Are We Liable for Our Contractor's ESIC and PF Compliance? Seeking Advice on Legal Responsibilities

“We are a non-profit organization registered under the ESIC & PF Act. We have a contractual relationship with a contractor/builder/developer to work on our site premises. The contractor has to perform civil, structural, firefighting, electrical, plumbing, finishing, and related jobs per the designs provided by us and finally deliver a fully furnished building on the site premises within a given framework of time. In this case, we expect the contractor to deliver on a timely basis as agreed upon. We are not concerned whether the contractor employs ‘x’ number of people and whether the same ‘x’ number is always available on the site.

Responsibility for ESIC, PF, and Labor Compliances

In light of this, are we responsible for checking on the ESIC, PF, and related labor compliances that the contractor undertakes? Would we be responsible for defaults on their part towards ESIC, PF, and related labor compliances? If yes, how do we ensure that the details they share for our audit are true and correct as we have no control over which employee of the contractor is available on site?

Additional Measures for Compliance

Are there any other matters that we should be wary of to avoid being caught unaware of our responsibility and liability? What additional measures should we take to be law compliant?”

Responsibility of the Principal Employer under ESI and EPF Acts

1. Under both the ESI Act and the EPF & MPs Act, 1952, it is established that the principal employer is responsible and liable for compliance concerning contractor employees. Therefore, it is not appropriate for a principal employer to claim, "We are not concerned whether the contractor employs 'x' number of people and whether the same 'x' number is always available on the site."

2. The principal employer or their staff can verify and confirm compliance for contractor employees in the same manner as for regular or direct employees, except that the contributions under the above Acts for contractor employees can be recovered from the contractor. As the principal employer, you can instruct your officers or concerned officials to obtain and keep copies of challans, returns, attendance, and wage records for contractor employees. This ensures that when department officials verify records, these documents can be produced for inspection. There are no separate rules or laws for an organization being non-profit or otherwise.

Please verify the attendance statement and salary abstract attached along with the bill by the contractor with ESI and EPF remittance. You can link the contractor in ESI Portal to know compliance. Similarly, under EPF, you can ask for a soft copy of ECR. You have to strengthen your audit system.