Calculating Provident Fund Liabilities for Contractors: How Do You Approach It?

In a manufacturing organization, if a contractor is carrying out job work at the company's site, including materials, how can we calculate Provident Fund liabilities?

As per my understanding, it will be 30% of the invoice amount raised.

Please provide your inputs.

Regards,
Vipul Rana

If you have complete details of the number of employees engaged for such job work, then you can deduct the contribution on actual labor charges paid. You need to pay monthly contributions based on the payment of labor engaged in the job, not on the material.

If you are unable to segregate the amount of material and labor charges, then generally, the authorities assume 25% of the invoice amount as labor charges or wages paid to employees, and the contribution is payable on this 25% of the amount. However, this is not required every month. Authorities apply this only in case of default.

I am inquiring whether the provisions of the PF Act, 1952 are applicable to service contractors as well. Given that the nature of work under the contract is not permanent, with the contractor's 2-3 workers coming in for job work around 7 to 10 days a month, what would be the liabilities of the principal employer under the provisions of the PF Act, 1952?

Regards,
Vipul Rana