Navigating Contractor Benefits: Can We Split ESI and PF Contributions Between Parties?

Sir, we are following the below-mentioned policy for every contractor working on our premises:

1. The contractor needs to have ESI and PF codes (regardless of the number of contract employees he may be employing).
2. If the contractor doesn't have ESI and PF codes, we are requesting our consultant to make ESI and PF contributions under his code.

The issue we are facing is with M/S A contractor; they have an ESI code but do not have a PF code. Is it possible for us to contribute ESIC under M/S A contractor and PF under our consultant? Please help.

PF and ESI are deposited in a separate entity account where employees are on the payroll. If employees are working in your company but the salary is paid by a contractor on their own payroll, they have the responsibility to deposit PF and ESI. If you want to deposit into your own account, you have to bring the employees onto your own payroll.

You mean the contractor M/s A needs to show a break in their service, and the consultant needs to show a new entry. If you say the above case should be followed, then they cannot show a break in their permanent employees.

Thank you.

Contractor Registration and Compliance with RPFC

If the contractor does not break any rules, he will have to register himself with the RPFC. Otherwise, he will be considered a defaulter in compliance. However, please let me know one thing: how is a business running if he is not registered under RPFC? Is he exempted or not covered under the RPFC in any act? If he is not covered or exempted, then you need not do anything.

Vishnu, you may hire contractors, and if contractors are working for you, then it's your accountability to ensure that they receive EPF and ESI benefits. If the contractors are not registered, then the employees can be registered under your code.

"I don't agree with this comment - 'If you want to deposit in own a/c, you have to take the employees in own payroll'." Experts, what are your views?

For a clear picture, discuss with an IR consultant.

The Act is not clear on this situation. Yes or no. The only exact picture is that the employer is responsible for depositing PF if employees are under their own. This suggestion is also good; we can go to the consultant.

If you have a contract with the agencies and it is mentioned in the terms, then your employee can be registered in the agency's account number, and subsequently, contributions can be made. This trend is followed by MNCs and small establishments.

Regards,

As per your query, I find the following solutions based on my knowledge:

1. If Ms. A has an ESIC Code but no PF registration code, then it is non-compliance as per the CLRA & PF acts. The liability as a principal employer falls on your company.

2. Why is Ms. A unable to obtain a PF registration number? As the principal employer, please assist in completing this process to ensure compliance for both the outsourced employees, Ms. A's contractors, and the principal employer.

3. If Ms. A is a significant contractor in your system, allow them to handle employee recruitments and assist in getting them empaneled with IR and legal consultants to complete PF and ESIC documentation. Ensure the remittances and challans are in place.

4. Alternatively, consider bringing all employees from Ms. A onto your payroll. Ensure proper remittances from your PF account and ESIC, taking on the liability for paid leaves and other statutory requirements as the employer.

5. Engage a manpower outsourcing agency and transition all employees from Ms. A to the third-party agency for compliance. Pay a nominal recruitment fee for the employees provided by Ms. A.

Regards,
Virag Shah
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