Dear All,
I have query related to Applicability of Contract Labour Act & PF Act:
XYZ Ltd. is Solitaire Cutting & Polishing company, it outsource its job work to its job contractor to manufacture at their premises. The job contractor take rough Solitaire from XYZ company's office. The Job Contractor cut & polish the solitaire in their own factory premises located in various districts of Gujrat & Maharashtra. These Job Contractor raise bill on the basis of quantity of polish Solitaire they produce in their factory. These job contractors are free to have rough solitaire for polishing from other companies also, in most cases they do get it from other companies. They employ their own worker and pay salary to their workers on the basis of piece rate basis. Almost 90% Job Contractors doesn't pay PF and ESIC benefits to its workers.
Labour officer from Labour department & PF enforcement officer visits office of XYZ and observe the payment made to these job contractors.
1) Now my query is whether in given scenario XYZ Ltd. can be treated as Principal Employer;
2) Whether XYZ Ltd. is liable to deduct PF & ESIC from the payment of its job contractors. since these payment includes their profits also.
Looking forward for your reply.
With regards,
Avinash K.
From India, Mumbai
60I have query related to Applicability of Contract Labour Act & PF Act:
XYZ Ltd. is Solitaire Cutting & Polishing company, it outsource its job work to its job contractor to manufacture at their premises. The job contractor take rough Solitaire from XYZ company's office. The Job Contractor cut & polish the solitaire in their own factory premises located in various districts of Gujrat & Maharashtra. These Job Contractor raise bill on the basis of quantity of polish Solitaire they produce in their factory. These job contractors are free to have rough solitaire for polishing from other companies also, in most cases they do get it from other companies. They employ their own worker and pay salary to their workers on the basis of piece rate basis. Almost 90% Job Contractors doesn't pay PF and ESIC benefits to its workers.
Labour officer from Labour department & PF enforcement officer visits office of XYZ and observe the payment made to these job contractors.
1) Now my query is whether in given scenario XYZ Ltd. can be treated as Principal Employer;
2) Whether XYZ Ltd. is liable to deduct PF & ESIC from the payment of its job contractors. since these payment includes their profits also.
Looking forward for your reply.
With regards,
Avinash K.
From India, Mumbai
.
1) Now my query is whether in given scenario XYZ Ltd. can be treated as Principal Employer;
Yes XYZ Limited is the Principal employer
2) Whether XYZ Ltd. is liable to deduct PF & ESIC from the payment of its job contractors. since these payment includes their profits also.
Deduction of Statutory liability has no relevance with Profit That is the minimum one need to deduct. The contracor should have signed a contract incorporating statutory liabilities
Minimum wages + PF+ ESI+ 8.33% Bonus +Leave salary at4% is the bare minimum for labour contract. Add profit margin over and above this
Principal employer will focus on productivity rather than saving cost on statutory liabilities
From India, Chennai
1) Now my query is whether in given scenario XYZ Ltd. can be treated as Principal Employer;
Yes XYZ Limited is the Principal employer
2) Whether XYZ Ltd. is liable to deduct PF & ESIC from the payment of its job contractors. since these payment includes their profits also.
Deduction of Statutory liability has no relevance with Profit That is the minimum one need to deduct. The contracor should have signed a contract incorporating statutory liabilities
Minimum wages + PF+ ESI+ 8.33% Bonus +Leave salary at4% is the bare minimum for labour contract. Add profit margin over and above this
Principal employer will focus on productivity rather than saving cost on statutory liabilities
From India, Chennai
Hi BSSV & Shivsankaranji,
Thanks for the reply.
I have little doubt.
Now a days, every big industry/company outsources some of work of manufacturing to smaller industries, who undertake to do it more profitablly and efficiently. Additionally these industries are independent manunfacturing facilities, who have nothing to do with the XYZ Ltd. apart from manufacturing on piece rate basis. Moreover XYZ Ltd. has no control over the affairs of these Job Contractors. Today they are manufacturing for XYZ Ltd. additionally they manufacturing for ABC, CHE or any other companies.
So How come XYZ is treated as Principal Employer or even held responsible for PF deduction?
Looking forward for your reply.
Regards,
Avinash K.
From India, Mumbai
Thanks for the reply.
I have little doubt.
Now a days, every big industry/company outsources some of work of manufacturing to smaller industries, who undertake to do it more profitablly and efficiently. Additionally these industries are independent manunfacturing facilities, who have nothing to do with the XYZ Ltd. apart from manufacturing on piece rate basis. Moreover XYZ Ltd. has no control over the affairs of these Job Contractors. Today they are manufacturing for XYZ Ltd. additionally they manufacturing for ABC, CHE or any other companies.
