Is It Legal for Principal Employers to Pay EPF Contributions to Contractors for Workers?

EPF Contributions for Contract Workers

Learned members, I have a question regarding 'contract workers' engaged by a principal employer through a contractor and their EPF contributions. I understand that the EPF contribution is to be made by the contractor, with the ultimate responsibility to ensure such payment lying with the principal employer, as per paragraph 30 of the EPF Scheme.

The contract between the contractor and the principal employer expressly mentions that the employees engaged by the principal employer are the employees of the contractor. It provides the salary breakdown (mentioning various components) and also states that the principal employer shall provide the EPF amount to the contractor. Is such a contract, which indicates that the principal employer is giving EPF contributions to the contractor, illegal or otherwise unsustainable?

Reimbursement and Legal Provisions

The contractor received some benefits under the PMRPY Scheme, and subsequently, the principal employer is seeking reimbursement. It would be very helpful if you could provide any legal provisions or precedents on the same.

Since you yourself mentioned in your query that the contract between the principal employer and the contractor was well-written, there is no question of the principal employer asking for any amount that the contractor has received or refunded under any scheme. Conversely, if the principal employer insists on asking for that amount back, then the contract is likely to be declared as merely a 'sham,' and the principal employer may be held to be the actual employer of the contract labor. The principal employer cannot even ask for it back under any provision of law.

If he asks, then there are other ways to react. I hope I have answered your query.