ESI & PF Liabilites

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Sanjay Gogia (Querist)
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15 May 2009 We have a contractor and he is building contractor and he raised a bill worth Rs. 15 Lacs with material to contract our new building. my question is what is the liabiltes of ESI & PF. Contractors had own ESI & PF Code No.

Ram Avtar Singh

Ram Avtar Singh (Expert)
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15 May 2009 liabilty of ESI & PF rise to Contractor

Its not your libility only collect Contractor EPF & ESI No. for your record.

Deepak Goel

Deepak Goel (Expert)
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15 May 2009 Liability of ESI & PF rise to contractor, if you will collect the ESI & PF challan for that period alongwith list of workers otherwise ESI & PF liability attract to you

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Sanjay Gogia

Sanjay Gogia (Querist)
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19 May 2009 Actually we are principal owner for a particular job for which Contractor has raised a bill including material value and manpower value in same bill without specify respective amount.I would like to know on which amount ESI & PF has to be calculated.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 When dealing with contractors who have their own ESI (Employee State Insurance) and PF (Provident Fund) codes, the liabilities for ESI and PF contributions typically depend on how the contract is structured and the nature of the work performed. Here’s a general guideline:

### 1. ESI and PF Liability Calculation for Contractors:

**ESI (Employee State Insurance):**
- Contractors who have their own ESI code are responsible for ensuring ESI compliance for their employees.
- As a principal owner, you are not typically liable for ESI contributions for the contractor’s employees if the contractor is independently responsible for their compliance.

**PF (Provident Fund):**
- Similar to ESI, contractors with their own PF code are responsible for PF compliance for their employees.
- The liability for PF contributions rests with the contractor if they have classified their workers as employees and are paying them accordingly.

### 2. Calculation Basis:

**Material and Manpower Breakdown:**
- Contractors often invoice for both materials and services (manpower). For the purpose of ESI and PF calculations:
- **Material Value:** ESI and PF are not applicable on the material cost since it pertains to goods purchased and not wages paid to employees.
- **Manpower (Labor) Value:** ESI and PF contributions are applicable on the labor component, i.e., the wages paid to the workers employed by the contractor for the job.

**Contractor’s Responsibility:**
- It’s the contractor’s responsibility to ensure that the correct amounts are allocated to labor costs (manpower) and that ESI and PF contributions are calculated accordingly on the wages paid to their employees.

### 3. Documentation and Compliance:

- Ensure that the contractor provides a breakdown of the invoice detailing the labor component separately from the material component.
- Verify that the contractor is making ESI and PF contributions for their employees as per their legal obligations.

### 4. Legal and Contractual Aspects:

- Review the contract or agreement with the contractor to confirm responsibilities regarding statutory contributions.
- If there are any doubts or discrepancies, consult with a legal or financial advisor specializing in labor laws to ensure compliance and mitigate risks.

In conclusion, as the principal owner, you are generally not liable for ESI and PF contributions on the material costs but should ensure that the contractor is compliant with these statutory requirements for the labor component of their bill. Clarifying these aspects upfront and maintaining proper documentation will help ensure compliance and smooth operations.