Concerned About PF Remittance by Contractor? How to Ensure Compliance and Protect Yourself

Hi, I am operating our warehouse through C&F. Every month, they are charging us the employer's share of PF, and we are paying them. However, I recently found out that employees who left a year ago have not received their PF amount, and the service provider is not responding adequately to our queries. My question is: what measures should be taken to ensure the agency is remitting PF to the authority? They show us some challans, but these do not contain employee details, leading to concerns that the payments might be for other purposes. Additionally, I am concerned about the legal implications for me if the service provider fails to remit the PF. What legal actions can I take against them?

Thanks & regards

Responsibility of Principal Employer in PF Compliance

As per your query, if your contractor is not remitting the PF amount to the PF Department, then that responsibility falls on the principal employer.

Every principal employer is responsible for conducting a monthly check on the contractor regarding various statutory compliances, i.e., PF, ESIC, PT, MLWF, CLRA License Validity, and maintaining registers under the Act.

Now, straight to the point, if your contractor is showing you a PF Challan and you are not satisfied with it, ask him to show the previous PF Returns of 3a & 6a. These should be filed in the PF Office, where 3a will have each employee's individual PF Account number with the contractor's PF Establishment code and accumulated amount for that financial year.

Stop the payment to the contractor with prior intimation, instructing him to ensure 100% compliance with various statutory requirements. Conduct a Statutory Audit so that the situation becomes clear and your employees are satisfied.

Lastly, if you still feel you need any help, kindly contact the undersigned for further queries.

Regards,

Ravikumar S.

[Phone Number Removed For Privacy Reasons]

You can assure yourself, as Ravi said, by asking for Form 3A, 6A, and you can also request the yearly PF slip issued by the department. Additionally, you can obtain a declaration on the letterhead on a monthly basis stating that he has been remitting the PF of specific employees into their respective PF accounts. By doing this, you would be able to safeguard yourself to some extent and also maintain some pressure on him.

Regards,
Mukesh Mehta

Legal Obligations of the Principal Employer

All these suggestions are not foolproof. In a recent judgment delivered by the Honorable High Court of Delhi, it was stated that the Principal Employer is bound to deposit the contributions on account of the Contract Labour under the PF Scheme. Even if the Contractor has a separate or independent code number, the contributions are payable only by the Principal Employer.

Best Practices for Compliance

However, the best suggestions are:
- Ensure the disbursement of wages in the presence of the Principal Employer as stipulated under the CL(R&A) Act 1970.
- Deposit the Contributions by the Principal Employer.
- Ensure the submission of the monthly and yearly returns by the Contractor regularly.
- The monthly payment should be ensured only after these formalities are completed.

Additional Suggestions for Ensuring PF Compliance

Let me add a few more suggestions put forth by Sh. S.K. Bhargava, as follows:

- The principal employer may ask for the names and the P.F. account numbers of the employees posted by the contractor and request copies of bank challans.
- They may withhold some security amount until they are satisfied.
- Intimate the name and code number of the contractor to RPFC.
- Ask for a copy of EO's inspection report, if any.
- Request a copy of P.F. slips issued by the RPFC at the end of each year.

These points are in addition to the viewpoints of other contributors on this matter.

With regards,

Chandok
Ex-RPFC