A mid-sized engineering components manufacturer in Tamil Nadu asked us to take over its contract workforce after a routine check found that the incumbent contractor's provident fund return covered fewer people than walked through the gate each morning. Within one wage cycle the workforce was re-enrolled and redeployed under our licence, and the site's monthly evidence pack reconciled to its own attendance record. The figures below are a representative composite, not a single client.
The situation
The gap was found by comparing two documents the site already had: its gate register and the contractor's ECR acknowledgement. A new plant HR head, working through the monthly pack for the first time, put the two side by side and the headcounts did not match.
Roughly a third of the contract workforce had no provident fund contribution going in, and a slightly larger share had no ESI cover. The contractor had been paying wages in cash to part of the workforce, so there was no electronic intimation to the site for those workers either. None of this had surfaced as a complaint; workers who are paid on time rarely ask whether a contribution was remitted on their behalf until they need it.
What the site was exposed to
Under the OSH Code 2020 and the Code on Social Security 2020, the principal employer pays what the contractor did not, and recovers it from the contractor afterwards. For the three short months that meant the employer's share of provident fund and ESI for around sixty workers, plus interest and damages on the late provident fund remittance, which under the repealed 1952 Act ran to 12% a year and up to 25% of the arrears [VERIFY: the equivalent provisions under the Code on Social Security 2020, ss.128 and 129, and current rates]. The recovery right is real, but it is only worth what the contractor can pay, and this contractor's licence status under the Code was itself unclear [VERIFY: composite detail].
There was a second exposure the site had not considered. Where the contract-labour chapter of the Code applies, contract labour may only be engaged through a licensed contractor, and engaging an unlicensed one is the principal employer's contravention as well as the contractor's. A site that cannot produce its contractor's licence on request has a problem that predates any filing gap.
How much of the arrears the site could ultimately recover, and whether any part of the exposure could be laid off on the incumbent, were questions for the client's own counsel and remain so.
What we did
Reconcile, enrol, redeploy, then report monthly. The order matters: enrolment before redeployment means no worker starts a shift under our licence without a UAN and an ESIC insurance number already in place.
- Reconciled the three lists. Gate register against the incumbent's ECR and ESIC challan, worker by worker, to establish exactly who had cover and who did not. This produced the arrears calculation the site needed for its own remittance.
- Enrolled the gap. Aadhaar-linked UANs and ESIC insurance numbers for every worker without one, before the changeover date. Existing UANs were transferred rather than duplicated.
- Redeployed under our licence. The workforce moved onto our rolls at the start of the next wage period, with the licence and security deposit receipt filed with the site on day one.
- Moved every wage to bank transfer. No cash. The electronic intimation the Code requires now goes to the site's HR head each month, for every worker.
- Started the monthly evidence pack. ECR acknowledgement with TRRN, ESIC challan, wage intimation, wage register extract, in one email by the 20th of each month [VERIFY: composite timing].
| Item | Before | After |
|---|---|---|
| PF return vs gate register | ~120 of ~180 [VERIFY: composite] | Reconciles worker for worker from month two [VERIFY: composite] |
| ESIC cover | ~110 of ~180 [VERIFY: composite] | Every worker under the wage ceiling has an IP number |
| Wage payment | Part bank, part cash | Bank transfer for all; electronic intimation to the site |
| Contractor licence on file | Status unclear | Copy of licence and deposit receipt held by the site |
| Monthly evidence pack | None requested | Five items, one email, each month |
| Welfare facilities check | Not recorded | Recorded monthly against the Code's list |
What changed
From the second wage period after the changeover, the site's provident fund return, ESIC challan and gate register carried the same names. Wages went out on the same date as before the transition, so the workforce experienced the changeover as a new payslip format rather than a disruption [VERIFY: composite outcome]. The arrears for the gap months were computed from the reconciliation, remitted by the site as principal employer, and pursued against the incumbent [VERIFY: composite outcome].
What the client actually bought was not the enrolment work, which any competent contractor should do as a matter of course. It was the monthly pack, because a principal employer who sees the ECR and the gate register side by side every month cannot have a three-month gap. The check that found the problem is now the check that prevents it.
Sources
- Figures are a representative composite drawn from our own deployments; no single client is described. Founder to confirm or replace before publish.
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), ss.47 and 55 [VERIFY: section numbers from secondary sources]
- Code on Social Security, 2020 (Act 36 of 2020), ss.17, 31, 128 and 129 [VERIFY: section numbers from secondary sources]
- Employees' State Insurance Corporation, Contribution — payment within 15 days of the last day of the calendar month
- Ministry of Labour and Employment, FAQs on the OSH Code, 2020 (January 2026), Q2 and Q16