Are We Liable for ESI? Seeking Advice on Security Guards' Salary Break-up and Compliance

Dear Seniors,

We have hired security guards for our organization. However, the agency from which we have hired security is not providing us with a salary break-up for the security personnel. I need the salary break-up to verify if the agency is providing PF or ESI to the security guards. I believe that as the principal employer, we may encounter issues if these benefits are not being provided.

We are paying Rs. 13,000/- for each guard. Please guide me and suggest further action. Additionally, please advise on the essential documents that I should collect from the housekeeping and security guard provider agencies as a principal employer.

Thank you.

Hi Ravita! We faced a similar problem. Here's what I did, and then you can decide on what should suit better in your case:

1. As I'm connected with all the hired personnel (i.e., not employees) on a one-to-one basis, I was completely updated on what they are receiving. I did this for two reasons: One, my ethical obligation, and two, even if the agency failed to provide dues, our company would still be liable to pay such dues as the Principal Employer. Therefore, I must ensure the payment of such dues.

2. I asked for a signed, duly stamped, and sealed statement from the vendor stating all the ESI, PF, and other labor law account numbers for each of the hired personnel, along with their names, and confirmed this directly with the hired personnel.

3. On a monthly basis, conduct surprise checks on records and have a conversation with the hired personnel to verify if they are indeed receiving their dues or not.

Please note that regardless of your own payment status, if the hired personnel are not receiving their statutory dues, your company will still be liable. Therefore, ensure the due payment thereof. Your vendor may try to persuade you when you ask for evidentiary documents, but that's when you must stand firm and ensure compliance.

As mentioned earlier, I have successfully navigated this situation, and believe me, it is truly rewarding to see the smile on the faces of the housekeeping staff when they confirm receiving what was promised to them on paper for so many years. 

If you encounter any further obstacles, feel free to reach out to me.

Compliance Under the ESI Act, 1948

So far as compliance under the ESI Act, 1948, and the rules/regulations framed thereunder in respect of security contractor employees is concerned, kindly also verify the following aspects from the immediate employer (contractor):

• Code Number allotted to such contractor by ESI authorities.

• Whether the said contractor is submitting Returns of Contributions in time to the appropriate office of ESIC in respect of all employees working in your factory/establishment.

• Whether Declaration Forms have been submitted by the contractor in respect of all his employees working in your factory/establishment, and whether such employees have Identity Cards.

• In case of any accident (out of and in the course of employment), whether the contractor or the principal employer has submitted an Accident Report to the appropriate office of ESIC.

If possible, keep a copy of such documents as above along with copies of monthly challans paid by the contractor in your records also for easy verification at the time of Inspection by the concerned authorities. Many times, the Contractor leaves the contract and he is nowhere to be found, resulting in a situation of non-production of records by the principal employer.

Regards,
Harsh Kumar Mehta

You are aware that PF and ESI have been made available online now. You need to request the contractor to provide the ESI/PF challan generated from the system and also the summary sheet that contains the basis on which the challan has been generated. This summary sheet will include the names of the guards who are covered and working in your establishment.

Insist on receiving this information for the previous month before releasing payment for the current month. Additionally, ensure to include such a clause in your agreement with the respective contractor.

Alternatively, you can ask the contractor to exclude the PF and ESI components from their wage calculation and propose that you will make a payment to them upon submission of the summary sheet and challan in the following month. This approach will provide evidence that you have reimbursed the contractor the amount remitted by them for statutory dues.

Regards,
M.V. Kannan