For a contract worker on Code wages within the PF and ESI ceilings, statutory costs on top of wages come to about 29%. That covers the employer's PF, admin and insurance charges, ESI, the minimum bonus, gratuity provision and the Labour Welfare Fund. On top of that, a site pays to cover about 24 paid days off a year, the contractor's service charge, and GST on the invoice. A quote that leaves any of these out is missing a cost the site may end up paying.
The statutory heads, one by one
Each head is a percentage of Code wages or a fixed amount, set by a named instrument. Code wages are basic pay plus dearness allowance, with any allowances above half of total pay added back under the 50% rule. They are usually higher than the basic shown on a payslip.
| Head | Employer's cost | Applies when | Instrument |
|---|---|---|---|
| Provident fund | 12% of Code wages (8.33% of it goes to the pension scheme) | Wages up to ₹25,000 a month at joining, since 17 September 2026 | EPF Scheme 2026, para 18; S.O. 5109(E) |
| PF admin charge and EDLI | About 0.5% each [VERIFY: rates under the 2026 schemes] | With PF | EPF Scheme 2026; EDLI Scheme 2026 |
| ESI | 3.25% of Code wages | Wages up to ₹21,000 a month | Code on Social Security 2020, Chapter IV; ESIC contribution rates since 1 July 2019 |
| Statutory bonus | Minimum 8.33% of wages earned, maximum 20% | Wages up to ₹21,000 a month and 30 days' work in the year; in an establishment of 20 or more | Code on Wages 2019, s.26; S.O. 4711(E) |
| Gratuity provision | 15 days' wages per year of service, i.e. 15/26 of a month, about 4.8% of wages | Payable after 5 years' continuous service; most employers provide for it monthly | Code on Social Security 2020, s.53 |
| Tamil Nadu Labour Welfare Fund | ₹40 a year per eligible worker | Factories and covered establishments in Tamil Nadu | TN Labour Welfare Fund Act 1972 |
Two of these change with the worker's wage. The bonus is calculated on a capped wage under section 26(2): the amount the Government notifies, or the minimum wage, whichever is higher. And a worker above the PF or ESI ceiling falls outside the mandatory contribution, so the percentages above apply to most shop-floor contract roles but not to supervisors on higher pay.
A worked example at ₹12,000 a month
Take a contract worker on Code wages of ₹12,000 a month. This is an illustrative round figure, not a rate for any employment. Assume the bonus is calculated on the full wage (s.26(2)) and the worker completes five years with the contractor, so gratuity is provided for.
| Head | Per month | Working |
|---|---|---|
| Code wages | ₹12,000 | Illustrative |
| PF, employer | ₹1,440 | 12% × ₹12,000 |
| PF admin and EDLI | ₹120 | 0.5% + 0.5% [VERIFY] |
| ESI, employer | ₹390 | 3.25% × ₹12,000 |
| Bonus, minimum | ₹1,000 | 8.33% × ₹12,000, accrued monthly, paid yearly |
| Gratuity provision | ₹577 | ₹12,000 ÷ 26 × 15 = ₹6,923 a year, ÷ 12 |
| Labour Welfare Fund | ₹3 | ₹40 a year ÷ 12 |
| Employer cost before the contractor's charge | ₹15,530 | ₹3,530 on top of wages, about 29.4% |
Paid days off: the cost that hides in the roster
A monthly wage already pays for leave and holidays, so they add no line to the invoice. They show up as days the post is empty and someone else has to cover it. A worker who puts in 180 days in a year earns one day of paid leave for every 20 worked (OSH Code s.32), about 15 days a year on a full roster. Tamil Nadu adds nine paid national and festival holidays under its 1958 Act. That is about 24 paid days off a year per worker, roughly 8% of a six-day-week year. A site that sizes its crew on headcount alone, without relief cover for those days, runs short or pays overtime at double rate to fill the gap.
The contractor's charge and GST
On top of the statutory build-up sits the contractor's service charge. It pays for recruitment, screening, supervision, payroll, compliance filings, replacements and the contractor's own licence deposit. It is a commercial figure, so quotes differ, and it should appear as a separate line. GST then applies to the invoice: manpower supply services are generally taxed at 18% [VERIFY: entry under Notification 11/2017-Central Tax (Rate) and any later amendment]. A registered business can usually claim input tax credit on it, subject to the GST rules and its own counsel's view.
How to read a quote
Ask for the build-up, not just a rate. A quote that shows wages, each statutory head and the service charge on separate lines can be checked against the table above in minutes. A single all-in rate below wages plus about 29% leaves only two possibilities: the wage is under the minimum, or a statutory head is not being paid. Either way, the site carries the risk.
- Check the wage line against the minimum wage for your industry, zone and skill level, including the dearness allowance reset every April.
- Check PF and ESI are on Code wages, not on a basic figure that leaves allowances out.
- Check bonus and gratuity are provided for, not left for the year end or the exit.
- Ask how relief cover for leave and holidays is staffed, and whether it is priced in.
The site carries the risk because the Codes put it there. The principal employer remains responsible for PF contributions (EPF Scheme 2026, para 20(4)), is first in line for ESI (Code on Social Security s.31), and pays wages a contractor leaves unpaid (OSH Code s.55(3)). A cheap quote is cheap only until the contractor defaults. How these duties apply to a particular contract is a question for the site's own counsel.
How Velura Services helps
We build every quote from the same heads shown here: Code wages, PF, ESI, bonus, gratuity provision and Labour Welfare Fund, with our service charge as a separate line. You can see what goes to the worker and the statutory funds, and compare quotes on like terms. Share your headcount, shifts and site, and we will prepare the build-up for your roles.
Sources
- Employees' Provident Funds Scheme, 2026, G.S.R. 525(E) dated 29 June 2026, mirrored copy of the Gazette. Paras cited: 18 (12% contribution, wage ceiling), 20(4) (principal employer remains responsible). Opened and read [VERIFY: against the e-Gazette original].
- PIB, "EPFO Raises Wage Ceiling from Rs. 15,000 to Rs. 25,000", Release ID 2313829, 23 September 2026. S.O. 5109(E), effective 17 September 2026. Opened and read.
- Employees' State Insurance Corporation, Contribution. Employer 3.25% and employee 0.75% from 1 July 2019. Opened and read for earlier posts in this cluster.
- The Code on Wages, 2019 (Act 29 of 2019), Gazette text hosted by the Ministry of Labour and Employment. Sections cited: s.2(y) (wages and the 50% rule), s.26(1)–(3) (bonus: 8.33% minimum, 20% maximum, calculation ceiling). Opened and read. S.O. 4711(E) dated 25 August 2026 (₹21,000 eligibility) as cited in our bonus article [VERIFY].
- The Code on Social Security, 2020 (Act 36 of 2020), Gazette text hosted by the Ministry of Labour and Employment. Sections cited: s.17(3), s.31, s.53. Opened and read.
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI. Sections cited: s.32 (annual leave), s.55(3) (principal employer pays unpaid wages). Opened and read.
- Tamil Nadu Industrial Establishments (National and Festival Holidays) Act 1958 (nine paid holidays) and Tamil Nadu Labour Welfare Fund Act 1972 (₹40 employer contribution), as cited in our holiday and welfare fund articles [VERIFY: current Labour Welfare Board rates].
- GST on manpower supply services, 18% under heading 9985 [VERIFY: Notification 11/2017-Central Tax (Rate) as amended; figure from secondary reports of an advance ruling and rate listings, not the CBIC text].