Are seconded employees from the holding company considered contract workmen under CLRA?
Employer and Project Company Financial Arrangements
The employer does not book any expenses on behalf of the Project Company. The employer maintains a separate balance sheet, and the Project Company also has its own balance sheet. Alternatively, the Project Company's P&L becomes part of the consolidated balance sheet of SPGVL.
Salary Payment and Statutory Contributions
Can the Host Entity pay the salary and remit statutory contributions using the PF registration of the Employer?
Additional Consideration for Secondment
In secondment from a parent company, is there a requirement for additional consideration payable to the Employer for seconding the services to the Host Entity (Subsidiary)?
Fund Transfers for Statutory Contributions
Can the Host Entity transfer funds (without an invoicing process) regarding statutory contributions like PF, ESIC, PT, LWF, etc., to the Employer for remitting the contributions under their code?
Full and Final Settlement During Secondment
During the secondment period, if any employee leaves, how will the full and final settlement be closed? In our arrangement, salaries are from the Host Entity (Project Company), and the Host Entity is transferring funds for statutory remittances as well to the Original Employer. Will the Original Employer bear the cost of other components like leave encashment, gratuity, or any other deductions from the Original Employer's finance?
Establishing Payment of Wages
Since salaries are paid by the Project Company (Host Entity) based on internal understanding (no invoice will be raised between the two entities), in the event of any inspection, will the Employer be able to establish the payment of wages to their employees?
Salary Slip Issuance During Secondment
While the employee is on secondment, the salary slip will be issued by the SPV (Host Entity). We mention the PF number on all employees' salary slips. In this scenario, the PF number mentioned on each pay slip will be of the Original Employer. Is this acceptable?
Legal Recourse for Unpaid Salaries
Can any employee go to the labor court claiming that the Original Employer has not paid the salaries as per the appointment terms for the period he has been on secondment with the Project Company (Host Entity)?
Response to PF Enforcement Officer Inspection
If any PF Enforcement Officer visits the Project Company (Host Entity) location for inspection, due to jurisdiction constraints, will our response to the EPFO EO be that the employees working at the Project Company (Host Entity) are not Project Company employees but are getting paid salaries from the Project Company, and their PF is remitted to the Original Employer in Delhi?
From India, Delhi
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Employer and Project Company Financial Arrangements
The employer does not book any expenses on behalf of the Project Company. The employer maintains a separate balance sheet, and the Project Company also has its own balance sheet. Alternatively, the Project Company's P&L becomes part of the consolidated balance sheet of SPGVL.
Salary Payment and Statutory Contributions
Can the Host Entity pay the salary and remit statutory contributions using the PF registration of the Employer?
Additional Consideration for Secondment
In secondment from a parent company, is there a requirement for additional consideration payable to the Employer for seconding the services to the Host Entity (Subsidiary)?
Fund Transfers for Statutory Contributions
Can the Host Entity transfer funds (without an invoicing process) regarding statutory contributions like PF, ESIC, PT, LWF, etc., to the Employer for remitting the contributions under their code?
Full and Final Settlement During Secondment
During the secondment period, if any employee leaves, how will the full and final settlement be closed? In our arrangement, salaries are from the Host Entity (Project Company), and the Host Entity is transferring funds for statutory remittances as well to the Original Employer. Will the Original Employer bear the cost of other components like leave encashment, gratuity, or any other deductions from the Original Employer's finance?
Establishing Payment of Wages
Since salaries are paid by the Project Company (Host Entity) based on internal understanding (no invoice will be raised between the two entities), in the event of any inspection, will the Employer be able to establish the payment of wages to their employees?
Salary Slip Issuance During Secondment
While the employee is on secondment, the salary slip will be issued by the SPV (Host Entity). We mention the PF number on all employees' salary slips. In this scenario, the PF number mentioned on each pay slip will be of the Original Employer. Is this acceptable?
Legal Recourse for Unpaid Salaries
Can any employee go to the labor court claiming that the Original Employer has not paid the salaries as per the appointment terms for the period he has been on secondment with the Project Company (Host Entity)?
Response to PF Enforcement Officer Inspection
If any PF Enforcement Officer visits the Project Company (Host Entity) location for inspection, due to jurisdiction constraints, will our response to the EPFO EO be that the employees working at the Project Company (Host Entity) are not Project Company employees but are getting paid salaries from the Project Company, and their PF is remitted to the Original Employer in Delhi?
From India, Delhi
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My views are as follows:
1. No, the CLRA Act is not applicable. There is no contractor involved; it is only a temporary transfer of service between two sister units.
2. This is an accounting practice. If the Project Company is separately registered, it must have its P&L accounts settled every year. Whether it is to be a part of the SPGVL is a managerial decision.
3. Yes, since the salary is paid by the host, it can remit the statutory contributions but should keep records at both ends.
4. Not necessary. We have done so without any additional remuneration, but if it is done, it would definitely be an incentive.
5. It can be transferred without any invoice, etc. However, this aspect could be covered in the correspondence between both organizations.
6. If the employee leaves service, the full and final settlement is to be made by the original company as he is still on its rolls, and he will have a claim of being back in employment there. The transfer of money between the host company and the original company is a mutual affair depending on the finances of both entities. However, a fair method is that the host company pays the proportionate expenses for the secondment period to the original company.
7. Yes, the original company shall keep a copy of the wage bill, payment details, statutory contributions made, and this would suffice if called to produce the evidence.
8. Yes, this would suffice.
9. If he goes to court, it would be sufficient to prove that the employee is seeking double employment, which is illegal as per the Factories Act 1948.
10. Yes, this is a valid explanation. The EO EPFO can only seek compliance either by the Project Company or by the Original Employer. The remittance details can be verified from anywhere. So it is not an issue at all.
I hope the above clarifies.
From India, Mumbai
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15931. No, the CLRA Act is not applicable. There is no contractor involved; it is only a temporary transfer of service between two sister units.
2. This is an accounting practice. If the Project Company is separately registered, it must have its P&L accounts settled every year. Whether it is to be a part of the SPGVL is a managerial decision.
3. Yes, since the salary is paid by the host, it can remit the statutory contributions but should keep records at both ends.
4. Not necessary. We have done so without any additional remuneration, but if it is done, it would definitely be an incentive.
5. It can be transferred without any invoice, etc. However, this aspect could be covered in the correspondence between both organizations.
6. If the employee leaves service, the full and final settlement is to be made by the original company as he is still on its rolls, and he will have a claim of being back in employment there. The transfer of money between the host company and the original company is a mutual affair depending on the finances of both entities. However, a fair method is that the host company pays the proportionate expenses for the secondment period to the original company.
7. Yes, the original company shall keep a copy of the wage bill, payment details, statutory contributions made, and this would suffice if called to produce the evidence.
8. Yes, this would suffice.
9. If he goes to court, it would be sufficient to prove that the employee is seeking double employment, which is illegal as per the Factories Act 1948.
10. Yes, this is a valid explanation. The EO EPFO can only seek compliance either by the Project Company or by the Original Employer. The remittance details can be verified from anywhere. So it is not an issue at all.
I hope the above clarifies.
From India, Mumbai
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EMPLOYER COMPENSATION AS PER W.C. ACT.doc