them with those benefits!

We keep a profit margin of Rs. 500/head. That is, if the client pays us 4500, we give 4000 as a salary. Now, if we contribute towards PF/ESI, then our margin gets lowered to say Rs. 20 or so, which is very, very low. So, suggest to us a good revenue model. You are not supposed to pay from your margin or your pocket. Renegotiate with the client for the appropriate payment as they, being the principal employer, are liable to pay the labor taxes.

In case of any further help, email me at namitabh.law@gmail.com or call 9930992660/661.

All the best!

Thank you, Namitabh, for your suggestions. They were very useful.

Thank you, Rajan Associates, for your reply. I will pass on this suggestion to my MD.

Girisharr - If we have overflowing requirements, then we will contact him.

Dear Ram,

a) I would like to know the revenue model of contract staffing.

Employees will be on your rolls working for the client. You will be given some x% to handle their payroll.

b) Who contributes to the PF/ESI - is it the consultant (us) or the Client Company?

The Client has to contribute to PF/ESI employer contribution.

c) Here we are planning to do recruitment for Layman workers like - Housekeeping staff, dishwashers, etc.; many of them say they are not interested in PF/ESI (in fact, many are not aware of PF/ESI); so what should we do?

You have to educate them on the benefits of savings and insurance coverage, and also explain the need for it. Whether they like it or not, you have to contribute to PF/ESI.

d) We keep a profit margin of Rs. 500 per head. That is, if the Client pays us 4500, we give 4000 as salary. Now, if we contribute towards PF/ESI, then our margin gets lowered to say Rs. 20 or so, which is very, very low. So, suggest to us a good revenue model.

Their salaries have to be according to the Minimum Wages Act. Explain to the client about this and renegotiate your costing accordingly.

Regards,

Mohd Abdul Aleem

Mr. Ram,

It was clearly explained by Mr. Namitabh. As he mentioned renegotiating, it's better to go for a percentage wise approach. This will be helpful in handling any changes or increases in the number of employees. Remember, you can't handle ESI, PF, and other statutory provisions like LWF and bonus will also be applicable.

Regards,
Ramnath