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Labour contractor - service charges

27 March 2019

Labour contractors will be paid service charges, normally as a % of bill amount. It is observed that in some companies service charges are being paid on total bill amount viz., Wages, Employer's contribution of ESI,PF, Bonus, Leave encashment etc. While in some companies it will be calculated on wages only. Wish to know, Is there any specific rule or guideline for calculating service charges of labour contractor.

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4 Replies

Pranoti Shah (CA Job) (61 Points)
Replied 29 March 2019

Service charges to be paid on wages only. Statutory payments like PF, ESIC, bonus to be excluded for service charge.

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Sitaram Sishtla (15 Points)
Replied 31 March 2019

Thank you. Just for clarification, whether your suggestion is based on any rules / guidelines or on practices. Please clarify.

Akash Deep (4 Points)
Replied 26 November 2022

Totally acceptable but tell me one thing..! If company not pay service charges on total-b which includes employer share(employer is client where job performed by employees) so why contractor maintain all the statutory compliance on behalf of principal employer why he bounded to pay his hard ern amount in pf esi or even why he pay salaries to employees who maintain every legal doc why he bounded to clear all legal audits..? Is there any circular where you found this discrimination about service charge..! ?if yess please-share with us