Can We Request a Refund from Our Contractor Due to ESI Contribution Changes?

Dear All, hope all are safe and staying at home. Seeking your valuable opinion on the following issue.

Security Service Agreement Details

We have entered a Security Service Agreement with a contractor effective from 01.04.19 to 31.03.20. During the negotiation, the contractor provided a breakdown of the wages, including his service charges. However, in the agreement, we specified Rs.11,500/- (as an example) to be paid to the security contractor for one person working 8 hours a day.

ESI Contribution Revision

From 01.07.19, the ESI contribution was revised from 6.50% to 4.00% (1.75% + 4.75% to 0.75% + 3.25%), indicating a 1.5% reduction in the employer's contribution. The contractor billed us at the rate of Rs.11,500/- without adjusting for this change. Can we now request the contractor to refund any excess amount collected from us? (If there is an increase in the statutory limit, he would ask us to raise his service charges.)

Regards,

Ganapathy V

Dear Mr. Ganapathy,

The Principal Employer is liable to pay ESI and EPF contributions at the prevailing rates. (As and when the rate of contributions goes up or gets reduced). As the Principal Employer, you have not followed the due procedure while processing the Security Contractor Bill. You are entitled to deduct the excess contribution from the Contractor's future bills. Please look for an alternate Contractor instead of persisting with such Contractors. Please put proper systems in place to monitor contractors in line with statutory requirements. Please evaluate your vendors periodically. Retain those who comply with Labour Laws.