We are contractors who provide machinery (forklifts) on rent to factories along with drivers. The factory HR department, where we are providing services, requests monthly submission of PF, ESI, and salary-related data for the drivers. Since the drivers are our employees, is there a need to comply with the factory HR policies and rules? Please clarify.
From India, Nagpur
Acknowledge(0)
Amend(0)
From India, Nagpur
Acknowledge(0)Amend(0)
When your service is to lease out the forklifts, stackers, etc., then the question of CLRA Act coming in will not arise. In this arrangement, it will be rent that you will be receiving from the company, and that rent is inclusive of your drivers' wages, wear and tear of forklifts, interest on the capital invested, and many other miscellaneous charges.
The contract being a contract for service is outside the purview of the CLRA Act, and hence there is no need to provide details of payment of wages and PF/ESI remittances in respect of the drivers.
From India, Kannur
Acknowledge(0)Amend(0)
4483The contract being a contract for service is outside the purview of the CLRA Act, and hence there is no need to provide details of payment of wages and PF/ESI remittances in respect of the drivers.
From India, Kannur
Acknowledge(0)Amend(0)
If at all you are engaging fewer than 20 out of 50 individuals based on the respective state CLRA, it is not applicable. However, other compliances like Minimum wages, Payment of Wages, ESI, EPF, and PT are mandatory for all persons engaged in the factory. If the vendor is not complying, then the responsibility lies with the factory.
From India, Bangalore
Acknowledge(0)Amend(0)
From India, Bangalore
Acknowledge(0)Amend(0)
That is the dispute. In this contract (a contract for service and not a contract OF service), there exists no employer-employee relationship, but the relationship is just like a purchaser and seller. It is just like hiring the service of a truck for transporting the goods on a regular basis or hiring the service of a cab for the employees. When you hire a taxi, will you ever ask whether the owner of the taxi has paid a salary to the driver? It is true if you have a car or truck and in order to run it you hire the services of a driver, and then you pay the concerned agency their bill which should include only the driver's wages plus an amount as service charges. In such an arrangement, the employer/the factory occupier will become the Principal employer in respect of the driver. But when the arrangement is that a vehicle is leased out and the fuel, maintenance, wages of the crew, etc., are met by the agency who owns or possesses the vehicle and in consideration, the latter issues an invoice, then he is the seller of service in all respects. The factory owner is not at all concerned with the wages, PF or ESI, fuel, maintenance, etc., but he buys the service in return for a consideration payable based on the kilometer run, kilo/tons of load carried.
However, whether the provisions of the CLRA will apply or not will be finally decided by the agreement between the two parties. It is true that a clause in the agreement to the effect that the driver should inform the factory manager of his absence on any day, the driver should report to an officer of the company, the driver is subject to disciplinary action if he is involved in any misconduct, etc., will make the agreement take a different status.
From India, Kannur
Acknowledge(0)Amend(0)
However, whether the provisions of the CLRA will apply or not will be finally decided by the agreement between the two parties. It is true that a clause in the agreement to the effect that the driver should inform the factory manager of his absence on any day, the driver should report to an officer of the company, the driver is subject to disciplinary action if he is involved in any misconduct, etc., will make the agreement take a different status.
From India, Kannur
Acknowledge(0)Amend(0)
If you are charging for services like "per hour per forklift" or "per month per forklift," then there is no need to provide individual driver details; however, you should submit the PF and ESI challans along with your invoice.
If you are charging for machinery and manpower separately, then all the drivers' records copies should be submitted to the Factory HR.
Reach out to me if you require more information.
From India, Chennai
Acknowledge(0)Amend(0)
If you are charging for machinery and manpower separately, then all the drivers' records copies should be submitted to the Factory HR.
Reach out to me if you require more information.
From India, Chennai
Acknowledge(0)Amend(0)
It is interesting to know that when the vendor is charging per kilo the drivers details are not needed but should submit the ESI and PF challans. What does it mean?
From India, Kannur
Acknowledge(0)Amend(0)
From India, Kannur
Acknowledge(0)Amend(0)
The forklift and other machineries provided on hiring are required to comply with PF, ESIC, and the Wages Act by the service provider contractor. The HR is right to ask you to submit the details of PF, ESIC, and salary-related data of the drivers on a monthly basis. This is a rule as well as per the act because you are the contractor, and the drivers/operators are attached to the machineries provided by you. The Principal Employer is paying the cost of operation along with the hiring charges, which may be hourly or as per the unit.
The contractor only provides machineries but not the operators, required not to comply with PF, ESI, and Wages. Further, if your manpower engaged in hiring machineries is 20 or more, or less, they come under the CL(R&A) Act because the establishment of PE is registered under the CL(R&A) Act. But no CL(R&A) license is required where the number is less than 20, but you need to abide by the CL(R&A) rules of the state.
