Navigating Contractor Payment Issues: Should We Handle Full and Final Dues?

Request for a quick guidance on the following case,

In our organization (factory), one contractor has failed to make payment to their workmen. So we, as the principal employer (PE), have taken the initiative to pay the wages, i.e., salary dues, PF dues, and ESI dues, under section 21(4). Now, the contractor is pressing us to pay the full and final dues to their workmen and adjust it from their bill. Our management's stance is not to enter into a settlement of full and final dues as it is a matter between the contractor and their workmen. Only the statutory payments like salary, PF, and ESI may be paid by the PE.

Please guide on the same. Is it possible that the payment directly made by the PE on account of full and final dues may invoke the concept of sham and camouflage to us?

Regards,
DG

No, as per the Act, the Principal Employer (PE) is liable, so your "ONLY" Full & Final (F&F) settlement payment will not make the contract sham and bonus. You can take the following precautions:

1. Obtain a written request from the contractor for the F&F settlement of the contract employees.
2. Provide written notice to the contractor along with an acknowledgment NOC from the contractor about the F&F settlement of contract employees.
3. After the F&F settlement, ensure that you do not engage any of the contract employees through any contractor.
4. Ensure that all payments are made through cheque only.

Hope this will help you...!!!