Esic & Pf Deduction As Per Labour Law - DOC Download

Hi all,

My company is hiring security guards from a contractor, but we are not aware of their deduction of ESIC & PF. We are paying Rs. 3500 per guard plus service tax. According to their income, the contractor should provide benefits for ESIC & PF.

If they are deducting ESIC & PF, are we liable to pay ESIC & PF to the government?

Dear Rachana,

ESI is contributed from both sides by the employee as well as the employer. It is calculated based on the gross salary per month, and the maximum ceiling is Rs. 10,000 per month. The contributions from both sides are as follows:

Employee Side: 1.75% of gross per month
So, if the gross salary of an employee is Rs. 8,000 per month, then the ESI contribution would be 8000 * 1.75% = 140 Rupees.

Employer Side: 4.75% of gross per month
The ESI contribution would be 8000 * 4.75% = 380 Rupees.

Additionally, PF is also paid from both sides. Both the employer and the employee are required to pay 12% of the basic salary. Out of this 12%, the employer's contribution of 8.33% goes to the Pension fund, whereas the remaining 3.67% goes to the PF Fund itself.

Regards,
Amit Seth.

Hi Amit,

Thank you for your reply. My question pertains to the security guards I am hiring. If their employer is not deducting ESIC & PF, am I liable for ESIC & PF in any case? I believe (though I am not entirely certain) that even for any repairing charges or any labor charges, the company is required to deduct ESIC.

Regards,
Rachana

Dear Rachana,

Your company is not directly required to pay these contributions to the government bodies. You are required to check whether the outsourced company is providing these benefits to their employees or not, as these employees are outsourced to you. Therefore, you are required to ask the outsourcing company to provide the returns and all details related to the same.

Regards,

Amit Seth

Dear Rachana,

You can demand ESIC & PF Challans per month, ESI & PF Nos. of your employees, ESI & PF return, or you can demand ESIC and PF details per month of your employees from your contractor so that you can check whether your contractor is depositing ESI & PF or not.

Regards,
Raj

Hi all,

My other query is, as per labor law, in this situation, am I considered a defaulter? Can a government body take action against me if security guards are not receiving the benefits of ESIC and PF?

Dear Amit,

Your reply to Rachana's query is correct, but now the salary for ESI has been raised to Rs. 10,000.00. If the employees have a gross salary of Rs. 10,000.00, then they are eligible for the deduction and benefits of ESI.

Dear Rachana,

You need to ensure that the contractors are deducting ESI and PF from the contract employees' salaries and remitting the amounts to the government. You can request monthly challans from the contractors to verify this. Failure to ensure compliance could result in sole responsibility falling on the employers during inspections.

Thanks,
Amit Shah

Dear Amit Shah,

Thanks. By the way, I have already specified that the ceiling for ESI is up to Rs. 10,000/- as a gross salary.

Moreover, dear Rachana, yes, the government body may ask you to produce the documents before them.

Regards,

Amit Seth.

Dear Rachana,

As a principal employer, you are liable to deposit ESI & PF. If ESI & PF authorities find anything wrong in that position, the principal employer is liable for these payments, and they will instruct the principal employer to deposit the amount. However, the principal employer can deduct the same amount from the contractor's bill.

Thanks,
Raj

Hi all,

All of us understand that compliance with ESIC & PF is a must, and therefore all the contract workers and direct employees must be covered under the act (according to the law). But my question is that in our company, we are appointing various service contractors for providing service on-site. In a few cases, the contractor visits only 4-5 times in a month (2 to 3 people). Are we required to deduct PF & ESIC contributions?

Regards,
Arvinder Rawat

Hi Rachna,

Please review the response provided by Mr. Raj, which is very appropriate. It is the responsibility of the principal employer to ensure compliance.

Regards,
Satish

Hi all,

ESIC is a must for labor covered under the law. But what if the employee is not ready to undergo deduction because I am facing the same problem in my company.

