Managing Daily Wage Workers: Who Handles PF and ESI When Using a Contractor?

In my company, I have 90 daily wage workers. Now, I want to put them under a contractor. My question is, who will pay PF for them? Is it mandatory to provide ESI? And who will pay?

Please help me.

Sanjivan

Sir,

Actually, we are not providing them with PF and ESI facilities, but they are on the payroll. What can I do now? If you don't mind, can I call you in the evening?

Please refer to the contract agreement carefully. In that document, the terms and conditions will be clearly outlined. If the contractor agrees to pay the statutory requirements, then there is no need to worry. However, if they do not agree, as the principal employer, you must ensure that all statutory obligations are fulfilled and filed on time.

Regards,
Ravi A.

Sir,

We are the contractor and ready to pay them ESI & PF. But we claim them with the minimum wages (ESIC at 4.75% and PF at 13.61%).

Thanks & Regards,

Ramesh
9313302804
GROUP-2 CARE SERVICES

I suppose what you wish to convey is that you have 90 daily wage earners on the payroll of your company. Please appreciate a simple fact that Daily Wage is only a mode of payment of wages to the workers. It does not in any way affect their status under various applicable labor laws. They are all regular employees of the company and are entitled to all benefits like:

- Minimum wage
- ESI
- PF
- Bonus
- Gratuity, etc.

Now, if you wish to place them all under a Contractor, you will have to terminate the relationship of the 90 employees vis-a-vis their current employer (your company) and then re-employ them as Contract Labor. The best way to address this would be to first obtain the resignation of all 90 employees, formally accept their resignation, settle their dues in full and final. Termination of their employment is likely to cause legal problems for your company.

Their employment with the Contractor will be a new inning on fresh terms and conditions. But then, they will be entitled to all legal benefits mentioned above. The only difference will be that the employees will be on the rolls of the Contractor. He will be responsible for compliance with all applicable statutory obligations. However, if the Contractor violates any of the applicable labor laws, the company as the Principal Employer will be liable for the same. In real terms, there is no benefit by making this change.

Best Wishes,

Vasant Nair

In response to your specific query regarding ESI & PF, well, it is the Contractor's responsibility to comply with these obligations. If he does not comply, the company as the Principal Employer will be responsible.

Dear Sanjivan,

As a daily waged workman or contractor, it is the responsibility of the principal employer to make the payment of the ESI, PF, Bonus, etc. Therefore, it is better to hire a contractor who has ESI and PF numbers and make the payments through them. You can then ask the contractor to submit the records to you, and only after verifying these records should you pay them for the work carried out.

Please note that contract labor has been banned in certain categories of work, so it is essential to check on this. However, nowadays, the factory inspectorate is also more liberal.

As someone pointed out, the first step is to legally get rid of all contract workmen. This is a significant task to undertake without attracting too much attention from labor laws or self-proclaimed labor leaders.

Regards,
Nagaraj

In fact, I have already selected a contractor, and we have arranged for them to obtain ESI and PF numbers at the company's expense. The system is working well even today.

You have to employ a contractor who holds a contract labor license if they are employing twenty or more people within your organization. If the number of laborers is below twenty, there is no need for the labor license. However, the contractor needs to pay the contributions of PF, ESI, TDS, etc., for them as well. We are responsible for checking all of this before allowing them to be employed. Otherwise, it becomes our responsibility to pay for all of these expenses for the laborers, and we can deduct the necessary amounts from their payments.

Compliance with RPFO and ESIC Regulations

If you have employed 90 workers and are not registered with the RPFO and ESIC, you have already violated the law. Whatever you want to do, you should do it quickly. Get your workers to resign, open a new firm, and re-employ them through a contractor. Ensure you complete all the necessary checks and safeguards as required, as suggested above.

Understanding Social Security for Employees

Let's please understand that providing employees with social security should be our prime objective. Accordingly, brief the top management regarding the additional expenditure it incurs for the company, but the right justification will be provided to the workers.

Kindly identify the contractor who is fulfilling the ESI and PF requirements and provide their registered numbers. Ensure that the contractor agrees to pay the workers every month. Along with the invoices, ask the contractor to submit the challans.

Hope you got it.

Regards,
Dennis

Dear Khola Sir,

Please tell me about these zones. How are they distinguished as Zone 1, Zone 2, and Zone 3? And what are they actually related to?

Aarti

Dear Aarti,

Different territorial areas have been declared as different zones by the government for setting minimum rates of wages in these areas. You can obtain a copy from the local labor office for further details.

Regards, R N KHOLA