I would like your guidance on the following issue.
We have hired one unskilled housekeeper for our office in Indore, Madhya Pradesh, through a labor contractor. The contractor charges us for the basic salary (Rs. 2476), a uniform allowance of Rs. 150, 13.61% for PF, 4.75% for ESIC, 8.33% for Bonus, service tax, and their service charges. Although the bonus is deducted monthly, it is paid to the employee annually in October. We have just received the first bill from the contractor, along with a PF and ESIC challan for the entire group of employees. Additionally, they have provided a declaration stating that the specified amount (i.e., Basic 2476 - 12% PF - 1.75% ESI) has been paid to the employee.
According to the law, the contractor should submit the following minimum documents along with the bill:
1. Payment sheet with the employee's signature
2. Attendance sheet
3. Individual PF challan
4. Individual ESIC challan
I requested the contractor to provide the employee's PFUI and ESIC registration numbers. However, they mentioned that since we have only hired one employee, separate registration has not been done. All their employees are registered under a single name and number.
The amount being paid to the employee seems to be insufficient. Nevertheless, I have asked them to complete the necessary formalities and submit all required documents.
Kindly advise me on this issue.
Best regards, Priyanka
From India, Mumbai
Acknowledge(0)
Amend(0)
1We have hired one unskilled housekeeper for our office in Indore, Madhya Pradesh, through a labor contractor. The contractor charges us for the basic salary (Rs. 2476), a uniform allowance of Rs. 150, 13.61% for PF, 4.75% for ESIC, 8.33% for Bonus, service tax, and their service charges. Although the bonus is deducted monthly, it is paid to the employee annually in October. We have just received the first bill from the contractor, along with a PF and ESIC challan for the entire group of employees. Additionally, they have provided a declaration stating that the specified amount (i.e., Basic 2476 - 12% PF - 1.75% ESI) has been paid to the employee.
According to the law, the contractor should submit the following minimum documents along with the bill:
1. Payment sheet with the employee's signature
2. Attendance sheet
3. Individual PF challan
4. Individual ESIC challan
I requested the contractor to provide the employee's PFUI and ESIC registration numbers. However, they mentioned that since we have only hired one employee, separate registration has not been done. All their employees are registered under a single name and number.
The amount being paid to the employee seems to be insufficient. Nevertheless, I have asked them to complete the necessary formalities and submit all required documents.
Kindly advise me on this issue.
Best regards, Priyanka
From India, Mumbai
Acknowledge(0)Amend(0)
Priyanka,
Your contractor's claim is right. It is not possible for him to make separate PF and ESIC registrations for each and every client of his. Now, keeping that aside, I can give you tips on what you can ask from him to check his compliances.
1. Payment Sheet with employees' signatures
This proof is valid only in case of cash payment. In the case of bank credit (if applicable), you can ask the employee to provide his bank mini statement. You can do that as a random check once every 3 months or so.
2. Attendance sheet
Yes, you can ask for the same.
3. PF Challan individual
This is not possible; instead, you can ask him to provide a photocopy of FORM 9 with an acknowledgment seal from the PF authority, where your contract employee's name reflects. Form 9 is submitted during the time of enrollment of an employee under the PF scheme. Also, you can ask him to submit Form 5. Every month, along with the bill, you can accept the consolidated challan of the previous month. Also, ask him to submit PF annual returns for the contract employee deputed to you.
4. ESIC challan individual
This is again not possible; alternatively, you can ask for the following:
a. The photocopy of the temporary ESIC card, which is normally given within 3 days of his joining.
b. After 3 months, ask him to submit the photocopy of the ESIC card given to the employee.
c. Also, make the contractor submit the ESIC half-yearly returns. If he has many employees in his role, then let him attach the sheet where your employee's name reflects.
d. By default, ask him to submit the consolidated challan of ESIC amount remittance of the previous month with the current bill.
Regarding bonus, it is better to accumulate it in your account rather than accumulating it in your contractor's account. Normally, what happens is that at the Housekeeper level, there will be heavy attrition. When a new person joins, he will get a bonus only from the date of his joining, and therefore the contractor enjoys the amount accrued in the previous employee's account.
Hence, you can advise your contractor not to charge a bonus on a monthly basis. During the time of disbursement, let him calculate and inform you of the amount to be disbursed, which can then be released from your company's account, for which you have already allocated in your P&L.
I hope I have answered all the queries. If you still have doubts, please write back.
Thanks and Regards,
Dinesh
Acknowledge(0)Amend(0)
Your contractor's claim is right. It is not possible for him to make separate PF and ESIC registrations for each and every client of his. Now, keeping that aside, I can give you tips on what you can ask from him to check his compliances.