Harshada

Dear Rachna,

Always remember one thing that whenever a contractor is hired, then as a principal contractor, liability remains with you only. So, you have to check whether those statutory compliances are complied with or not. There are ways to have a way out of it.

Dear All,

Please advise on ESI & PF deductions on contractors' bills. In which conditions should we deduct ESI & PF, what is the deduction percentage on the bill amount, and in which cases should we not deduct the PF & ESI of contractors? Please provide a brief explanation.

Regards,
Rakesh Roshan

Dear Rachana Gadage,

Referring to your query on PF & ESI relating to security guards outsourced by your company, you as a principal employer are liable under the PF & ESI Act. The principal employer is not absolved from liability under these Acts if there is any failure on the part of the contractor (security agency company). The best option is to ensure that the contractor is complying with the provisions of PF & ESI.

Thank you.

Dear Amit Seth,

I want to know if an employer recruits direct employees on a fixed contract rate, do statutory deductions such as PF and ESIC need to be deducted? What about PT and TDS? Will we deduct TDS under section 192 or section 194C as per the Income Tax Act 1961? Since they are fixed amounts and there are no other perquisites. So, please suggest me.

Thanks in advance.

Regards,
Dhiraj

It is very much your company's responsibility to ensure that ESI & PF is deposited for the security guard or any other person working under any contractor in your company. If the contractor's establishment is not depositing, then it is very much your responsibility to pay the deposit. You do not have any excuse for the same.

Regards,
MOTHI

Hi,

I'm Niladri, a new joiner in a company that works on quality analysis of raw materials. They hire contract employees from various core areas all over India, mostly from the eastern region, on a daily basis. However, I am unsure about how to deduct ESI for them.

Please reply.

Dear Friend,

While engaging security services through a contractor or outsourcing agency, the employer has to make an agreement between the employer and the contractor. When entering into a contract, the employer advises the contractor to produce copies of Registration Certificates under the statutory provisions of the Contract Labour (R&A) Act - 1970, EPF Misc. Provisions Act - 1952, ESI Act - 1948 rules within two weeks from the date of commencement of work. The contractor must also submit copies of challans under PF & ESI every month and maintain all statutory records and registers under the provisions of the said enactments.

If the contractor fails to produce the above documents, the principal employer is responsible for compliance under the provisions of the acts and must deduct the amounts of contribution under PF & ESI from the contractor's account and pay the balance amount to them. Do not engage such contractors and outsourcing agencies without fulfilling the above norms.

In your second query, if the employer is unable to make the payment of contributions under the provisions of PF & ESI Acts, they are liable to pay the contributions along with penal damages, interest, and face penalties and prosecutions under the said acts. The amounts to be recovered from the employer's movable and immovable properties and also cease their bank account transactions by the department as a defaulter.

This is for your kind information.

Regards,

P.V. Rama Rao

Dear Sirs,

We employed two persons recently on a fixed salary basis. This is a short-term job outside the factory premises for the fabrication and procurement of certain machinery. The monthly payment is made by voucher. Our factory is covered under PF & ESI.

Do we need to deduct PF & ESI for these two persons as well? As the job is purely on a temporary basis, the employees are not willing to deduct the same. What is the alternative?

Learned friends, please help us by giving your opinion.

-RAPARLA

See their quotation and the breakdown given in it. The first column should pertain to MINIMUM WAGES (as applicable). In the columns that proceed, deductions of ESI & PF would also be there. In the end, it should be the Service charges and thereafter the total figure of Rs 3500/-. Also, ask the Security Service provider to deposit a copy of ESI & PF challans to your department every month. It will ensure that as a principal employer, you are adhering to all statutory and legal compliances.

Friends in Chennai!

