Labor License Consulting Investigation – India

In certain states in India, companies that retain contractors to perform a project onsite such as a construction project assume the liability for the payment of payroll withholding taxes of the contractor’s employees for the period of time they are working on the company’s behalf. This unusual circumstance gave rise to a category of consultant in India known as a Labor License Consultant or “LLCs”. LLCs take responsibility for the payroll withholding associated with contractors, remit payments to state taxation authorities and complete all of the necessary paperwork. During a routine anti-bribery and corruption audit being performed by the company’s internal audit department, auditors were told the local human resources director “we pay bribes” all the time. In the ensuing investigation, the records of several LLC companies were reviewed, witness interviews were performed and background investigations were completed. The investigation results led the company to conclude that the allegations of bribes paid by LLC contractors were unfounded.