E.P.F. And ESI - CiteHR
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Daleep Shimla
Hr Business Partner
Hr Executive
Hr, Ir & Compliance
Sr.hr Manager
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Dear Sir,

I shall be thankful to my reader friends, if they can clarify my question in clear terms in view of the given situations:

An X Ltd company gave a contract to a Chartered Accountant firm naming it as a Service provider for deployment of manpower at various locations to look after record keeping work mainly & other Subsidiary duties.

In the Agreement of one year period - it has been stated by the Company that the Service provider shall abide by and comply with all statutory registrations of Service provider's establishment as an industrial/commercial establishment and comply with all labour welfare legislation as may be in force from time time, with respect to its establishment. The Company shall be fully indemnified against any such statutory compliance, any mishaps or accidents while services are carried out in this agreement.

The Company is giving Min. wages + EPF (both shares +adm chrgs i.e 25.61% and Service tax at 10.30% and allowing a small margin over the total bill. The Service provider has PF Regn. & promptly remitting EPF. But, either ESI or Workmen Com. Ins has not been given by the Com and the Service provider has no regn with ESI or Labour Dept. So, what would be the actual liabily of the Service Provider if any thing happens to wokers and who is responsible for ESI ? Also, can a C.A firm can get Regn with ESI & get a licence from Labour Dept.

Kindly let me know at the earlist. Thanks

it is not a question of CA firm.basically you are contractor and providing manpower at diiferent places.in lieu of that company is paying you wages plus your margin than you have to take ESI code and cover all employees under ESI.but your principle employewr is not paying you on behalf of ESI than from where you will pay.
you are advised to ask principle employer because ultimately he is responsible.
js malik

Hi Dear,
first, let us know as to where the establishment is located, in order to find that the provisions of ESIS is applicable there. If it is applicable, then there is no escape and the cotractor is bound to get registration under the Act and comply, otherwise the principal employer has to step in his shoes and shall be liable for compliances.

As per my knowledge it isthe responsibility of principal employer to look in to the matter, and in case of any mishap/accident principal employer will be responsible. CA should claim the same amount from the principal employer and there is no excuse for not registring under ESI. Also it looks like principal employer will not resist for paying the ESI amount.
Daleep Sharma

Dear All,
Thanks for your immediate replies. The CA firm has not been registered under the Shops and Est. Act and have no Contract Labor Licence. Anyhow, recruitment of manpower in Accounts related jobs is under the purview of the services of a CA. The Co. is located in Andhra Pradesh. Already contacted the Co. for ESI obligations. But, the Company is not coming forward inregard to the ESI. Is there any chance of getting exemption from ESI under some circumstances?. In the absence of ESI, will there be any benefit of taking Workmen Compensation Insurance. Will the W C Ins is highly burdensom? - kindly let me know.

dear rao
there is no exemption possible and principle employer will be held responsible.workmen compensation act is not alternatve of ESI.
if the are where factories or establisments are located comes
under the exemption zone from ESI than only workmen compensation act
will apply.
js malik

Dear Venkata Rao,
In the case given by you, the Company X is the principal employer (provided it has registered itself as PE under "Contract Laobour (Regulation & Abolition) Act-1970". The PE is responsible for anything happens to workers in it's premises. The CA firm may not be liable to take license under above act since the manpower employed by it are working in administrative capacity.
PF, as you stated is being complied...so no problem.
But Company X can not escape from insurance liability for the employees employed directly or indirectly. The indemnity clause in the agreement also can not save it from penalties in case of any untoward happenings. If the location of the deployed manpower by the CA firm is within the ESIC limit then they have tobe covered by ESIS.
Lastly about your query about 'actual liability of the Service Provider', remember if any thing wrong happens, you BOTH will be in trouble from authorities.

Mr Venkat,

To engare the contract emplyee within the company the principal employer must have to take the CLRA registration. Based on the registration the contractor whether it may be CA firm, any out sourcing egency or who ever may be have to take the contract license from the labour department. After obtaining the license the contactor may depute the contract worker at the work place or meanwhile between the contract work the contractor may apply for the CLRA license.

W.r.t. PF, ESI or other statutory obligation is concern its the prime liabilty of both the contarctor & the principal employer as well for the compliance of different statute. Since the principal employer have to mantain some mandatory register on behalf of contract workers. Infact the ESI is a most mandatory compliance & both principal employer & contractor have to take this responsibility.

Infact the contractor can apply now for the ESI code / sub code & CLRA license. But before applying for contract license the principal employer must have to take the CLRA registration.



See Mr Rao, infact now a days health care industry those who are deals with health care i.e. private hospitals are also covered under ESIC. These industry are also not been exempted now. So there is no question of any exemption w.r.t. ESIC. Offcourse you may be exempted from CLRA license if the no of contract employees is less than 20.

Hi dear,
Further on the subject, the CA firm which is functioning as a contractor and Principal employer(PE) have the following obligations:-
1. If it employs more than 20 employees, then PE has to get registered and CA firm Licence under CLRA Act .
2. PF & ESIS registrations also are mandatory for any of them, who can comply with statury obligations.
3. Registration and licensing under the Factories Actor Shops & Estt. Act, whichever is applicable is also mandatory.
4. Getting coverage under Workmen's Comp. Act is no substitute for ESIS.

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