How Should We Handle a Security Agency's Non-Compliance with Uniform Allowance?

My bank floated a tender for providing security services through an open tender. One security agency was selected for the same at a service charge (agency charge) of 2%. The total quantity of security guards supplied is 32. The wage structure was as per DGR (Director General Re-settlement)/Central Minimum Wages. Also, the agency agreed to provide two pairs of uniforms to its guards.

When the agency produced the first bill, it was found without EPF and ESI challans. Additionally, in the salary statement of the guards, one allowance, i.e., Uniform Outfit Allowance, was missing. Upon our repeated instructions, the agency has paid the ESI and EPF. However, they are now adamant about not paying the Uniform Outfit Allowance, claiming they provide free uniforms.

The agency is claiming the Uniform Outfit Allowance from us (the bank) but is not passing the same to the guards. Currently, their bill for the month of July is pending (the contract started on 1st July 2015), and they have refused to pay the salaries to the guards for the month of August (salaries for July have been paid to guards without the outfit allowance).

As the principal employer, our action should be to address the issue promptly by communicating clearly with the agency about the non-compliance and the importance of fulfilling all agreed-upon terms, including the Uniform Outfit Allowance for the guards. It may be necessary to escalate the matter if the agency continues to refuse to comply with the agreed terms and obligations.

Dear Mr. Amit,

The security agency is required to follow the statutory rates of Guardboard if it is applicable to you. If they are not paying the outfit allowance, you can hold back the bills until they pass on the full statutory dues to the employees as agreed in the contract agreement.

Thank you.

Dear Mr. Amit,

As a principal employer, you have to ensure that the employee receives all the specified amounts. It is advisable to call the contractor and explain to him which amounts fall under the Director-General Re-settlement Central Minimum Wages, and he must pass the entire amount to the security guard. In addition to the uniform already provided to the guard, he must bear the cost of those uniforms as per the contract.

Warm Regards,
Anurag

Dear Mr. Amit, In my opinion, the agency is right because you pay them some amount against the uniform, and the agency is providing the uniform set to security personnel from their pocket. Now, the considerable point is the terms you have decided/negotiated in the quotation/agreement.

Uniform Outfit Allowance

Is it mentioned in the quotation that the Uniform Outfit Allowance will be payable to the security staff? If so, then the agency should pay the allowance.

Generally, in a security contract, the Uniform Cost indicates that the agency will provide the uniform set (you can ask for details) from their pocket, and they will not recover the same from the security staff. It does not mean that they will pay the uniform allowance (which is not part of Minimum Wages).

Please note, the agency is working on a 2% margin, which is too little. How will they pay for the uniform allowance/set from their cost?

Tender and Payment Discussion

You released a tender, and they are the lowest one with a 2% margin. From my point of view, you can ask them to produce the document supporting whatever they have claimed in their quotation. Instead of going with the lowest bidder, you should opt for the best one in compliance.

However, you can call their representative for discussions across the table. Since it is a new contract, it may take time to streamline things. They have already paid one month's salary and compliances from their pocket. Now, discuss with them and release a part payment (at least the salary amount of 32 personnel) to enable them to release the August salary.

I have dealt with many security agencies. Keep one month bill pending with you. If they don't submit reliable documents/payment proofs, hold the bill but release a part payment for salary distribution.

Regards.

Dear Sir, As you said, we are releasing their payment by deducting 5% of the outfit allowance to enable them to release the salary for August. The firm was well aware of the terms and conditions, where we had stated that free uniforms (2 sets) would be provided by the agency and the uniform outfit allowance would be passed on to the guards. They knowingly quoted the lowest price bid since that was the criteria for choosing the L-1, and the firm was awarded the work. We will keep this in mind for next time.

Thanks once again.

The agency is trying to cut corners. 2% administrative charges may not be providing them with sufficient profit, and they are now seeking ways to increase profit. The bank must insist on following the contract word for word. Whatever has been promised to be paid to the guards needs to be passed on to them. As I understand it, the relationship with this agency may not continue, and a new agency will have to be found sooner rather than later.

You expect the security agency to pass on the uniform allowance and also pay for free uniforms for the security guards? Where do you expect the money to come from? You are giving them a 2% service charge and then deducting a 2% TDS from the bill, which means the amount they receive equals the amount they have to pay. This is also with payment coming a month late. This must be a joke.