From India, Mumbai
Acknowledge(0)Amend(0)
The contractor only provides machineries but not the operators, required not to comply with PF, ESI, and Wages. Further, if your manpower engaged in hiring machineries is 20 or more, or less, they come under the CL(R&A) Act because the establishment of PE is registered under the CL(R&A) Act. But no CL(R&A) license is required where the number is less than 20, but you need to abide by the CL(R&A) rules of the state.
From India, Mumbai
Acknowledge(0)Amend(0)
For this situation, you don't need to take the license under the CLRA Act as you have only one employee (driver) engaged in the factory. However, if you have registration under the EPF and ESIC (in respect of the total number in your firm for eligibility under the EPF and ESIC), then you may submit his monthly contributions and submit them to the concerned company.
From India, Rudarpur
Acknowledge(0)Amend(0)
From India, Rudarpur
Acknowledge(0)Amend(0)
In this case, the principal employer and the contractor should first ensure and establish the very purpose of the services they are dealing with.
As the service receiver, the principal employer (PE) is hiring the machine and manpower (driver) from the contractor. Although the contractor is not a manpower services provider, and being a machine provider, he cannot skip the obligation of social security and any other social, regulatory, or statutory obligation in respect of any such person he is going to provide along with his machinery for contract services to the PE within his premises.
Under such circumstances, it is mandatory for the PE to establish a contract agreement that binds the service provider in the interest of statutory and regulatory fulfillment. It is also noteworthy to say that if any person (driver in this case) is working for the contractor as an employee, then it is obligatory for the contractor to cover him under statutory norms and provide wages and compensation accordingly.
Therefore, asking for EPF/ EPIC challans or any other compliance proof by the PE is valid. If the contractor does not have any such arrangement of compliance as he is not a manpower provider or for any other reason, he should seek the solution from the principal employer.
It is important to understand that one cannot escape statutory obligations regarding human resources by simply stating that since they are providing machines, they would not be responsible for their operators and can avoid compliance. The principal employer has the responsibility to establish the contracts correctly and in the best interest of both parties.
From India, Vadodara
Acknowledge(0)Amend(0)
As the service receiver, the principal employer (PE) is hiring the machine and manpower (driver) from the contractor. Although the contractor is not a manpower services provider, and being a machine provider, he cannot skip the obligation of social security and any other social, regulatory, or statutory obligation in respect of any such person he is going to provide along with his machinery for contract services to the PE within his premises.
Under such circumstances, it is mandatory for the PE to establish a contract agreement that binds the service provider in the interest of statutory and regulatory fulfillment. It is also noteworthy to say that if any person (driver in this case) is working for the contractor as an employee, then it is obligatory for the contractor to cover him under statutory norms and provide wages and compensation accordingly.
Therefore, asking for EPF/ EPIC challans or any other compliance proof by the PE is valid. If the contractor does not have any such arrangement of compliance as he is not a manpower provider or for any other reason, he should seek the solution from the principal employer.
It is important to understand that one cannot escape statutory obligations regarding human resources by simply stating that since they are providing machines, they would not be responsible for their operators and can avoid compliance. The principal employer has the responsibility to establish the contracts correctly and in the best interest of both parties.
From India, Vadodara
Acknowledge(0)Amend(0)
Mr. Madhu, I disagree.
Where any person is working on the premises of another, due to an agreement between the direct employer and the owner-occupier of the premises to provide some result other than the pure sale of goods, then CLRA will apply.
There is nothing like a contract of service or for service. As soon as you have some contractor's employee working in that factory, CLRA applies (subject to the minimum number applicable within the state).
Since it is the responsibility of the occupier to ensure that all workers are paid properly and statutory dues are paid, he will ask for the details rather than risk a demand a year or two later.
Please note that the definition of a worker in a factory includes contract workers.
From India, Mumbai
Acknowledge(0)Amend(0)
Where any person is working on the premises of another, due to an agreement between the direct employer and the owner-occupier of the premises to provide some result other than the pure sale of goods, then CLRA will apply.
There is nothing like a contract of service or for service. As soon as you have some contractor's employee working in that factory, CLRA applies (subject to the minimum number applicable within the state).
Since it is the responsibility of the occupier to ensure that all workers are paid properly and statutory dues are paid, he will ask for the details rather than risk a demand a year or two later.
Please note that the definition of a worker in a factory includes contract workers.
From India, Mumbai
Acknowledge(0)Amend(0)
You can disagree, but I also agree to disagree!
