Do Canteen Contractor Employees Need PF and ESI Compliance? Seeking Guidance

Respected Seniors, I am a pioneer in Human Resource Management. Please guide on "If a company appoints a Canteen Contractor on its premises, do the casual employees of the Canteen Contractor come under statutory compliance such as PF, ESI? If yes, how, because the company is paying for food or plate charges? How should their attendance be maintained?"

1. The canteen employees engaged through a contractor are covered under the EPF & MP Act as well as under the ESI Act, 1948. The compliance is to be made based on the records of payment of wages and attendance as maintained by the said contractor in the normal course of his business/work. The inspecting authorities under the above Acts, when conducting inspections, will also demand the production of records of the canteen contractor and show compliance in respect of the said contractor employees.

2. In case compliance is not found to be satisfactory to the authorities, the competent authorities can claim contributions on an ad hoc basis as per the information available to them. For non-production of records and non-compliance of any category of employees, prosecution can also be launched under the provisions of the said Act(s).

I am curious. What makes you a pioneer?

Understanding Contract Labour Act

Please read the Contract Labour Act. The definition of contract labour is any person who is working on your premises because you have an agreement with their direct employer to deliver some result. So, the canteen workers are contractors, and all regulations apply.

It does not matter how the contract amount is computed. You are still liable to ensure that the workers are paid minimum wages, receive overtime if necessary, all statutory dues are deposited with the government, and that they are working normal shift hours and get proper paid leave as provided in the relevant legislation.

I am an accountant working as an accountant, and my work is to issue work orders for sub-contractors. What I suggest is to include the following line in your work order:

Statutory Compliance for Canteen Contractor Employees

"You will follow all the labor laws and other local laws and will obtain a license. You will pay P.F/ESI as applicable for the employees deployed by you. We are in no case responsible for any such payment. Alternatively, BSC-C&C ‘JV’ will deduct P.F 0.25%."

--- Or ---

"You will follow all the labor laws and other local laws and will obtain a license. You will pay P.F/ESI as applicable for the employees deployed by you. We are in no case responsible for any such payment. Alternatively, the Company will deduct P.F 0.25%."

Hope that it will help you. Thank you. 

Writing any such note in the contract is nothing but a measure to protect your own interests. In law, this will make very little difference. You are still liable to ensure compliance, and this does not absolve you of your requirements. The law, anyway, allows you to recover such costs as a debt. However, the likelihood of having done that is minimal.

So, while writing this is a good idea from the legal point of view of fighting against your contract in a court of law, in reality, it does nothing. You will still need to monitor compliance and ensure that it is done.

Sir, it appears that the contractor is functioning from his house and not on the premises of the employer. The employer buys food items or plates from the contractor. If the food items are served by the contractor on the employer's premises, the employer must comply with PF, ESI, and other legal requirements.

Minimum Wages and Compliance

If the employer is a factory, the minimum wages of the scheduled employments have to be paid by the contractor. Are minimum wages applicable to the employees of the factory? Or are the minimum wages applicable to the Shops and Establishment Act, or Hotels and Restaurants?

If the food items are bought by the employer or his staff and distributed by the employer himself, will it not be a different situation?