How Can a Small Contractor with 5 Workers Register Under Contract Labour and PF Acts?

Our company has a guest house that is maintained by a contractor. The total number of manpower employed in the guest house is only 5. The contractor does not have any registrations (ESI, PF, etc.).

Registration Under Contract Labour Act and PF Act

How can the contractor, who has a workforce of only 5 laborers, get registered under the Contract Labour Act and PF Act? What procedures does he need to follow to obtain the above registration certificates?

Can anyone please help me find a solution to these issues?

Please clarify, can the contractor apply for any voluntary registration if the number of workmen is below 20? What does the contractor have to do to obtain a PF account if the number of workmen is below 20?

Thank you.

No, the contractor cannot apply for voluntary registration under the Contract Labor Act because it does not fall under the purview of having 20 employees. The Contract Labor Act applies only after reaching 20 employees. However, the contractor could be registered under the Shops & Establishment Act if it falls within the jurisdiction of the same.

Registration Under the CLRA Act and PF Act

For registering the contractor under the CLRA Act, the number of contract workers should be 20 or more on any day of the preceding 12 months. In your case, you can't register the contractor under the CLRA Act since the number of contract workmen is less than 20. Similarly, the PF Act is also not applicable. Once the contract manpower reaches 20, you can apply for registration.

Regards,
D. Pannerselvam

Employer Compliance with EPF & MP Act/ESIC Act

If an employer is covered under the EPF & MP Act/ESIC Act, then the contractor can comply with the employer's code number. It is purely the principal employer's responsibility to ensure compliance under the EPF and ESIC Act for all workers, whether direct or contract.

The contractor is not required to obtain a license under the Contract Labour Act unless they have fewer than 20 workers.

Thank you,

Regards,
Sanjeev Sharma
[Phone Number Removed For Privacy Reasons]

Clarification on Contractor Registration and Compliance

The Contract Act is not applicable to the contractor since he has only 5 employees. If any work is assigned to the contractor, and for the purpose of execution of such work, the contractor involves fewer than 20 employees, in that case, the contractor does not need to obtain a contract license for that particular contract work.

Please note, contractor registration/license is applicable for each and every contract work, and it is not a permanent license/registration. As per law, each contract requires separate registration. It is a registration of the contract and not the registration of the contractor. (In normal language, we call it a registered contractor, but the actual fact is this.)

However, the EPF and ESI Act are applicable to him even though he has only one employee. The number of employees he has is not within our purview. The contractor might have other clients and provide services to others.

When the principal assigns any work on a contract basis, and the contract is to be executed on the principal's premises, in that case, all the rules and regulations, such as ESI, EPF, minimum wages, etc., apply to the principal; the same applies to the contract employees. The principal must ensure whether the contractor is observing these things or not. If the contractor himself has fewer than 20 employees, then he must comply with ESI and EPF under the principal's code number.

Another thing to note is if the contractor has their own registrations under the ESI and EPF acts, they can make compliance under their code number. The principal must obtain necessary documents related to registration and compliance from such contractor from time to time.

Regards,
Pramod Thakar

Well said, Pramod. In this thread, Pramod's reply covers all points. BAILSDCP, follow this one. You are liable as a principal employer to deduct PF and ESIC from the contractor's payment and comply in your Challan. If you have more than 20 employees, your contractor is covered by PF and ESI regardless of their employee count.

Simply ask your contractor to provide you with a monthly wage register and calculate PF and ESI. There is no need to register with the Contract Labour authority, but do check whether your contractor has any other operations beyond what you have assigned.

Hope this clears things up.

Regards,
Dilip Bhandari
HR Manager

If the contractor supplies only manpower to every industry, he might have taken the ESI and PF code for his firm. You should ensure this before giving the contract to him. If you want to extend ESI & PF to them now, you can do so by deducting from their bill and paying in the employer code. There is nothing wrong with this approach. Both are welfare legislations valid in law.

Regards,
D. Gurumurthy
LL, HR & IR Consultant

The above discussion is very interesting and provides a prompt answer. I would like to mention that, to avoid these kinds of problems, before engaging a contractor in a company, the principal employer should ensure that the contractor is registered under PF, ESI, License, PAN No., bank accounts, TIN No., etc. This will help prevent any legal conflicts.

Thanks & Regards,
P. Sivaguru.

Thank you for the reply. In this case, the contractor himself is working with other contract workers. He does not have any other contracts. As a principal employer, is it required to inform the details of this contract to the authorities?

Before engaging a contractor, you must ensure all necessary requirements are met. If you have a contractor who does not have a license and has fewer than 20 workers, kindly remove them and appoint a new contractor who has all the required legal registrations. This is beneficial for you as the principal employer. It may be somewhat challenging, but you must follow this if you want to avoid any legal issues.

Regards,
P. Sivaguru.

Dear Sir,

Under the Factories Act, registration under the ESI Act is possible only if there are 10 employees, while for EPF, 20 employees are required along with certain conditions.

Conditions under the ESI Act:

1. Contract labor must be registered under the Contract Labour Act and obtain a labor license.
2. Attach 3 or 4 work orders.
3. Enclose 3 to 4 months' bank statements.
4. Prepare a pay order for 6 months.

Regards.

Need Expert Suggestion

We have received a notice under the Kerala S&E Act. However, we don't have any on-roll employees there. The only employee working there is off-roll. We have obtained the Shop RC for this branch. However, the authority has asked us to present all the registers as per the Kerala Shop Act rules.

The contractor is stating that they are following central rules and have obtained a single Shop RC centrally at Pune, Maharashtra. They are providing registers under the Contract Labour Act.

Please suggest, should we ask the contractor to maintain the registers as per Kerala state rules under the Shop Act?

I am a contractor working in an MNC company. I have only 4 employees. However, the MNC company is asking for a PF code. They have asked me to provide proof of why I cannot open a PF code. They require a report or a letter to submit with their documents as a reason for not opening a PF code.

Dear sir,

Please suggest regarding EPF for contractor employees. Do we need to pay PF for them based on full wages or basic wages? Please provide any suggestions.