Contract employees working on your premises? You are responsible for their compliance! Pratik Vaidya’s take on how to ensure you stay compliant at all times. Don’t miss out on the Q&A inside!
Host to an Expert Webinar at greytHR, on a topic that addressed the needs of over 500 participants, Pratik Vaidya began with the basics. He paused often to take the quickly mounting questions and in general delivered a session far more interactive and valuable than we could have hoped for.
We didn’t want you to miss out, so here are the highlights.
If you prefer a quick read on key takeaways for the principal employer, head here.
Many organizations employ contract employees in the form of housekeeping staff, security guards, cafeteria personnel, etc. Add to this the rise of the gig economy, and compliance management with regard to contract employees takes on added significance.
Interchangeably called the vendor, supplier, contractor or partner, a contractor is a third party who offers services that deliver results for your own organization. Now, a contractor may be of different types. Here we only look at those who deploy contract employees on-premise at their client (your) location and offer their services to you for 8-9 hours a day for over 240 days a year. In particular, we look at the aspects that you as the principal employer need to look into when enlisting contract employees.
Why should you care?
The law of the land necessitates that all employees - whether direct or indirect - deployed on your premises be compliant with the relevant laws at all times. The responsibility for the benefits and compliance of all such direct employees and contract or indirect employees falls on you - the principal employer.
Defining relationships: Principal employer, contractor, sub-contractor
The occupier of the premises where the deployed employees work is called the principal employer. Such a person should hold a valid Shops and Establishment license or a valid factory license. Now, on the principal employer’s premises, various contractors and sub-contractors may have deployed employees. These contractors and subcontractors must be viewed with an equal eye.
In a (rather big) nutshell: The laws governing contract labor
Various national and state laws govern contract labor. These are:
Q1. If a person is working as a consultant, is it mandatory to deduct PF and PT for the person?
Ans: The term ‘consultant’ is not mentioned in labor law. If the individual is deployed on premises, and is dedicated to the same client, then he or she is termed a ‘deemed employee’. In this case PF and ESI will apply to him. If he’s not working on your premises, the question of vendor compliance does not arise.
Q2. Can a company have two dfferent salary stuctures at a time, with some employees being paid salaries and others being paid wages?
Ans: You can have any salary structure, but the pay cycle is not to exceed 30 days. Also, once the cycle ends, the payout is to be made in 7 days (if employing less than 1000 employees) or 10 days, depending on the employee headcount.
Q3. We have employees who are paid salaries in line with minimum wages. Our gross salaries are in line but not the basic wages. Is this compliant?
Ans: So long as wages are more than minimum wages, any breakup is okay. But very less basic may attract questions from the PF dept.
Q4. We engage an employee who is deputed on location for 200 hours. Are PF, ESI and PT the responsibilities of the principal employer?
Ans: No matter the conditions of the contract, if an employee is working on your premises, then PF, ESI and all benefits are to be given to the employee.**
Q5. If employees are working on an hourly basis, are PF and ESI to be paid? Ans: Consider a carpenter who puts in 30 minutes of work at your establishment. Here, collect an invoice of material and labor charges from the carpenter, then deduct PF and ESI on the labor charges alone. If only a consolidated invoice is made available, then out of every 100 rupees, 30-35% is to be considered labor charges and PF and ESI paid on that. Now, hiring may also be on a regular basis. If regular, one has to be compliant under the PF and ESI Acts.
Any vendor is to have valid PF and ESI registrations. However, the onus is on you to have their credentials on your code number and extend benefits to employees through your code.
Q6. We do deductions on the uniforms we provide. Is this legitimate?
Ans: If this being done as a part of payslip/wages, then it is non-compliant.
Q7. Do PF and ESI apply to franchise employees if the franchise is a separate entity?
Ans: Given they are a separate entity, they have a Shops and Establishment license in their name. You are not at risk for their PF, ESI compliances.
Q8. We employ 10 individuals in a cafeteria. Should we follow statutory compliances? Ans: Yes. Benefits to these employees are to be extended on your PF and ESI registration code.**