Understanding EPF Compliance for Contractors and Principal Contractor Liability

We have a manpower contractor, and we are paying a daily wage. If OT is applicable, OT is also paid (like 310 per day wage, then OT rate will be 310/8 = 38.75 per hour). ESI & PF we are paying on both Duty and OT, but the contractor has not paid to EPFO, only on-duty amount is being paid. Is it correct? What type of action will be taken by them? Please suggest.

Dear Harikrishna,

First of all, please check at your end whether the below-mentioned points are being followed or not (considering your company falls under the Shops & Establishment Act). If not, please confirm.

1. As per the S & E Act, Sec. 17, the working hours spread over the employees in commercial establishments shall not exceed eleven hours in any day.

2. As per the S & E Act, Sec. 63, when any employee is required to work overtime in excess of the limit of hours of work, he must be paid for such work at double the rate of his ordinary wages.

If you are following the above rules and paying according to your contractor, then the contractor is liable to pay to the authority. If, in the case of the contractor's failure to pay any payment or due to any authority, then as per the Contract Labour Act 1970, all liability comes to you as the principal employer. In that case, you have to pay all dues or payments to the authority, and the same can be debited to the concerned contractor.

I hope this clarifies things for you.

Regards,
Tushar Swar.

If I understand your question correctly, you want to know whether the payment of PF by the contractor is only on the regular working salary and not on the overtime salary. In this case, the contractor is right in paying PF only on regular duty hours and not on overtime. If he is paying ESI contribution only on regular duty and not on overtime, then it is wrong.

Secondly, your calculation of OT should be 310/8 = 38.75 x 2, i.e., Rs. 77.50.

Hope this resolves your query.

Regards,
Preetam Deshpande

I agree with Mr. Thusar Swar. If your company falls under the Factories Act, please ensure the following:

1. The maximum working hours per day should not exceed 10.30 hours, including breaks.
2. The total working hours per week should not exceed 48 hours.

Additionally, kindly review your contract agreement. If the contractor fails to remit to EPFO, consider imposing a condition on them. They must provide the last payment challan before receiving payment each month.

Thank you.
Regards

Contractor's Enrollment Under EPF Act

Whether the contractor is enrolled under the EPF Act? If not, then ultimately the liability falls on the Principal Contractor. Keep this in mind.

Regards,
Adv. Kishor Goswami

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Labour Laws Consultant