Contract Workers' PF Dilemma: How Should We Handle Conflicting Codes?

We are facing a peculiar situation regarding the PF remittances of contract workers. Initially, the PF for contract workers was remitted under the employer code. Recently, the management decided that all contractors must obtain their own PF & ESI code. As a result, some contractors have acquired separate PF code numbers. However, once the contractors obtained the PF codes, the workers under them objected strongly and demanded to continue with the original practice.

Subsequently, the management reconsidered its decision and now wishes to maintain the contract workers under the company code. However, since some contractors have obtained PF codes, the PF authorities are requesting contributions to be remitted under the contractor code.

In light of this situation, what should we do? Your suggestions are appreciated.

Thank you.

Regards,
M S GIRI

A few queries:

1. What was/were the reason(s) for the PF remittances of contract workers to be on the Company Code to begin with? Usually, it's the employee's Direct Employer who takes the responsibility for PF.

2. What were the reasons for asking the Contractors to get their own PF/ESI Codes? Were there any problems/issues with the earlier mode?

3. You mentioned 'workers working under the contractors have objected' with the new system—why? Were there any shortcomings in the changeover process?

Regards,
TS

In the past, without insisting on the contractors to get their PF & ESI codes, their workers' PF & ESI were covered under the Company code. They have followed the same practice up to now. Now, they have taken a decision to gradually divert the contract workers from the company code to the contractor code and asked all the contractors to get their own codes.

During this process, some unnecessary doubts spread among the contract workers. Even though we have tried a lot to clarify their doubts, they have not heard and requested us to continue in the same. The contract workers feel that their accumulations and other benefits will be safe if they continue in the company code.

Query Regarding PF Authorities and Contractor Code

Since the PF authorities have allotted the code, they are insisting on remitting the contributions in the contractor code for at least one or two months. The contract workers are willing to remit the contributions for one/two months in the contractor code if the management accepts to remit the contributions in the company code after one/two months.

What should we do in the above situation? Kindly suggest.

Kind regards,

GIRI

Addressing PF Remittance Issues for Contract Workers

You are sitting on a time bomb. It was foolish of your company to allow payment of PF on the company code for contract workers. This is a ground that workers will have for claiming to be permanent/direct employees and showing that the contracts are a sham. The workers know that.

That's why they are not willing to allow a move to the contractor's PF code; they would lose their leverage. Now it is becoming an industrial dispute. You are in trouble for sure.

Since the move has been made, it's important to ensure it goes smoothly. Start paying the PF on the contractor's code. Do not revert to the company code. Promise the workers that you will ensure the PF gets transferred to the new account and that no one will lose anything.

Further, promise to monitor and check returns every month of every contractor to ensure they receive their full PF dues. Get a PF consultant involved and ensure all balances are transferred to the new account. Provide them with prints of their statements, teach them to view and check their balances online.

If possible, have PF officers talk to the workers to allay their fears that money will be lost. Work with your IR team to address the underlying problem; the workers may believe that moving them to contractor PF only helps the company avoid making them permanent.

Saswata Banerjee has the Plan of Action laid out for you. What seems to have started off as a goodwill/good-faith measure by your company has now become an albatross around your neck. I suggest you heed his advice: "Do not revert to the company code" at any cost. Just because a mistake was made earlier doesn't mean you have to repeat it.

Your IR team can take the stand that the earlier action was due to the company's lack of complete knowledge of the rules. Now that things are clearer, it would be illegal to knowingly repeat it. The apprehension that the workers may be trying to build a case to make it permanent does not need to be discussed. However, you need to keep that factor in mind while moving forward.

All the best.

Regards,
TS