I would like to see a copy of the tender terms where you have stated that uniforms must be given free AND the allowance must be passed on.

Saswata,

Here, the uniform outfit allowance is basically to maintain the uniform in a manner that is presentable in front of the public/visitors. A guard is almost the first person a customer sees, and if their turnout is poor, it leaves a poor impression. In services, kit maintenance allowance used to be paid on a monthly basis to uniformed personnel to ensure the highest standard of turnout.

Thank you.

Understanding Uniform Outfit Allowance

To the extent I understand, the Uniform Outfit Allowance is meant to maintain the uniform issued to the guards and not in lieu of the uniforms issued. Some concerns use the wording 'Washing Allowance'.

Revising Tendering Norms

I think Amit's Bank needs to revise or modify their tendering norms, where the L1 is only one of the parameters to decide who will be issued the order. In fact, this very L1 process has been responsible for India's poor state of affairs vis-a-vis the quality of services in most sectors for decades, if not since Independence.

Challenges with L1 Quoting

Many agencies, whether in security or any other field, quote L1 figures (no surprise if some 'manage' to obtain competitor figures to ensure they quote lower rates) just to secure the order, without any verifiable proof or references of their past work. At the end of the day, there's no point blaming the agencies for the shoddy state of affairs; they were allowed to do so and, like any entity with short-term goals, the agency took advantage of the loopholes.

Regards,
TS

"In fact, this very L1 process has been responsible for India's poor state of affairs vis-a-vis quality of services in most sectors for decades, if not since Independence."

The Role of L1 Process in Service Quality

There is a clear provision in financial rules that L1 need not always be taken blindly. The Competent Financial Authority (CFA) can choose the next highest and must record the reasons in writing. The CFA needs to have the moral courage to make such decisions, as they can always be scrutinized by audits, anonymous complaints, etc. The entire system in India is crumbling due to numerous rules, outdated regulations, and a peculiar attitude that impedes progress. We lack faith in our administrators and fellow workers, constantly introducing checks and counterchecks, leading to delays and escalating prices.

Dear Amit, You have received many reviews and suggestions from members. I would like to add the following:

1. As I suggested, please release an amount that is sufficient for distributing the salary. Holding only 5% is not enough because the agency may refuse to distribute the salary. Even though they have submitted the PF-ESI challan to you, it is not confirmed whether the security staff deployed at your bank are covered under the challan or not (this can be confirmed only after checking the ECR and challan altogether). Since it is a new contract, they may not have deposited the PF-ESI. As a PE, you will ultimately be held responsible for the compliances.

2. I would not suggest changing the agency since you are following DGR rules. If the agency is also complying with DGR standards regarding other sites, it indicates that the agency is not ordinary. You need to handle the situation with techniques and strategy. Do not give them much scope to escape and leave the liability on you. However, do not withhold/deduct so much that they are unable to operate day-to-day activities.

3. Call upon persons from the Marketing and F&A Team to discuss the matter. Convince them about the compliances. Always withhold one month's payment. If they have a significant fund shortage, release the payment against the submission of BG.

4. I am providing below a format; please compare the quotation with the contents and ask the agency to provide the proof accordingly on a monthly basis.

- Basic
- D.A.
- Total (A) = (1+2)
- Washing allowance
- Total B = (3+4)
- PF @ 13.36% (On Total A)
- ESIC @ 4.75% (On Total A)
- Total (C) = (5+6+7)
- Reliever Charges @ 16.67% or 1/6th (Weekly off) on wages part (Total B)
- ESIC @ 4.75% on Reliever
- Total (D) = (9+10)
- Service Charges @ ===
- Total (E) = (11+12)

5. If after making all the above efforts the agency is not working as per your requirements, proceed to release a new tender, but provide them with an adequate notice period (1 month). Before selecting the L1, please check all the contents regarding compliances, welfare, payment terms, etc.

Regards,

No, sir. If it is a washing allowance, it would have been stated as such. Uniform allowance is the money given to the contractors to pay for uniforms for their employees who are deployed at the site, and that is the uniform practice. This is why I said I would like to see the terms originally written.

Dear Mr. Pan Singh,

Kindly do not provide incorrect information regarding minimum wages. For your reference, the wage structure was as per DGR (Director General Re-settlement)/Central Minimum Wages.

URL: http://media.dgrindia.com/downloads/wagespage1.jpg