1. Payment Sheet with employees' signatures
This proof is valid only in case of cash payment. In the case of bank credit (if applicable), you can ask the employee to provide his bank mini statement. You can do that as a random check once every 3 months or so.
2. Attendance sheet
Yes, you can ask for the same.
3. PF Challan individual
This is not possible; instead, you can ask him to provide a photocopy of FORM 9 with an acknowledgment seal from the PF authority, where your contract employee's name reflects. Form 9 is submitted during the time of enrollment of an employee under the PF scheme. Also, you can ask him to submit Form 5. Every month, along with the bill, you can accept the consolidated challan of the previous month. Also, ask him to submit PF annual returns for the contract employee deputed to you.
4. ESIC challan individual
This is again not possible; alternatively, you can ask for the following:
a. The photocopy of the temporary ESIC card, which is normally given within 3 days of his joining.
b. After 3 months, ask him to submit the photocopy of the ESIC card given to the employee.
c. Also, make the contractor submit the ESIC half-yearly returns. If he has many employees in his role, then let him attach the sheet where your employee's name reflects.
d. By default, ask him to submit the consolidated challan of ESIC amount remittance of the previous month with the current bill.
Regarding bonus, it is better to accumulate it in your account rather than accumulating it in your contractor's account. Normally, what happens is that at the Housekeeper level, there will be heavy attrition. When a new person joins, he will get a bonus only from the date of his joining, and therefore the contractor enjoys the amount accrued in the previous employee's account.
Hence, you can advise your contractor not to charge a bonus on a monthly basis. During the time of disbursement, let him calculate and inform you of the amount to be disbursed, which can then be released from your company's account, for which you have already allocated in your P&L.
I hope I have answered all the queries. If you still have doubts, please write back.
Thanks and Regards,
Dinesh
Acknowledge(0)Amend(0)
Hi,
I do agree with Dinesh. You can also advise the agency to submit all the payment proofs at the time of collecting the cheque (monthly bill). Payment proofs of all statutory payments of last month need to be submitted; then only the current month bill would be cleared.
Regards,
Chakradhar.
From India, Hyderabad
Acknowledge(0)Amend(0)
I do agree with Dinesh. You can also advise the agency to submit all the payment proofs at the time of collecting the cheque (monthly bill). Payment proofs of all statutory payments of last month need to be submitted; then only the current month bill would be cleared.
Regards,
Chakradhar.
From India, Hyderabad
Acknowledge(0)Amend(0)
Mr. Dinesh's comments are correct with one minor amendment. The contractor cannot charge you a bonus payment at 8.33% as the definition of wages does not include bonus. Bonus, as per the Payment of Bonus Act, is payable on the profits generated by an establishment, and in case of no profits, minimum bonus is payable. However, this liability is not of the principal employer but is payable independently by the contractor on his profit and loss account, i.e., on the service charges levied by him on you.
The Contract Labour Act does not make the principal employer liable for the payment of bonus of the contractor's employees. Furthermore, even if the principal employer does agree or want to pay the contractor's employees bonus through the contractor, this is payable by November, i.e., within 8 months of the closing of the accounting year. Therefore, you can ask for the attendance sheet of employees who were in the employment of the contractor in the accounting year, calculate, and pay pro rata bonus.
Regards
From India, Pune
Acknowledge(0)Amend(0)
The Contract Labour Act does not make the principal employer liable for the payment of bonus of the contractor's employees. Furthermore, even if the principal employer does agree or want to pay the contractor's employees bonus through the contractor, this is payable by November, i.e., within 8 months of the closing of the accounting year. Therefore, you can ask for the attendance sheet of employees who were in the employment of the contractor in the accounting year, calculate, and pay pro rata bonus.
Regards
From India, Pune
Acknowledge(0)Amend(0)
Dear Priyanka,
The contractor needs to pay wages as per the Minimum Wages Act. Any violation of this would make the principal employer liable in law to pay wages. Whenever the contractor pays wages, it is necessary that one of the authorized representatives of the employer is present, and the representative needs to sign on the muster that the wages are paid as per the minimum wages.
With regard to the ESIC and PF Challans, you can take a letter from the contractor stating that he is registered under the PF and ESIC with a reference to the PF and ESIC Code numbers. Also, insist on the six-monthly returns of employees to be filed by the contractor to ensure that he has deposited the contributions. In case of any queries, you may write to me at personnel@wtcmumbai.org.
Vincent
Acknowledge(0)Amend(0)
The contractor needs to pay wages as per the Minimum Wages Act. Any violation of this would make the principal employer liable in law to pay wages. Whenever the contractor pays wages, it is necessary that one of the authorized representatives of the employer is present, and the representative needs to sign on the muster that the wages are paid as per the minimum wages.
