Are Contractors Paying Fair Wages? Seeking Advice on Central vs. State Rates

We are a central PSU, and the appropriate government in our case is the Government of India. Thus, any contractor working with us needs to pay minimum wages as per the central rate. A big IT company has hired a few individuals for networking jobs and is paying wages at the state rate, i.e., minimum wages in line with the Government of West Bengal. Furthermore, they are segregating the minimum wage into basic pay and other allowances. To the best of my knowledge, I have objected to this practice and have requested them to pay wages as per the central rate without segregation. I seek your guidance on this matter.

Regards,
DG

Understanding Contracts: Service vs. For Service

The main thing to consider is whether this contract is a contract of service or a contract for service. If the IT company has been awarded the work of laying LAN cable and commissioning it to your satisfaction, and if the price charged is all-inclusive (including the cost of wires, connectors, RJ, Ports, etc.), then it should be considered a contract for service. In this case, we are receiving a service, similar to purchasing a product from the IT company. In this contract, there is no direct supervision involved, and therefore, the provisions of the CLRA Act will not be applicable. As such, we are not the principal employer but only a buyer, and therefore, we need not look into what the supplier pays to his employees, etc.

On the other hand, if the IT company is just providing you with workers who do their job according to your directions using cables, connectors, etc., supplied by you, then you will be in the position of a principal employer. You will be responsible for ensuring the payment of minimum wages and other statutory contributions. If so, the contractor (IT Company) will not have any problem because whatever they pay will be put on your shoulder. If you want their workers, who work in your undertaking, to be paid higher wages (as per the Central Minimum Wages notification), they can do so and charge it to you. Similarly, if you say that the contractor should not bifurcate salary but should pay PF and ESI on the whole amount, they can follow you and charge the additional amount of PF and ESI from you.

As far as the contractor who is registered under the State's Shops and Commercial Establishments Act is concerned, whatever is applicable to employees in shops and establishments is applicable to him also. There is nothing wrong with his act of paying the same salary to the workers he has engaged in a central PSU as is paid to the rest of his employees. If you are ready to pay more as service charges, he will also pay wages according to your rules.

Regards,
Madhu.T.K