Is PF and ESI Compliance Necessary for Short-Term Contractors in Our Factory?

Request for Advice on Compliance

We are procuring a few air conditioners, and as part of this process, 3-4 personnel will enter the factory premises for 2-3 days for installation. Additionally, during the warranty period of the next year, individuals will come periodically for breakdown maintenance along with 4 free services.

In such a scenario, is it mandatory for the firm to ensure PF and ESI compliance?

Clarification on ESI and PF Contributions for Installation and Maintenance

Installation is done by the vendors who have supplied the machine/AC. There is no payment made by you to those who do the installation. Similarly, during the warranty period, you will not be making any payment to technicians who will perform maintenance on the machine or asset. Then why should you pay ESI and PF? On what basis should you contribute when there is no payment or wages paid in respect of the said work?

Regards,
Madhu.T.K

In addition to workers, there may be a number of visitors who visit the factory daily for various reasons, such as to meet the Purchase Manager, HR Manager, MD, etc. Do we cover all these visitors under ESI or take responsibility in case they have an accident while they are on the factory premises? No. Visitors will be given a separate pass at the security gate, which will contain certain conditions and safety precautions. In other words, they enter after accepting these conditions, which make them responsible for any injury or mishap.

The same thing applies to these technicians as well. The payment made to the supplier or the purchase price of the machine is inclusive of installation and free maintenance for a certain period. Therefore, the element of labor cannot be put on the employer. Certainly, if something happens to these technicians, their employers should indemnify.

Regards,
Madhu.T.K

Dear @Madhu T.K,

Thank you, sir, for your valuable guidance. In this regard, I would be very grateful if you could shed some light on the issue of Annual Maintenance Contracts (AMC) and the applicability of the CL (R&A) Act, EPF Act, Minimum Wages Act, and ESI Act in an AMC. From my experience over the last two years in the industry, I have realized that AMCs issued are different in nature.

Applicability of Acts in Different AMCs

For certain AMCs, like AC plant maintenance, the vendor needs to depute certain personnel (say, two) on a regular basis during the entire working hours. In such cases, all the above acts are applicable.

However, in other cases of AMCs, like Split/Window AC maintenance or Computer maintenance, the vendor's personnel enter the factory on a weekly, biweekly, or monthly basis for preventive maintenance (e.g., twice a week or six days in a month) and for breakdown maintenance. In such cases, I have doubts about the applicability of statutes.

Your advice will help junior officers like us to update our knowledge and perform better.

Regards,
DG

Applicability of CLRA Act to AMC

The matter of AMC and the applicability of the CLRA Act to AMC was discussed at length in the past. You can find the details on this forum itself. In short, AMCs will not come under the purview of the CLRA Act since this pertains to a contract for service and not a contract of service.

Regards,
Madhu.T.K

I endorse the views expressed by Madhu ji. My addition to the annual maintenance or service contract is as follows:

Contract Labour Supervision

Work by contract labour is being supervised by the Principal Employer (PE). However, the work by technicians or experts from outside agencies, such as repairing or servicing machinery or equipment, cannot be supervised by the PE. Such annual service contracts should be considered as a Contract for Service. Hence, such technicians or experts are not to be considered for coverage.

Recommendation for Hiring Services

It is advisable to hire such services from covered agencies, as far as possible. This may help you in case of any mishap.

Regards,