Who Handles ESI and PF Payments for Subcontractor Workers: Us or Them?

Dear All,

I am Vinod, working as an HR professional. My question is regarding our status as a contractor. We have obtained a labor license for 400 workers, and currently, we have engaged 4 subcontractors. Each subcontractor has employed 7 workers, bringing the total number of workers to 28.

I would like to clarify who is responsible for paying the ESI and PF contributions for these workers - the subcontractors or us, the main contractor?

Thank you for your assistance.

Compliance under CLRA, ESI, and EPF Laws

Obtaining labor licenses under CLRA has no relevance to compliance under ESI and EPF laws. These laws are self-contained, complete codes, and their provisions must be complied with. You have mentioned that your establishment is a contractor firm; therefore, in addition to your establishment, the principal employer with whom your establishment is working is also liable for compliance under the above Acts regarding employees engaged through all contractors or subcontractors.

Though a principal employer can recover contributions of employees of contractors or subcontractors from their bills, the principal employer is still liable for all types of compliance under the above Acts, such as payment of contributions, registration of employees, submission of all types of returns, and maintenance of records as required under the said Acts.

Retention of Documents for Compliance

It would be even better if the principal employer retains copies of complete documents of contractors and subcontractors, such as challans, returns, registers of payments of wages and contributions, etc., concerning the employees of contractors and subcontractors. This way, when there is any verification of records or inspections under the above Acts, the principal employer or their HR department can demonstrate compliance to the satisfaction of the authorities.

Please clarify what labor license you have already obtained. Is it under CLA or any other Act?

In respect of employees whom you have engaged for the execution of work and for whom you are paying a salary or raising a bill against the principal employer for such employees, it is your responsibility to make payments for ESI and PF.

The manpower of each subcontractor will not enable them to apply for registration under PF or ESI Act. Therefore, you have to comply with these acts.