I am currently working in a reputed electronics industry. Recently, we encountered an issue with contract workers. The problem is that the workers who come for fabrication work do not have PF & ESI, and they are not registered for it. In this case, what should be done? If we are required to include them under PF and ESI, they will only work for a few days and then may not return. I kindly seek your assistance regarding this matter, and I need a response for my Management.
Thank you.
Regards
From India, Mysore
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2Thank you.
Regards
From India, Mysore
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Understanding ESI and PF for Contract Workers
If the fabrication work is connected with the work of the company, the labor charges will attract ESI and EPF. It is payable by the employer (you) even if you have engaged the workers for a day. Therefore, while making payments to the contractor, take a bifurcation of the amount paid to his workers and his service charges. If the total bill includes material costs, then that should also be taken separately. Then you may work out 6.5% for ESI and 13.16% towards PF and deduct that amount from the bill and pay the remaining only to the contractor. The amounts deducted can be remitted along with your own employees' payments. Since the payments are online, you have to enroll the workers and then pay it. Enrolling the workers shall be done under your own registration.
If, however, the labor charges per worker are more than 6500 for the whole month, you can exclude them from PF, and similarly, if the wages exceed Rs 15,000, you can avoid the payment of ESI as well. Please do a calculation based on the daily rate/weekly rate and find if this will come to 6500 or 15,000, as the case may be, and decide accordingly. The most important thing is that in such cases, you have to keep a record of their payment of wages so that in the future, during the course of an inspection by ESI/PF authorities, you can say that you did not deduct and pay ESI/PF because their wages had crossed the ceiling.
Regards,
Madhu.T.K
From India, Kannur
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If the fabrication work is connected with the work of the company, the labor charges will attract ESI and EPF. It is payable by the employer (you) even if you have engaged the workers for a day. Therefore, while making payments to the contractor, take a bifurcation of the amount paid to his workers and his service charges. If the total bill includes material costs, then that should also be taken separately. Then you may work out 6.5% for ESI and 13.16% towards PF and deduct that amount from the bill and pay the remaining only to the contractor. The amounts deducted can be remitted along with your own employees' payments. Since the payments are online, you have to enroll the workers and then pay it. Enrolling the workers shall be done under your own registration.
If, however, the labor charges per worker are more than 6500 for the whole month, you can exclude them from PF, and similarly, if the wages exceed Rs 15,000, you can avoid the payment of ESI as well. Please do a calculation based on the daily rate/weekly rate and find if this will come to 6500 or 15,000, as the case may be, and decide accordingly. The most important thing is that in such cases, you have to keep a record of their payment of wages so that in the future, during the course of an inspection by ESI/PF authorities, you can say that you did not deduct and pay ESI/PF because their wages had crossed the ceiling.
Regards,
Madhu.T.K
From India, Kannur
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Thank you for your valuable time. Another constraint I have is that a particular worker or team of workers will be employed for a shorter period, maybe a week, and once they leave, we need to close their PF and ESI accounts. In this regard, how can we make the payment of withdrawal to them? Are they able to withdraw the payment, and if so, how? Is it possible to open a PF account for 2 or 3 days and close it within the same month?
Kindly assist me with this matter.
Thank you.
From India, Mysore
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Kindly assist me with this matter.
Thank you.
From India, Mysore
Acknowledge(0)Amend(0)
You cannot close the PF account. He can take the PF registration number and use it when he gets another engagement somewhere else by transferring the amounts. Though it is not practical with regard to PF, he can retain the registration of ESI and start getting ESI medical benefits free of cost. For this, he can take a printout of the temporary ID card when you register him and get the photograph of himself with his family and dependents attested by you and then take the smart card from the ESI branch office. Whenever he gets employed in companies like yours, he can ask the Executive in the Personnel Department of that company to remit the ESI in his number since he is already registered. He can retain the ESI number; it is employee-specific.
From the employer's perspective, once a casual employee is engaged, register him and pay his contribution. If he is not engaged again the next month, forget about it, mark his attendance as zero, and contribute nothing since he was not paid any wages. That's all.
PF can also be done like this, but since PF is not employee-specific but employer-specific, it is not practically possible to transfer the PF account every time he is engaged in different establishments. Even one transfer takes a lot of time; just remember how it is possible to have multiple transfers. At the same time, for persons like wage earners, I don't think that PF will attract because you will not get a fabricator for less than 216 (6500/30) per day. Therefore, they must be engaged on wages of more than 6500 when computed monthly and accordingly remove them from the cover.
Regards,
Madhu.T.K
From India, Kannur
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From the employer's perspective, once a casual employee is engaged, register him and pay his contribution. If he is not engaged again the next month, forget about it, mark his attendance as zero, and contribute nothing since he was not paid any wages. That's all.
PF can also be done like this, but since PF is not employee-specific but employer-specific, it is not practically possible to transfer the PF account every time he is engaged in different establishments. Even one transfer takes a lot of time; just remember how it is possible to have multiple transfers. At the same time, for persons like wage earners, I don't think that PF will attract because you will not get a fabricator for less than 216 (6500/30) per day. Therefore, they must be engaged on wages of more than 6500 when computed monthly and accordingly remove them from the cover.
Regards,
Madhu.T.K
From India, Kannur
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When you engage any labor contractor/contractor who does not have PF/ESI registration, and such contractor is working on your premises or under your supervision and control, you are responsible and liable for PF/ESI compliance of the contract laborers working in your premises or under your supervision and control, even if they work for just one day.
You can exclude the employee from ESI as advised by Madhu ji. However, when excluding an employee from PF, you must be very cautious. You cannot exclude all employees earning Basic+DA more than Rs. 6500/- from PF; certain conditions apply.
Regarding your query on withdrawal/refund, there is no withdrawal/refund of ESI contributions paid. Withdrawal/refund/transfer of PF accumulation is not your concern unless you receive an application to that effect from the individual employee.
This post was made by me hurriedly. If there are any errors, seniors, please bring them to my attention.
From India, Mumbai
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You can exclude the employee from ESI as advised by Madhu ji. However, when excluding an employee from PF, you must be very cautious. You cannot exclude all employees earning Basic+DA more than Rs. 6500/- from PF; certain conditions apply.
Regarding your query on withdrawal/refund, there is no withdrawal/refund of ESI contributions paid. Withdrawal/refund/transfer of PF accumulation is not your concern unless you receive an application to that effect from the individual employee.
This post was made by me hurriedly. If there are any errors, seniors, please bring them to my attention.
From India, Mumbai
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ESI - Construction site workers.pdf