Pf Bebefit For Temporary Worker

Dear All,

I am working in a Steel Furniture Manufacturing Company. We have employed some temporary workers for manufacturing purposes, and their gross salary is around Rs. 6000/- on average. As per the PF rules, even temporary workers are supposed to be covered under the PF benefit. However, due to the high attrition rate, it is not conducive for us to bring all the employees under the scheme. Can anyone please suggest the best alternative without violating the rules?

With best regards, Debasish

Dear Debashish,

Trust this mail of mine finds you in the best of spirits.

Your posting reveals a very practical problem that we have to face to comply with the applicable statutory enactments.

Regarding the provision of PF, high attrition cannot be an acceptable excuse for not adhering to the said enactment, although I totally agree with you on the challenges the HR department faces in documentation when attrition is high.

My suggestions are as follows:

I. Fix the basic salary to Rs. 6600 (Basic + DA) and have all such workers sign Form 11 of EPF to avail exemption from EPF contribution. Additionally, ensure you pay 5% HRA on the basic salary extra, and the total amount should be the gross pay. Make sure the gross salary complies with the notified rate of Minimum wages applicable for your area and the schedule of employment the workers perform. Other statutory requirements like ESIC, Bonus, etc., should be paid as per the provisions of the respective acts.

OR

II. Engage such workers through contractors on a contract term basis where you make an all-inclusive payment of salary as per the applicable Minimum Wages for your state, including the cost of statutory contributions like EPF, ESIC, Bonus, etc. It will be the responsibility of the contractor to comply with all applicable enactments on your behalf. Keep regular checks to ensure statutory compliance by the contractor.

If you choose option I, one issue that may still arise is ESIC compliance, which is also compulsory. There may be other challenges to adhere to when attrition is high.

If you opt for the second option, you may consider seeking the expertise of "Pyramids Staffing Solutions Pvt Ltd." They offer effective and cost-optimized solutions in Contract Labour on a pan-India basis.

Please feel free to contact the undersigned at the provided number or write to us at arnab@pyramidsconsultants.com.

Kind Regards,

[Your Name]

It is always desirable to bring the temporary workers into EPF and ESI cover. The suggestion that we may make the salary (basic + DA) just above Rs 6500 is not a practical solution because the EPF Organization can at any time bring a higher salary limit for coverage. Since the discussions are on to make the salary ceiling Rs 9000 or even more so that more employees could be brought under EPF net, your purpose will not be served if you make the salary Rs 6501 from the present gross of Rs 6000.

Similarly, by engaging such temporary employees through a contractor, you (the principal employer) are not going to benefit much. Being the principal employer, you have to ensure that employees engaged by the contractor are getting all statutory benefits like PF, ESI, minimum wages, etc. This will in turn become your own cost or liability and in addition to this the contractor should also be paid a service charge. Besides this, service tax will have to be paid. In your case, the employees seem to be employed in regular work and engaging contract labour in work of regular nature in which a regular employee can be engaged is illegal as per the Contract Labour (Regulation and Abolition) Act.

Besides all the above, in my practical knowledge as an IR person, I have seen that contract labour often resort to strikes to press their demands and when they strike, the principal employer is often brought in for negotiations or the principal employer would be forced to call for a negotiation with the contract workers. Finally, the contract itself would become a sham contract resulting in a regularization claim by the employees. Therefore, I will not advise you to bring the employees under a contractor.

Regards,

Madhu.T.K

Nowadays, the minimum wage itself is more than Rs 6500. It is better to fix the salary consolidated at Rs 6600 or more, exempt from PF provisions, and pay the other statutory provisions such as ESI, PT, etc., to lessen the financial burden.