We are experiencing some peculiar hassles in making payment of ESI and EPF contributions in the branches of SBI in Chennai. Though the cheques are presented with the challans well before the due mandatory dates, the staff in SBI do not receive the cheques immediately but ask the messengers to drop it in the drop box. The cheques are cleared for clearance after a week or so and the date stamp of the SBI is also affixed later. When taken up with the Managers, they plead helplessness citing acute shortage of staff as a reason. This happens almost every month. Though reported to ESIC, no action has been taken by them.

If any others in HR of other companies are experiencing such a difficulty, how do they tackle it? One way out is to make advance payment of contribution to ESIC and adjust the deposit every month.

What should we do if we are unable to make advance deposit to ESIC due to cash flow problems? Can this be taken up with the SBI Ombudsman?

Regards,

S. Krishnamoorthy

Dear Rachana,

The most important thing is that you are paying that employee below minimum wages. You need to check whether the contractors are registered with PF, ESI, and PT.

Thank you.

Dear All,

My company's corporate office is in Mumbai, and the branch is in Chennai. The Mumbai corporate office is registered with an ESIC code number but needs to obtain the ESIC Sub code number in Chennai. Can anybody tell me if we can make payments of Branch ESI in Mumbai?

Thanks in advance for your help.

Principal employers are responsible for the deduction of contractors. Normally, what companies do is they obtain the ESI number of contractors and don't deduct. However, when there is no ESI number, they deduct and pay on behalf of contractors.

Sudarshan

I would like to know about labor laws in Madhya Pradesh, minimum and maximum rates for skilled and semi-skilled labor, and the latest updates. Please provide me with a reply. Thank you.

We are an autonomous body of the Ministry of Agriculture, and we have been managing a security contract for nearly 15 persons for the past 12 years. Almost every year, the contractor has been changed. However, there is one person who has been working under every contractor continuously since then. He is now in need of his Provident Fund (PF) as some of the contractors did not deposit his PF. What is our liability in this situation? Do we need to assist him, considering he requires his money?

Please help.
Sunil.

Dear All,

Kindly let me know if the Company is required to deposit ESIC for the Retainers engaged by the Company for a period of 6 to 12 months, whose TDS is deducted as a contractor (194c) and what if TDS is deducted as professional fees.

Further, can we employ persons as retainers on a contract basis for temporary sales promotion jobs for our Client in numbers like 1000, 2000, 3000, or should they be appointed as employees only. In this case, should the Ad Agency need to register under Contract Labour.

Further, please let me know the labor law compliances that a service company needs to do, who is employing more than 3000 employees.

Seek your opinion, please.

Regards,
SVK

Hi Rachna,

As the principal employer, you are responsible for the deduction of PF and ESI contributions for the contractor's employees if the contractor has their own PF or ESI code. In such cases, you should request a xerox copy of the PF and ESI challan for verification.

Harshad Patel

Regarding this contact 9414359895, Mr. Guruvinder Singh (Chief Consultant) at Bharat Personal Services in Jaipur.

Hi Amit,

As per the rule, the contribution from both sides is as follows:
Employee Side - 1.75% of gross/month
So, if the gross of mine is 7500/month, then ESI contribution would be 7500 * 1.75% = 125 Rupees.
Employer side - 4.75% of gross/month
ESI contribution would be 7500 * 4.75% = 356 Rupees. Now, my question is, is the above 125 Rs deducted from my salary as well as 356 Rs is also deducted from my salary on a monthly basis? Both deductions are done from my salary. Is it right? Please reply to me.

Dear Rachana,

ESI is contributed from both sides, employee as well as employer. It is calculated based on the gross salary per month, and the maximum ceiling is 10,000 Rs./Month. The contribution from both sides is as follows:

Employee Side - 1.75% of gross/month
So, if the gross of an employee is 8000/month, then ESI contribution would be 8000 * 1.75% = 140 Rupees.
Employer side - 4.75% of gross/month
ESI contribution would be 8000 * 4.75% = 380 Rupees. Whereas, PF is also paid from both sides. Both the employer and employee are required to pay 12% of the basic salary. Out of this 12% of the employer's contribution, 8.33% goes to the Pension fund, whereas the rest 3.67% goes to the PF Fund itself.

