Legal Concerns: Is Depositing Contractor's PF and ESIC Under Company Code Risky?

Dear Sir, Our company has been depositing the PF and ESIC contributions of the contractor's workmen under the company code. Can you please advise whether it has any legal ramifications in the future?

Regards, Hilary Joseph

You are depositing in the company code. Ensure you are completing all compliance requirements and be prepared to comply in the future if any grievances are raised.

Sir, the company has been following this practice right from its inception, and I joined only in September 2022. I found this alarming.

You are adopting the wrong practice, which may have far-reaching consequences for your company. It is not a matter of the company making contributions. If your company wants to make contributions, it can do so as a gesture towards the contract workmen of your company. However, you should have directed your contractor to obtain a code for himself, and contributions should have been remitted through his code number, not the company's.

Now, if some anomaly occurs on the PF and/or ESI fronts in the future, your company will have to face the music.

The basic question in all such matters is whether the contract arrangement is genuine or not. Where the contractor has obtained a license, PF & ESI registration, recruited the labor, supervises them, and pays them, the arrangement would appear genuine. The ultimate question is whose labor it is, the contractor's or the PE's? So, payment of PF & ESI contribution directly by the PE goes against the above principles, though it is not decisive.