Navigating PF and ESI Deposits for Contract Laborers: What Are Our Responsibilities?

We have engaged a contractor to execute a job by deploying a certain number of laborers. The contractor left the work midway without making wage payments to his laborers for the relevant period.

Principal Employer's Liability

Now, as per the law, being the principal employer, we are liable to make payments of wages, PF, and ESI to the contract laborers. My question is, under which PF and ESI code should we make PF and ESI deposits in respect of the contract laborers? As we know, recently EPFO and ESIC have introduced an inline deposit of PF/ESI challans by the employer through a process of on-registration. Under this paradigm, can a principal employer make deposits of PF/ESI on behalf of a third/contract employer? Please suggest the future course of action.

Deposit of Interest and Damages

Furthermore, what about the deposit of interest and damages for PF/ESI, as there is some time lag between the wage payment by us as the principal employer (we have already disbursed wages to contract laborers) and the deposit of PF/ESI (which is yet to be done by us).

Addressing Contract Labor Issues

Your problem is genuine. First, your company management has to decide whether to continue the contract labor with another contractor or not. If not, then please meet with the PF/ESIC authority to suggest a solution to this problem.

With regards,
Amit

You have to pay wages if the contractor evades payment as a principal employer to the contract labor. Regarding P.F./ESI remittances, you can recover from them in their salary. If you know the Contract ESI/PF code numbers, you can remit the same. If not, keep quiet. The recovery remains in your company account. Please decide later as per the situation.

Regards,
D. Gurumurthy
LL. HR & IR Consultant, Hyderabad.

Your problem is a common issue in contract labor management, so don't panic. Simply pay them their wages along with a full and final settlement. You can recover all these amounts from the contractor's running bill. There is no need to remit the PF/ESIC as practically no one checks it in the case of contract labor. Please let me know if you need further assistance or clarification.

Regards

I don't agree with some of you who say keep quiet, don't deposit any contribution, and the like. As per me, the contractor who has his own PF and ESI codes, as in this case, is an employer in itself. It has the responsibility to the employees deployed by it. Every worker who works for a principal employer to whom the provisions of the Contract Labour Act are attracted is to be treated as the worker of the principal employer unless it is satisfied that the establishment has secured a certificate of registration for the relevant period under Sec 7 and it had employed contract labour through a licensed contractor under Sec 12. No right flows from the provisions of the Act for the contract laborers to be absorbed by or to become the employees of the principal employer. You need not worry about this issue.

Action to be taken:

1. Once the Contractor has fled away, I feel it's time to say goodbye to the employees deployed through it. There is no point in continuing with a dormant Contractor. Termination of the contract should be preceded by proper notice in terms of the contract. Hopefully, this has been a clause of the contract in your case.

2. It should be substituted by another contractor with proper licenses and PF ESI codes.

3. Trace the individual PF/ESI accounts of the contract labor from the Regional PF/ESI office using the PF codes of the Contractor and deposit every unpaid contribution (both sides) with interests.

4. The amount paid for the time being should be recovered from the pending bills of the contractor along with related costs and penalties if any.

I must compliment your company for paying the wages to the contract laborers. This is mandatory in terms of the PW Act. Keeping quiet and sitting mum is not the solution to this problem.