PF, Gratuity, Cheque Payment

Today I had a discussion with a friend about making payments to people such as sweepers, electricians. They are currently paid in cash and I suggested that they henceforth open a bank account so cash can be avoided.

My friend countered and said that bank payment will cause problems 1. because the persons being paid are illiterate and hence can't use ATM and 2. This will involve having to pay PF, pension, gratuity etc. And that Labor Welfare Act would be in their favor.

Message he sent on Jul 12, 2018

I understand  that  you  want all our staff should open a bank account to receive  their salaries etc.  While  it is  good thinking  that all should  have bank account      we should  bear in mind that most of them cannot read and write except  in Telugu and their banking  transactions particularly ATM are at a risk.   We are also liable to pay them all compensations such as PF Pension Gratuity and other severance costs in case of removal from service as per Labour Welfare Act and the law is in their favour. Taking  all the above  into account  we have been making all salary payments all these years in cash.   Another  mutual friend (UU3) is much aware of this. Hence you will be well advised not to  deviate from established  conventions in our own interests

I may also add here that as an employer  we should  make  them contribute from their income towards  Pradhan Mantra Insurance  scheme  of Re1 per month that gives them coverage of Rs 1lakh per annum per member.

I told my friend that regular cash payments made to these people from our account and when the account is audited how would one explain the expenses? Wouldn't the same PF etc liability arise? If the payments were made from an account that wasn't audited then it's a different issue. Plus the fact that there are only 5 people being paid and PF etc arise only when 10 or more people are employed. The place we were discussing had 5 such electricians and sweepers.

And I continued that first one needed to understand whether the people being paid were employed or just causal labor. 

My friend answered that they were contract workers and not employees. That broughy up an even more interesting question. Since when is PF pension etc applicable to non-employees (there being less than 10 such people working is another relevant point).

Since they are transient labor, having Aadhaar card from a different city, getting a local proof of address to open a bank account is another issue which was a bottleneck towards their opening a bank account.

Another friend suggested a solution which was to give a cheque in their name which they can encash without opening an account. Great.

Now the question was: why did my first friend raise the issue about PF, Labor Welfare Act etc when he knew that the 5 people concerned were not employees. Why did he bring up employee benefits issue when the question was only about shifting to bank payment.

Was it because:

1. He prefers cash and avoids bank transactions wherever he can.
2. Hates change in status quo. Currently those fellows are being paid in cash.
3. He thought use of keywords such as PF Labor act will give credibility to his ideas?