With regard to the ESIC and PF Challans, you can take a letter from the contractor stating that he is registered under the PF and ESIC with a reference to the PF and ESIC Code numbers. Also, insist on the six-monthly returns of employees to be filed by the contractor to ensure that he has deposited the contributions. In case of any queries, you may write to me at personnel@wtcmumbai.org.
Vincent
Acknowledge(0)Amend(0)
Dear Priyanka,
I have gone through your query. Please ensure the following:
1) Is the Principal employer (Your company) registered with the local Labour Department for engaging contract workmen?
2) Is the Labour supply contractor registered as a contractor with the Labour department?
3) Has the contractor registered with PF / ESI authorities?
4) If the contractor does not have any PF / ESI number, as a principal employer, you have to obtain a separate code number for all the contractors engaged in your organization and advise them to remit all the PF / ESI contributions under that code. It is a very safe guard for organizations engaging contractors.
5) If you need any clarifications, please visit the websites of PF / ESI organizations.
Regards,
PBS KUMAR
pbskumar2000@yahoo.com
From India, Kakinada
Acknowledge(0)Amend(0)
I have gone through your query. Please ensure the following:
1) Is the Principal employer (Your company) registered with the local Labour Department for engaging contract workmen?
2) Is the Labour supply contractor registered as a contractor with the Labour department?
3) Has the contractor registered with PF / ESI authorities?
4) If the contractor does not have any PF / ESI number, as a principal employer, you have to obtain a separate code number for all the contractors engaged in your organization and advise them to remit all the PF / ESI contributions under that code. It is a very safe guard for organizations engaging contractors.
5) If you need any clarifications, please visit the websites of PF / ESI organizations.
Regards,
PBS KUMAR
pbskumar2000@yahoo.com
From India, Kakinada
Acknowledge(0)Amend(0)
Hi Friend,
What you want to know is not clear. But have a look at the suggestions below:
1. Bonus cannot be a part of wages. Therefore, ask him to withdraw this part of the amount.
2. It is not possible to cover all employees under one PF and ESI registration. It might be separate for each employee, but the employer registration can be single.
3. You may ask him for Form #05 and Form #01, respectively, for PF & ESI for the concern.
There are many options regarding your note, but I am not properly understanding what you require. Please ask widely and clearly to have a clear picture.
SANJAY SEHGAL
JAIPUR (RAJASTHAN)
From India, Mumbai
Acknowledge(0)Amend(0)
What you want to know is not clear. But have a look at the suggestions below:
1. Bonus cannot be a part of wages. Therefore, ask him to withdraw this part of the amount.
2. It is not possible to cover all employees under one PF and ESI registration. It might be separate for each employee, but the employer registration can be single.
3. You may ask him for Form #05 and Form #01, respectively, for PF & ESI for the concern.
There are many options regarding your note, but I am not properly understanding what you require. Please ask widely and clearly to have a clear picture.
SANJAY SEHGAL
JAIPUR (RAJASTHAN)
From India, Mumbai
Acknowledge(0)Amend(0)
Shekharji is all right as far as the lawfulness is concerned. However, in reality, there are practical difficulties regarding the bonus. The new trend in the industries for this does not conform precisely to the act.
Rajan Kumar
From India, Delhi
Acknowledge(0)Amend(0)
Rajan Kumar
From India, Delhi
Acknowledge(0)Amend(0)
Dear Mr. Rajan Kumar,
The reply given by me was in pursuance of the query which, to my reading, had legal advice in mind. Since I am a practicing lawyer dealing with employment laws, I can only restrict my comment to the legality. I am sorry, but I don't understand what practical difficulty means when applying the law in the instant case. Either it applies, or it does not apply. I have also clarified that in case a benevolent principal employer wants to pay, the best way to ensure there is no undue enrichment for the contractor is to ask for the details of persons employed in the relevant accounting year and pay based on the number of days worked.
Regards
From India, Pune
Acknowledge(0)Amend(0)
The reply given by me was in pursuance of the query which, to my reading, had legal advice in mind. Since I am a practicing lawyer dealing with employment laws, I can only restrict my comment to the legality. I am sorry, but I don't understand what practical difficulty means when applying the law in the instant case. Either it applies, or it does not apply. I have also clarified that in case a benevolent principal employer wants to pay, the best way to ensure there is no undue enrichment for the contractor is to ask for the details of persons employed in the relevant accounting year and pay based on the number of days worked.
Regards
From India, Pune
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Labour laws compliance.doc
Compliance of labour laws.pdf