How to Settle Service Charges for a Contractor Without an EPF Code?

Dear Professional Friends, We have introduced a contractor to supply contract labor to our plant. Since the contractor is new and does not have 20+ employees, he is not eligible to obtain the EPF code. In this context, we need to address the service charges of the contractor who has supplied labor for unskilled work.

Please provide your input on settling his service charges despite not having the EPF code.

Thanks & Regards,
Manjunath MH

Dear Manjunath ji, your contractor has no more than 20 employees in total. Therefore, he is not eligible for PF registration legally. However, since the PF Act is applicable to you, the employees of your contractor working with you should be covered under PF. If not, you are liable for it.

Ensuring PF Compliance

Since you have engaged a contractor who is not registered with PF, you should ensure the PF compliance of the contractor under your code. The same applies to other social security enactments as well.

Regards

Regarding the service charges, it is not a valid defense for you to claim that you have not cleared the service charges of the contractor due to non-compliance.

Thank you.

Liability Under EPF

Liability under EPF falls on the shoulders of the principal employer, i.e., you. Hence, the compliance has to be done by you. If the contractor does not have an EPF code number because the number of his employees is below 20, you have to discharge the PF liability under your code.

Regards,
Lalit Thakkar

I fully agree with the views offered by Mr. Thakkar. As an HR Manager, you must ensure that no contractor is enlisted and engaged for any work without PF & Code Registration in the future. To settle the contractor's bill, I suggest you deduct the exact PF amount payable from the contractor's bill and deposit the same under your code. As the principal employer, you are liable to comply with this requirement.

Regards,
Sibabrata Majumdar
Management Consultant - Legal & HR
Kolkata
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He can opt for voluntary coverage under the EPF Act and obtain the code. Otherwise, you have to deduct PF Contribution and pay it under the contractor-wise list in your establishment code.

As a principal employer, you are liable to comply with the provisions under the EPF Act.

Regards,
Swaminathan
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Though it is not mandatory for the contractor now (since the number of employees is less than 20) to register with EPF, he can still opt for EPF registration by contacting the enforcement officer of the concerned EPF office. The main reason is that in the future, he may increase the strength above 20 for your company, or he might supply laborers to another factory or company with or without your knowledge. It is better for him to opt for EPF as it has become a quick process nowadays.

At any instance, do not pay your contractor's EPF under your establishment code, which will put you in trouble later if he starts supplying laborers to other companies too.

Regards,
Vijay

If any contractor provides manpower for your establishment and does not have an ESI & PF Code No., but provides service at your establishment, every principal employer has a duty to check his statutory compliance and fulfill it. At this stage, you should deduct both the employee and employer's share of contributions and deposit them using your code No.

Thanks & Regards,

M A Zinna

Management Consultant (HR)

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