Over time payment violation - they have paid only a single rate Over time and not a double rate

We are from a power plant in Gujarat. We have one contractor who supplies manpower to the Maintenance department. While processing their legal compliance documents it has been observed that they have paid only a single rate Over time and not a double rate.
Their claim is that while issuing PO to them by procurement dept. has not given a double rate for OT in their PO and hence, they can not extend that to the contract worker.

As an HR head can I take the following step:
We shall clear the invoice of the said contractor to avoid any C.W issue for wage payment.
At the same time, we can ask the user dept. to proceed for Purchase Requisition -Purchase Order for Over Time which will be compiled against the double payment through PR-PO with retrospective effect.
Seeking your suggestions.

Dear Colleague,
This is a common compliance gap found in many of the Factories by the Contractors and in some cases even by the Principal Employers themselves. This is a serious violation and if action is initiated by the Govt, it attracts penalties. Normally the authorities give a lenient view and thus the defaulters escape from the provisions of penal actions.

As far as the given scenario is concerned, the user departments will not take this serious and will not give much importance and only HR has to struggle as a lone warri0r. Here we had such complex situations and what we did was a separate PO for OT Payment at the double rate and bill processing, payment everything is separated out. If wages are paid on 7th of every month, the OT is paid on every 10th. Once they comply with double wages etc only the Contractor Margin will be released on every 15th after checking PF/ ESI and other compliance requirements. Hence what we have to improve is the checks and controls that only will help.

While issuing PO by PE to Contractor is it mentioned to pay PF, ESI, BONUS, GRATUITY ETC to the employee. Probably the answer is "No ".

Then why is it necessary to mention OT to be paid at the double rate. Like PF, ESI ETC. - OT payment is also one statutory requirement, not as per discretion of PE or Contractor. Factories Act is very specific and the Power Plant is also Factory.

This is gross negligence and exploitation to weaker partner of the society ( contract labour ).

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions,
+91 98310 81531
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USD HR Solutions – To Strive towards excellence with effort and integrity

Dear friends and senior members,

Though the exact solution of the problem depends upon how the contract was negotiated and management strategy.

But I would like to mention some points based on my practical experiences. Now a days the working conditions and norms are dynamic which sometime leads to contradictory situations.

The manpower handling job has been point of concern from long back (due to involvement of various factors like negotiations, compliance, site/job requirement, personal perceptions etc.).

1. The negotiation is part of PSCM, their main focus is upto L1 (Lowest One) offer only and want to optimize the cost hence pay least attention to compliance. Earlier such job was negotiated on lump sum basis (Fixed value contract) in which the contractor was supposed to independently handle all compliance and the PE least involved. In this pattern labour exploitation was high. But now for doing proper compliance it is done on basis of Service Charges (% on CTC as per actual deployment).
2. Due to increasing scope of Labour Laws, from last few years the HR Dept. is also involved in such activities (employment detail, Labour Compliance, Recruitment, Compensation & Benefits etc.).
3. The Project people (Operation Team) is most likely to depute personnel and vendor as per their requirement. So that smooth operations can be maintained without any hassle. Moreover, sometime they have personal favors as well (in connection of vendor engagement and personnel deployment).

IF the “Double OT” is not considered in the CTC / Price of work, how come we can suppose the contractor to pay the same. Moreover, in project costing management approval is taken for site specific POs. If these points not considered in the “Costing approval” than there is no value (in the PO) and HR can’t process the Bills.

So while taking costing approval it is recommended to consider all components properly (No. of projected personnel, expected OT, statutory compliance, expected rate revisions under MW Act etc.). It is better to take some higher amt. approval and process the bills as per actual and certified CTC.

I do agree with Pan singh that the issue is depend on how the contract was negotiated. USD HR Solutions outsourced about 200 employees of MNCs & Indian organizations through their own pay roll and the payment term is negotiated and finalised as follows:-

( Monthly Gross + Employer portion of PF -as per PF and Misc.act + Employer portion of ESI - as per ESIC rules and regulation + OT if any as per Factories Act or S & E Act + Statutory Bonus as and when payable as per Payment of Bonus Act + Gratuity as and when payable as per payment of gratuity act + Leave encashment as and when payable as per Factories Act/S & E Act + Any other payment if specially directed by PE + If there is any retrenchment benefit payable to contractual employee) + Service charge fixed per employee per month or % basis + GST on whole amount including Service Charge - monthly invoice. Payment is made by PE after deduction of TDS.

In the above process there will be no need for PO for each items.Moreover, if there is any change in PF, ESIC, Gratuity, Bonus, Leave encashment, Retrenchment benefit etc. in between operating period of the agreement, it will not be any issue. There will be renewal procedure at the end of the year or as will be agreed by the parties - PE & Service Provider.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions,
+91 98310 81531
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USD HR Solutions – To Strive towards excellence with effort and integrity

Dear Salil

Get one point clear, and take this up to the top management.

The contractor is liable to pay double rate OT irrespective of whether he had it in the PO and whether he is getting the reimbursement for it. The law does not care about how he priced his contract or how he negotiated it.

Further, in case of a complaint by even one worker to the Labour Commissioner, the department will investigate and enforce the differential pay for the past 3 years. They may (and probably will) investigate your entire payroll and find every problem and issue a show-cause and a demand.

If the contractor does not pay, the principal employer (your company) will be liable to pay it and no amount of excuses will be accepted.

Therefore, you need to take the following steps :
- Bring the matter to the notice of the HR Head, Contract Cell Head, Legal Head and other concerned managers.
- Ask the contractor to pay double rate OT. Whether you want to hold back his bill or not is your call. Take the HR Head into consideration as non payment of salaries will be a massive negative impact.
- Inform the contract cell or the person issuing the PO that he needs to ensure this is not repeated.