We will discuss this issue in the light of a judgment by the Madras High Court reported last month only (available in the May 23 issue of LLR). Please refer to EMKO KCP Ltd vs. The Employees' State Insurance Corporation (2023 LLR 506) tomorrow. I am busy with another preoccupied engagement today.
From India, Kannur
Acknowledge(0)Amend(0)
We will discuss this issue in the light of a judgment by the Madras High Court reported last month only (available in the May 23 issue of LLR). Please refer to EMKO KCP Ltd vs. The Employees' State Insurance Corporation (2023 LLR 506) tomorrow. I am busy with another preoccupied engagement today.
From India, Kannur
Acknowledge(0)Amend(0)
Apart from the minimum wages, PF, etc., compliances, God forbid, if the forklift operator meets with an accident on the shop floor, definitely the PE will be liable. Therefore, compliance proof should be asked for by the PE. If the contractor does not have PF/ESI code, the contribution can be made on the code of PE.
From India, Kolkata
Acknowledge(0)Amend(0)
From India, Kolkata
Acknowledge(0)Amend(0)
Madhu-ji,
I am not able to find the judgment on the net. Looking forward to a discussion and learning from you. Please ping me on WhatsApp when you are free from your current engagement.
If possible, please send me a copy of the judgment. (Note, I already searched Google and ChatGPT and couldn't locate it. Clarifying as I always post back saying Google for it ;-) )
From India, Mumbai
Acknowledge(0)Amend(0)
I am not able to find the judgment on the net. Looking forward to a discussion and learning from you. Please ping me on WhatsApp when you are free from your current engagement.
If possible, please send me a copy of the judgment. (Note, I already searched Google and ChatGPT and couldn't locate it. Clarifying as I always post back saying Google for it ;-) )
From India, Mumbai
Acknowledge(0)Amend(0)
No, it may not be available on the internet right now because it has been reported in this month's LLR. I will share the relevant points today in due course. I had a long meeting yesterday, etc., and I reached back late midnight only!
From India, Kannur
Acknowledge(0)Amend(0)
From India, Kannur
Acknowledge(0)Amend(0)
There have been controversies on the terms "Contract For Service" and "Contract Of Service". There are a lot of ambiguities in the construction of contracts. The Apex Court of India, in Sushilaben Indravadan Gandhi Vs New India Insurance Company Limited, has given some interpretations about it and tried to define a workman and what differentiates a contract of service from a contract for service. The recent Madras High Court judgment also refers to the above case. In this case, EMKO KCP has appointed some third-party agents to boost their sales for a consideration. The ESI Corporation demanded ESI contribution on this amount, saying that this amounts to 'wages'. But actually, this is not merely wages but the fee for their services, which could obviously include sales promotion activities by their employees. The court observed that the amount paid is purely service charges and not wages.
In the present case, the service of lifting the goods/stacking the same, etc., using the machines, tools, equipment, and men of an outside agency is what is 'purchased' by the factory owners. For them, whoever is engaged to do the work is immaterial; it is immaterial how many are engaged also. What is material? Only the tons of goods loaded or stacked. If there exists no supervision by the factory managers, no control over the machines and equipment by the factory people, but everything is taken care of by the agency who undertakes the work. He is certainly an independent contractor who takes a contract for service and to accomplish the same, engages his workmen and his machinery.
In respect of independent contractors, there are a number of verdicts that the master-servant relationship will not be present. The Hassan Cooperative Milk Society's case is an example supporting that in respect of a Contract For (transportation of milk from the factory to different outlets) Service, no employee-employer relationship exists. This case is very similar to the one in our discussion.
I am attaching a scanned copy of the Madras High Court judgment.
From India, Kannur
Acknowledge(0)Amend(0)
In the present case, the service of lifting the goods/stacking the same, etc., using the machines, tools, equipment, and men of an outside agency is what is 'purchased' by the factory owners. For them, whoever is engaged to do the work is immaterial; it is immaterial how many are engaged also. What is material? Only the tons of goods loaded or stacked. If there exists no supervision by the factory managers, no control over the machines and equipment by the factory people, but everything is taken care of by the agency who undertakes the work. He is certainly an independent contractor who takes a contract for service and to accomplish the same, engages his workmen and his machinery.
In respect of independent contractors, there are a number of verdicts that the master-servant relationship will not be present. The Hassan Cooperative Milk Society's case is an example supporting that in respect of a Contract For (transportation of milk from the factory to different outlets) Service, no employee-employer relationship exists. This case is very similar to the one in our discussion.
I am attaching a scanned copy of the Madras High Court judgment.
From India, Kannur
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.
SERVICE AGREEMENT cite hr.doc
Aligning HR Policies to Business Objectives.ppt
HR policies & procedures May 2007.pdf