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PF & ESI - Principle Employers responsibility
Human Resources » Compensation & Benefits

Chrm Message From: sanjibani Total Posts: 21 Join Date: 04/04/2009
Rank: Executive Post Date: 04/04/2009 01:21:22 Points: 105 Location: India

Dear all, 
I am working in a Manufacturing Company and we are out sourcing part of our operations. 
Now the problem is some of our Ancillaries not complied with PF/  ESI. The PF / ESI officials insisting us to hold the  ancillary  payments / not give any further works. 
Regarding this issue I had a discussion with my  Director  (foreigner), his stand is that " we buy a service  and we pay for it,  we work with the people who give quality and  quantity, if the Govt.  has any issue with the ancillaries they must target  them not us". 

My problem is my TOP MANAGEMNET is focusing only on  production,  Please help me to handle this situation!!!! If  anybody handled the  same kind of situations please share your  experience. 
Your immediate advise in this regard will be highly  appreciated. 
Thanks & Best Regards,


Chrm Message From: subramani Total Posts: 30 Join Date: 04/04/2009  
Rank: Executive Post Date: 04/04/2009 01:22:22 Points: 150 Location: India

If the contractor or the outsourced acivity is taking place within the factory premises, then you become responsible for the ESI and PF regulations as a Principal Employer. If the activities are done at the contractor's place or outside the factory premises, then you, as a principal employer is not responsible for ESI and PF. Recent Supreme court judgement has clearly stated this, and the Officials from the govt agencies cannot hold you responsible or cannot give any direction to you with regard to payment or any other issue.

Hope this helps : - )


Chrm Message From: jothiramani shreya Total Posts: 32 Join Date: 04/04/2009  
Rank: Executive Post Date: 04/04/2009 01:23:59 Points: 160 Location: India

Hi, all,

If i could understand coorectly the issue is your ancillaries working for your manufactuirng units by way of subcontracing labours in your services are not paying the statuory ESI and EPF for employees whom they have employed in your work permisis, it is potentially dangerous for you that it may fall on you as a principal employee to be obligated to make these payments.

The solution is go for a supplier who is fully complied stautoryly, there are many man power contractors who just provide mapower just because they have the source, but a professional reputed firm would do the same wiht all the stautes fulfilled and may cost a little more. (it is manddatory that you insist that who bid for your contracts have the various statutory required before bidding,- list out them)

Always remember it is these provisions of the act, that benifits the sub contract employees directly, and they are in your premisis and working for your production even though indirectly.

On your TOP MANAGEMENT (who are obiviously foreigners) dont try to prove that you could bring cheap labour there by trying to project to them that India is still a country with cheap labour.

It is you who have the reuqirement of your ancillaries and not the government, so if you need services through them it is better to have them stautoryly complied, if you leave it to the government they could penalise and close the ancillary supplier where in it is your production unit that is to suffer by not having its services from the ancillary.

With my limited experience dealing with simialr situation of employing direct contract labour thorugh various sub contractors i have given my opinion, hope it helps in clarifying your point.


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