EPF/ESIC Delays: Are Principal Employers Liable for Vendor Mistakes? Seeking Clarity and Protection

Dear All, I would like to know in detail about EPF/ESIC compliance by a Principal Employer. It is a well-known fact that the Principal Employer is liable for the PF/ESIC remittance by the vendors for the contract laborers. However, please clarify whether the interest/delay/damages applicable in EPF & ESIC for the delayed remittances are the responsibility of the Principal Employer or the vendor.

In real-time, ESIC routes notices for interest/damages to the Principal Employer under 45G.
What is the exact rule position to address this issue, and what are the ways and means to safeguard ourselves as the Principal Employer?

Thanks in advance to all experts.

The situation has now changed. HR need not be responsible for non-compliance with statutory acts such as ESI/PF by the vendors or contractors.

Dear RKN Sir, Can you help me with details, please? How to handle the notices issued on behalf of the vendor in EPF & ESIC? Is the principal amount the responsibility of the PE or not? Are the interest, delay, and damages the PE's responsibility or not, etc?

If the contractor is registered as per the PF & ESI Acts, then it is a separate establishment duly recognized under the respective statutes, and accordingly, the responsibility would lie there. However, the inspectors take the easy way out and give notice to the Principal Employer (PE). You can reply to them, giving the registration number and the documents regarding it.

As a Professional Employer (PE), you shall be responsible only when you have remitted the contributions to the authorities on behalf of your contractor employees, using your own Code number. You should remit the contributions through the code number of your contractor. If you adhere to this process, you need not worry.

In this regard, I am also attaching an article for your reference. Please review it.

Dear RKN Sir, It really helps. Is anything of this sort available for ESIC? If so, please help with it. TIA.

Dear KK!HR Sir, Thank you for your valuable feedback and suggestions. Could you please assist with the ESIC liability part regarding PE? Is the delay interest or damages a direct responsibility of the PE? Each year, we receive a notice under 45G for a specific vendor, and the interest and damages have been increasing significantly. Last year, as a PE, we received a notice and promptly settled the principal amount that was defaulted by the contractor. We also notified the contractor, although they are currently untraceable. Now, we have received another notice under 45G with increased interest and damage amounts. Our consultant advises us to challenge the demand from the ESIC authority and file an appeal with an affidavit detailing the facts and figures. The demand relates to 2018, which is now over five years old since the contractor completed their work in May 2017. We aim to resolve this matter conclusively and avoid further notices. Your guidance on this issue is highly appreciated. Please advise accordingly.

You need to act immediately on this. As opined by your legal team, please challenge the notice issued to you. If the contractor had a valid ESI registration, then the ESI Corporation has to go after them; it is not your responsibility at all. There is a point of law that the ESIC or EPFO need to identify the beneficiaries first before going after the Principal Employer because they cannot aggrandize their income without any liability on their part. There is also a guideline that the penalty/interest cannot be more than the principal amount.