Legal Concerns: Can We Pay PF and ESIC Directly for Our Contractors' Employees?

We are a company with around six labor contractors, totaling 90 employees. It has been noticed that the payments to PF, ESIC, etc., are not being made on time by the contractors. Our management has decided to directly pay these amounts to PF, etc., from our bank account. Is this legally permissible?

It is not possible. You need to insist the contractor on obtaining individual numbers from the EPF and ESI Office. Any violation of this statute makes you, as the principal employer, liable for their non-compliance.

Payment to Contractor

Its implications are not strategic from practical angles. Normally, the contractor should be allowed to reimburse what he has paid upon evidence and scrutiny of the papers he has deposited/paid. That payment can be given as reimbursement to the contractors. If the contractor has his PF and ESI numbers, he will be liable as the first party to respective inspections and its regulatory compliance. Please note that the Contract Act is subject to regulations and abolitions both. Any artificial arrangement will be untenable. What if workmen claim wages equal to regular employees engaged by your company? Also, see what others nearby are doing and consult some advisors as well.

Regards,
RDS Yadav
Management Advisor and Trainer
Director - Future Institute of Management and Technology

Dear Mr. Balaji,

Please note that the contractors do not comply with statutory regulations under the Contract Labour (R & A) Act. The ultimate responsibility shall lie with the Principal Employer. Therefore, the Principal Employer shall remit the contributions for PF, ESI, etc., on behalf of the contract labor and deduct the amount from the bills of the contractors.

Thanks & Regards, V R RAO PULIPAKA

There is no harm in remitting PF and ESI from the account of the company's codes. Normally, contractors avoid compliance due to the low income from contract work. They generally try to manage this with the company's Personnel Department or the Government Labour Department. However, responsibility should not be disregarded.

Appointing a Record Keeper

Please consider appointing a literate daily wage laborer from the contractor and allow them to maintain records of all the contractors. Enable this individual to learn from your Labor Officer on how to properly maintain these records. I implemented this once during my career 15 years ago, where all the contractors were willing to pay a monthly salary to the record keeper.

Regards and best of luck.