So How come XYZ is treated as Principal Employer or even held responsible for PF deduction?
Looking forward for your reply.
Regards,
Avinash K.
From India, Mumbai
If the employees are being outsourced then the employer who is holding the right in employee to outsource them is responsible... he becomes the employer......
Say, A is the company hires 50 employees and send them to work at your place, then you are not responsible but A is responsible. Because he is the employer of the 50 employees and the one who pays them.
2) A is the company hires 50 employees, but it will not send to other place but it takes the work projects from other say B C D E & F companies.
You mean to say, why cant these B C D E & F are liable to pay PF to 50 employees.
IT is A who is employed those 50 employees and A is the one which is PAYING them their Salaries and not B C D E & F. Hence, 50 employees are the employees of A. So when A is paying their salaries, it is A's responsibility to pay them their PF and other benefits right??
How can B C D E & F deduct PF amount from the basic salary of those 50 employees when they are paying it??
Hence, A company is taking the work from B C D E & F, just serving them, and A' 50 employees has got nothing to do with B C D E & F. But 50 employees are subjected to A directly.
Hope I am not confusing you..........
From India, Bangalore
Say, A is the company hires 50 employees and send them to work at your place, then you are not responsible but A is responsible. Because he is the employer of the 50 employees and the one who pays them.
2) A is the company hires 50 employees, but it will not send to other place but it takes the work projects from other say B C D E & F companies.
You mean to say, why cant these B C D E & F are liable to pay PF to 50 employees.
IT is A who is employed those 50 employees and A is the one which is PAYING them their Salaries and not B C D E & F. Hence, 50 employees are the employees of A. So when A is paying their salaries, it is A's responsibility to pay them their PF and other benefits right??
How can B C D E & F deduct PF amount from the basic salary of those 50 employees when they are paying it??
Hence, A company is taking the work from B C D E & F, just serving them, and A' 50 employees has got nothing to do with B C D E & F. But 50 employees are subjected to A directly.
Hope I am not confusing you..........
From India, Bangalore
Dear BSSV,
XYZ Ltd. does not hire any employees in HKG Pvt. ltd. who is just doing contract manufacturing e.g. you see in the Godrej soap, although they carry the brand name of Godrej but the soaps are not manufactured at Godrej Factories, if you see carefully in cartoon they are marketed by Godrej but manufactured at xxx pvt. Ltd. in given scenario, one can not hold Godrej or xxx ltd. for all misdeed committed by the contract manufacturers.
All the employee working for xxx pvt. ltd does not become ultimate contract employees of Godrej or xxx ltd. just because they contract manufacturing the soap or any other thing which will be later marketed by them but not manufactured at their premises.
I hope to make things clear and waiting for your reply.
With regards,
Avinash K.
From India, Mumbai
XYZ Ltd. does not hire any employees in HKG Pvt. ltd. who is just doing contract manufacturing e.g. you see in the Godrej soap, although they carry the brand name of Godrej but the soaps are not manufactured at Godrej Factories, if you see carefully in cartoon they are marketed by Godrej but manufactured at xxx pvt. Ltd. in given scenario, one can not hold Godrej or xxx ltd. for all misdeed committed by the contract manufacturers.
All the employee working for xxx pvt. ltd does not become ultimate contract employees of Godrej or xxx ltd. just because they contract manufacturing the soap or any other thing which will be later marketed by them but not manufactured at their premises.
I hope to make things clear and waiting for your reply.
With regards,
Avinash K.
From India, Mumbai
We call it "Exclusive Marketing Rights" (EMR) in legal terms. Who ever may manufacture the products but you own complete rights over the products. Right to Trade... Just like the Britannia Marie Gold biscuits, manufactured by some other factory but "overall rights" are held with Britannia..... and yes, the godrej too..... and the spare parts of cars, durable!!...... The Branding is held with the rights owner.
Yes. you got it ;-) employees do not become the employees of Godrej. Cheers!! :-)
From India, Bangalore
Yes. you got it ;-) employees do not become the employees of Godrej. Cheers!! :-)
From India, Bangalore
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Child & Adolescent Labour Prohibition Act - Schedule amdmt 30082017.pdf
Contract Labour Act.zip
SELF-CERTIFICAT E PROFORMA UNNDER CONTRACT LABOUR (R&A) ACT, 1970.doc