Many a times, contractors do in-house work based on Work Orders/Job Orders wherein they have to complete a given assignment as per negotiated rates. Since they bring their employees inside company premises, the company is liable to pay their ESIC (either through their own ESIC code or the contractor pays through his ESIC code, if he has one).
But my question is how will be the ESIC laibility be calculated:
1) Will it be calculated on monthly salary of the employees & what if they have been hired only for that assignment & paid for a few days only OR
2) Will it be calculated as percentage of the bill amount.
3) Is there any provision in the ESIC Act or any court ruling to calculate contributions in such cases.
The above question is important since principal employer can easily calculate the ESIC liability in cases of manpower contractors depending upon the salary paid to them but there is confusion for contractors working on job/assignment basis.
Thanks in advance for your responses
ESI in nay case shall be calculated on the actual wages paid by the contractor to his employees engaged at your plant. In such a scenario, the principal employer has to get a wage sheet from the contractor and ensure that the deductions as per Act are made and remitted. In case he raises a job/service bill without bifurcation as to what will constitute wages part, contributions should be on that full amount. In any case, if no record of costs of supervision etc are available, 60% of the total bill shall be deemed as amount qualifying ESI contribution. But this is the manner in which liability of a principal employer is determined once a contract is over and the contractor has already left and it is not possible for the principal employer to find out what should be the wages element of the contract amount. Remember that this is a one time assessment and will not be available every time and therefore, before engaging a contractor the Principal employer has to ensure that he will give us a statement of salary paid or gives the bill with bifurcation showing the labour part separately.
You have said 60% of bills to be considered for ESIC contribution. Is there any provision in the Act or any court ruling to this effect.
Would be highly obliged for this answer.
ESI is a beneficial Act and ESIC will seek benefits to employees of contractor also. When an employer engages contractor, contractor should has his own ESI code and deduct ESI contribution and send it to ESIC. If not then he must submit his records of wages and general ledger for the satisfaction of the ESI Inspector. Then ESI will charge contribution on the wages shown. If the record is not proper or acceptable or if there is no record, it is an assumption by ESIC as to amount of wages. It cannot be challenged, because contractor does not have the record.
The principal employer should not pay contractor in full. Principal employer should withheld an amount to pay ESIC. If ESIC claims lesser amount, the balance can always be refunded to the contractor.
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