Are We Responsible for PF and ESI for Our Van Contractors' Drivers? Seeking Clarity

Greetings to All, seek your valuable guidance for the following.

We are a manufacturing company that entered into an agreement with two van contractors for pickup and drop-off facilities for our company employees. The owners of the two vehicles are the same.

In one vehicle, the owner is driving, and in the second vehicle, he has appointed a driver. We are paying daily rent for the van and charges per kilometer based on actual usage.

We seek your clarification regarding whether, for the above two drivers, we have to cover PF and ESI as a principal employer.

Regards, Ganapathy V

Contract for Service vs. Contract of Service

This is a contract for service and not a contract of service. The van owner is charging not for the labor but for the kilometers run. The employer does not fill diesel nor does any repair work, but it is taken care of by the owner of the vehicle only. It is as if the employees are traveling by public transport where there exists no master-servant relationship. As such, no ESI or PF will be applicable to the driver of the cabs.

Similarly, there is an issue if the driver does not receive a salary from the owner of the cabs. He cannot ask it from you because you pay for the travel undertaken, and it is not that you have taken the vehicles on lease and have appointed or taken the services of the driver. You fill the fuel, take care of the repairs and maintenance, and run it for your operations, pay a rent to the cab owners, and wages to the drivers.

There is no contract agreement for services. The vehicles are being used and payments made for travel use - rental. So, no EPF, ESIC, etc. However, to be on the safer side, suggest that employees traveling by such vehicles must be properly covered and insured.