How Should We Handle Subcontractors Refusing to Pay PF & ESI Under Main Contractor's Code?

Query Regarding Statutory Contributions for Subcontractors

I, Ramu, work as DM-HR in the manufacturing sector. Our management has assigned the unit expansion project to L&T company. Accordingly, L&T has obtained a Contract Labour license. L&T is engaging several subcontractors for building construction works on piece rates. As per our terms and conditions, L&T has agreed to pay statutory contributions (PF & ESI) under their code only. They are also maintaining statutory records required under the CLRA Act (Form-A, B, C, & D). All subcontracted workmen are also enrolled in L&T records.

My query is as follows:

L&T is now offering a portion of the work to "ABC" company. ABC company refuses to remit the statutory contributions under L&T's code, stating that our PF & ESI codes would become null values until the work's completion. This may lead to questions from PF & ESI enforcement authorities regarding non-payment of contributions.

Kindly provide us with your valuable advice on how to proceed with this issue.

Regards, Ramu

Compliance Responsibilities Under the PF Act 1952

The contractor ABC company has a point in that it is an establishment covered under the PF Act 1952 and is hence subject to compliance audit. They will be answerable to PF authorities regarding their compliance status, and it will be cumbersome to explain it by the L&T route. Although it is possible to explain the situation by tallying the unique identity number of all the individual workmen, PF Officials are not known to be very customer-friendly and could create a lot of technical issues.

Responsibilities of L&T and ABC Company

Since L&T is only an intermediate contractor and is without any assigned responsibility, it is either the contractor, ABC company, or the Principal Employer, i.e., the establishment where the work is taking place, who have to answer to the PF authorities. Therefore, the plea of the ABC to let them comply is a practical and feasible solution. Otherwise, you may find yourself in difficulties at a much later time when the PF Inspector will take up your compliance inspection.

Maintaining Compliance Documentation

But at any rate, be it L&T or the ABC company, please keep a copy of the compliance document and persuade the PF authorities to hold compliance inspection from time to time.