Why Are Big Companies Forcing Us to Register for PF and ESI When It's Not Required?

Dear Professionals/consultants,

We are an organization undertaking erection and commissioning of various plants at different locations in the country. We have kept our organization small to avoid mandatory PF / ESIC registration. However, whenever we receive orders, every company insists on this registration, even though it does not apply to us. Moreover, if we don't comply, they deduct from our payments.

I find the whole situation unfair and coercive, to comply even though it is not applicable. Can anyone suggest why this is happening and if there are any remedies available for such situations?

Dear sir,

This is one of the most efficient ways to implement employee welfare globally. Today, all public sector and MNCs are also following this rule. As contractors, we have been working with public sector & MNC for the past 7 years and have been facing these problems for the last 2 years. Finally, we realized that "We can never run a business without this registration."

In the public sector, they will never accept us if we do not have proper registration for PF/ESI, whereas the private sector gives time for registration.

So, it would be better for you to go with this. This is my suggestion only.

I agree, because that's the only way to run the business. However, we had been doing our bit by removing the Workmen's Compensation policy for each and every site. But this, too, is unacceptable as I have found out. Laws need to be made easier to work and implement, as everyone knows contract labor is not stable, and we will end up doing only administrative work.

Please note that if PF/ESI is applicable to the establishment of the Principal Employer, then the contractor's labor/employee is also covered under the Act. This is mandatory, and you cannot escape on the ground of number. Please comply with the provisions of the Act.

Regards,
NNT

These are social welfare measures provided to an employee, whether they are daily wage workers, contractual employees, or permanent staff. In case your organization has fewer employees than required for the implementation/applicability of these Acts, when you deploy workers to a worksite, they will automatically be considered your employees under the applicable labor laws.

You cannot avoid liabilities by not providing these social benefits. You may consider withdrawing the Employee Compensation policy, but in the event of a worker meeting with an accident, especially in industries prone to fatal accidents like construction sites, you will still be liable without the Compensation Policy in place.

ESI/PF contributions are minimal for the employer but offer significant benefits to the employees.

Please abide by the law of the land. The welfare laws have been made for the proper compensation of employees, especially grassroots level employees.

The question is not just to run a company; the question is to run the country by providing better facilities to all citizens. Those companies that bypass these laws by some hook or crook are actually harming the economy by restricting the flow of money.

Dear Hemant,

PF/ESI

The act becomes applicable to you on any day you employ 20 employees (including contract employees) in any preceding 12 months. I expect an organization undertaking erection and commissioning of a plant would definitely have more than 20 employees directly or indirectly.

These are social security benefits provided to employees, so kindly register and secure the future for those who are securing your organization's future. This will also motivate employees and increase productivity.

Your principal employer will ask for the PF and ESI numbers of your employees when you deploy them on their site. Nowadays, rules are becoming stricter; appropriate authorities may charge penalties and damages to your organization. BE PROFESSIONAL.

Dear Hemant et al,

Please be clear that PF & ESI are applicable to the establishment wherever work takes place. If at such a place the number of employees (including those of contractors) exceeds 20, PF & ESI become applicable to all. The Principal Employer, instead of accounting for all such workers under its code, insists on the condition that the contractor must have valid PF & ESI registration. Therefore, even if your workforce is below 20, PF & ESI coverage is applicable. From the perspective of the Principal Employer, it is always advantageous to limit outsourcing work to PF & ESI registered parties. However, please check whether ESI coverage is available at the construction site, which in many cases is in remote areas.

Regards,
KK