Are IT Contract Vehicle Drivers Required to Pay PF/ESI? Let's Discuss the Rules and Responsibilities

In the IT sector, are the owner-cum-drivers of contract vehicles for pick-up and drop required to pay PF/ESI? The principal employer provides vehicle facilities for pick-up and drop, and the drivers are not directly employed by the principal employer. In this scenario, the principal employer should issue appointment letters to all drivers if PF and ESI contributions are mandatory.

It is better to have a service contract with the bus owner. Thus, you don't need to employ a driver. What you want is that your employees are picked up on the dates specified. Since you don't give a salary to the driver, you don't need to pay PF/ESI. However, for the payment you are giving to the bus owner, you may have to pay service tax.

Regards,
Sebastian K S

Dear Vasant, just tell me how this arrangement is different from some security agency? For a security agency to perform their operations, you provide them facilities like furniture, shades for the security guards, lockers to change their dress, etc. Security personnel come, do their duties, and go back. For providing these services, if you check their bill, you will find the component of PF/ESI too.

Therefore, in your case as the owner of the drivers' agency, you should include PF/ESI in the bill itself. To be on the safer side, it is better to mention the PF/ESI component against each individual too. Secondly, ask the agency to provide a xerox copy of the monthly return also.

For Sebastian KS: You have written that "It is better to have a service contract with the bus owner. Thus, you don't need to employ a driver. What you want is that your employees are picked on the dates specified. Since you don't give salary to the driver, you don't need to pay PF/ESI. But the payment you are giving to the bus owner, you may have to give service tax."

In the above case, you need to pay ESI. If the labor component is not mentioned in the service contract, then you have to assume 40% of the contract amount is a labor charge and pay the ESI monthly. The onus for payment is on the principal employer in such cases.

Regards, DVD

The Contract Labour (Regulation & Abolition) Act is applicable to the workers of the contractor, not to the contractor himself. Therefore, the contractor driving the vehicle himself is not eligible for PF/ESI benefits. The principal employer should not issue any kind of appointment letter to the workers of the contractor.

Thanks,
M L Barber