Here it is a three-party arrangement: PE, Contractor, and Sub-contractor. Usually, the entity that pays the salary/wages is also responsible for PF, ESIC, etc., compliance.
Here, the arrangement is not proper. In case of any audit, it will appear that the employees are under the payroll of the Sub-contractor, but compliance is done under the code of the Contractor. It is almost like the Contractor has failed to comply, and thus the PE is complying under their code. As per the CLRA Act, a Contractor includes a Sub-contractor.
So far as the PE is concerned, to them, there is no existence of the Sub-contractor as all compliance is done by the Contractor.
The entire arrangement is confusing, and in case of a detailed inquiry, the PE and statutory body may raise objections regarding the present arrangement. For all practical purposes, the presence of the Sub-contractor will raise a big question, and all employees will be considered as the Contractor's employees.
My organization, USD HR Solutions, is a Sub-contractor to Tata Steel, where the Contractor is Vesuvius India Ltd. (MNC). We engage people, pay salaries, and comply with all statutory needs—PF, ESIC, Bonus, and Gratuity. We have been allotted one Vendor code by Tata Steel. We have no commercial agreement with Tata Steel, but we have the same with Vesuvius India Ltd. in detail. In my opinion, this is the right arrangement.
Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons]
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