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 for overtime and not a double rate. Their claim is that while issuing a PO to them by the procurement department, a double rate for OT was not given in their PO, and hence, they cannot extend that to the contract worker.

As an HR head, can I take the following steps: We shall clear the invoice of the said contractor to avoid any CW issue for wage payment. At the same time, we can ask the user department to proceed with Purchase Requisition - Purchase Order for Overtime, 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 government, 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 seriously and will not give much importance, and only HR has to struggle as a lone warrior. 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 the 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 are 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 a statutory requirement, not at the discretion of PE or Contractor. The Factories Act is very specific, and the Power Plant is also a Factory.

This is gross negligence and exploitation of the weaker partners of society (contract labor).

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions, +91 98310 81531 skb@usdhrs.in 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 depends on how the contract was negotiated. USD HR Solutions outsourced about 200 employees of MNCs and Indian organizations through their payroll, and the payment terms are negotiated and finalized as follows:

Monthly Gross + Employer portion of PF (as per PF and Misc. Act) + Employer portion of ESI (as per ESIC rules and regulations) + 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 + Retrenchment benefit payable to contractual employees + Service charge fixed per employee per month or % basis + GST on the 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 a PO for each item. Moreover, if there are any changes in PF, ESIC, Gratuity, Bonus, Leave encashment, Retrenchment benefit, etc., during the operating period of the agreement, it will not be an issue. There will be a renewal procedure at the end of the year or as agreed upon by the parties - PE and Service Provider.

S K Bandyopadhyay (WB, Howrah) CEO - USD HR Solutions +91 98310 81531 skb@usdhrs.in 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 regardless of whether it was included in the PO and whether he is being reimbursed for it. The law does not consider how he priced his contract or negotiated it.

Furthermore, in the event of a complaint by even one worker to the Labour Commissioner, the department will conduct an investigation and ensure the payment of the differential for the past three years. They will likely scrutinize your entire payroll, identify any issues, and issue a show-cause notice and a demand.

If the contractor fails to make the payment, the principal employer (your company) will be responsible for it, and no excuses will be accepted.

Therefore, you need to take the following steps:
- Bring the matter to the attention of the HR Head, Contract Cell Head, Legal Head, and other relevant managers.
- Request the contractor to pay double-rate OT. Whether you choose to withhold his payment is your decision. Consider the HR Head's input as non-payment of wages would have a significant negative impact.
- Inform the contract cell or the person issuing the PO to ensure this issue does not recur.