Regards,
Amit Seth.

Here, one thing we want to add is that at the time of the inspection of the books by the ESIC Inspector, he always sees the records of the security guards and related papers. Please ensure to receive the acknowledgment copy of ESIC and EPF deposited on behalf of the Company to avoid litigation.

Regards, AKB

Hi, I'm Virendra. I am newly joining this site. I am working as a Labor Officer in a textile industry where labor adjustment is a main task. However, it is not a professional job for a Master of Social Work (MSW) holder. I want to gain knowledge in HR/administrative work. Therefore, I kindly ask all of you to help me and provide me with a set of all legal compliance forms in various labor acts.

Hi all,

I am a student of MBA HR. I was just reading about ESI from this site. I came across this interesting discussion. Please, seniors, clarify for me why security guards would pay for ESI. Often, a security guard's gross monthly salary is less than 10000 per month, like a maximum of 5000/month. So, how are they eligible for such a deduction? Please reply; I want to know.

Thanks

Hi all,

I am a student of MBA HR. I was just reading about ESI from this site. I came across this interesting discussion. Please, seniors, clarify for me. Why would security guards pay for ESI when often a security guard's gross monthly salary is less than 10,000 per month, like a maximum of 5,000 per month? How are they eligible for such a deduction? Please reply, I want to know.

Thanks

Dear all,

ESIC limit is now INR 15,000 per month gross salary. If a contractor is paying the salary to guards, then only he is liable to pay PF and ESIC for the guards.

Hi, I wanted to ask whether an employee leaving the organization within a year and a half would be eligible to receive the PF amount deducted from their salary during their employment period. Is there a law stipulating that an employee can only receive their PF and ESI amounts after completing a specific duration in the company?

Hi,

In your case, if your company is already covered under ESI/PF, then you must ask your contractor to cover the site employees. Otherwise, you will be liable as the Principal Employer.

K. Gowri Shankar

Hi Raj Meritech,

Amitmhrm,

Rachana Gadage,

Through our constructive discussions, I have learned many things regarding EPF and ESI. Thank you very much.

With regards,

Dhananjay
8095674711

It is not material for ESI whether the casual employees - either employed by the Company or of the contractors - work for a day or more in a month. The employee and employer contribution on the wages earned by them must be remitted.

As a principal employer, it is the duty of the company to ensure that ESI contribution of the contract employees is paid together with the employer contribution.

Obtain the ESI code assigned to the contractor. Obtain the statement of employees in respect of whom contribution is paid. Find out whether the contract employees' names who work with your company do figure in the statement.

Keep this statement as a permanent record to be shown to the Enforcement Officers of both ESI/PF.

Mind that the ESI and EPF are social security measures and the Companies should strictly abide by the extant rules.

S. Krishnamoorthy

Dear Rachna,

I agree with Mr. Amit Shah. You have to ensure from the contractor's side that they are deducting the ESI and PF from contract employees' salary and paying the same to the government. For that, you can ask for monthly challans from the contractors. If you are not ensuring the same, during the inspection, it's the sole responsibility of the employers.

Regards,
Harshad

The company fired me from my job, and I filed a case in the labor court. How many days can I continue to use the ESI facility after leaving the job?

If the contractor is deducting ESI and PF, then the company is not liable to pay the same. However, if the contractor deducts the contribution but fails to pay, then the company is liable to pay since it is the principal employer.

Ensuring Compliance with ESI and PF Deductions

For your safety, what you have to do is ask for the half-yearly returns of ESI and annual returns of PF. These returns should specify the names of employees employed by the company through the contractor. The company should preserve a copy for inspection.

Regards,
Avinash
Human Resources
Alwar, Rajasthan, India