Understanding PF Rules for Contract Workers: What Are the Limits and Regulations?

I am working in a private limited firm as an HR. The PF ceiling limit is up to Rs. 6500 basic. However, I want to ask if the same applies to contractors. If 2 or 3 contractors are working in our firm, what is the ceiling limit for the workers of the contractors? If the workers' basic salary is above Rs. 6500, what are the PF rules for them?

Please help me understand the above questions.

Thank you.

Regards,
Hetal

Hi everyone, I am working in a private limited firm as an HR. The PF ceiling limit is up to Rs. 6500 basic. Here, I want to ask if the same is applicable to contractors. If 2 or 3 contractors are working in our firm, what is the ceiling limit for the workers of the contractors? If the workers' basic salary is above Rs. 6500, what is the PF rule for them? Please help me understand this question. Thank you. Regards, Hetal

PF and ESI Deduction for Contractors

In our private limited company, we have some contractors whose basic pay exceeds the PF ceiling limit and also the ESI ceiling limit (PF: Rs. 6500 and ESI: Rs. 15000) as we are registered under the Factories Act. I want to know if PF and ESI will still be deductible.

Kindly advise.

In our private limited company, we have some contractors whose basic pay exceeds the PF ceiling limit of Rs. 6,500 and the ESI ceiling limit of Rs. 15,000, as we are registered under the Factories Act. I want to know whether PF and ESI will still be deductible from the contractors' salary. Kindly advise.

Thank you.

Best regards,
Hetal

Why did you post it 3 times? To answer your question, PF rules are the same for all. Every company with more than 19 workers is covered by PF, and the rules will apply to every employer, no matter how big or small. Contractors who have fewer than 20 workers are also liable for PF if the workers are working in a factory where PF rules apply. Therefore, they will also have to pay. The limit of 6500 will also apply to them. Please note that employees whose starting salary was above 6500 and who didn't have any PF account at the time of joining will be eligible for exemption.

Thank you for your reply. With the continuation of my question, if the salary exceeds Rs. 6500 and is less than Rs. 15000, will ESI be applicable for a contractor working in a PF registered company?

ESIC Rule for Contract Workers

The rule for ESIC is similar to that of PF. If the factory is covered under ESIC, the contract workers have to be covered as well. They are exempt only if the gross is above ₹15,000 per month.

Regards

You seem to be referring to persons employed under contract. It is not known whether it is a tenure-based contract or through some contractor. Whatever the case, the ceiling limit is the same for everyone, i.e., Rs. 6500/- per month. However, your question seems to be whether, since their basic pay is more than Rs. 6500/-, they can be covered under the PF Act.

In this context, my view will be that if they were members of the PF scheme prior to joining your company, they need to be covered by you as well, even though their basic is more than Rs. 6500/-. If they were not, they can become excluded employees, and you need not cover them. Therefore, obtain a declaration from them to this effect, whether or not they were members of PF previously.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai