Navigating Subcontracting Under the Contract Labour Act: What Are the Legal Requirements?

Respected seniors,

This is Ramu, working as DM-HR in a manufacturing unit. Our management has given the plant expansion project contract to M/s. L&T Co. Accordingly, L&T has obtained a labor license as per the provisions of the Contract Labour Act. Now, L&T is offering subcontracts to others. Some of the subcontractors have PF & ESI establishment codes, and they are remitting contributions on their codes. L&T is paying PF & ESI contributions to some of the subcontract workmen who do not have individual PF & ESI codes. Subcontractors do not have labor licenses, and we have not issued Form-V either.

My queries are:

1. Is subcontracting permissible?

2. Does the subcontractor have to obtain a labor license, and does the principal employer have to issue Form-V?

3. Is the license with the main contractor and PF & ESI contribution in the subcontractor code valid?

4. Who has to maintain the statutory records, the main contractor, or the subcontractor (Form-A, B, C, & D)?

5. Can the main contractor issue Form-V to the subcontractor?

6. Can we allow it if there is a valid agreement between the main contractor and subcontractor?

Kindly provide your valuable suggestions on this issue.

With regards,
Ramu

Subcontracting Responsibilities and Compliance

Subcontracting is a regular affair for any project. You need to ensure the enforcement of all labor rules through your contractor, L&T. As the license is issued to L&T, they are liable for all matters related to the engagement of employees under subcontractors. As the principal employer, it is your responsibility to ensure ESI and PF coverage and the payment of contributions for all employees engaged on your premises. This must be ensured through your contractor, L&T.

You may regulate the entry of all employees to the company premises through appropriate passes on the recommendation of your contractor, L&T. On a regular basis and during the settlement of bills of the contractor, you must ensure as the principal employer that ESI and PF contributions and all statutory requirements for the engagement of employees are met by your contractor, L&T. It is left to the contractor, L&T, to have similar arrangements with the subcontractors.

Regards, Mohan Kumar A R

[Email Removed For Privacy Reasons]

Thank you for your advice, sir.

Is it acceptable under labor laws for the main contractor's license to have PF & ESI contributions remitted in the sub-contractor code?

Ramu

Yes, this is acceptable since they have an agreement in place between them. Only the contractor L&T has to be certified on the compliance part before they submit to PE for settling bills.

PF Contributions for Employees of the Immediate Employer

Can you please advise on how exactly the Principal Employer remits PF contributions for employees of the Immediate Employer (IE) under the IE code? Is there an IE mapping facility available in the PF portal (I haven't seen one)? How exactly does the PE remit PF contributions under the IE code (the exact procedure)?

ESI Contributions for Employees of the Immediate Employer

Regarding ESI contributions for employees of the Immediate Employer under the IE code, I have seen the feature in the ESIC Portal for adding IEs under the PE and also mapping IE employees. Does this feature work smoothly? Though I have seen this feature, I have not yet used it, hence the doubts!

I want to start paying PF & ESI contributions for the employees of IE working with us so that the statutory aspects of being a PE are met by my organization. Advice would be most appreciated.

Dear Ramu HR,

The vital question here is whether the contract awarded by your company to L&T permits subcontracting. Has the contractor (L&T) intimated your company in writing about subcontracting? Please verify the relevant records.

Dear sir,

There was an agreement between L&T and their subcontractors, but we have not mentioned any conditions regarding subcontracting in the work order. L&T is the authorized licensed contractor. PF and ESI contributions are being remitted through subcontract codes for some portions.

Ramu