Harsh Kumar Mehta
Consultant In Labour Laws/hr
Hr & Administration
Compensation Mgt, Performance Appraisal &
+1 Other

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Respected All,
What happens if we use a vendor and he does work for us (inhouse jobs) . If he does not have or pay ESI. will it be our liability to pay ESI?
Please guide me for the same.
Hardik Bhavsar
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pls be clear about your question.
if by vendor you mean a staff in your company who is on third party payroll (maybe a manpower/placement agency), then in that case; you are not liable to pay any component like esi, pf etc. Its the liability of that agency.
Hi, I am working in manufacturing. We have given some jobwork to vendor but they are working in our premises. will it be deduct ESI & PF from vendor Payment. If yes, what is method for calculation.
Greetings Hardik,

Please respond to the following queries

You have mentioned that they (Vendor) is working in our premises. By the word they you refer to how many persons (1,2,3 ... persons)

Does the vendor have an ESI code.

If he has an ESI code has he covered the employees under the ESI on his code.

If he does not have an ESI code, you should consider 4.75% of the wages payable to the persons employed by him in your premises. For this you must know the wages being paid by the vendor on those days his employees are employed in your premises. If you know the wages then obtain details of the employee and obtain a ESI code for him. In the event he has an ESI code number created by yet another employer (as he is an employee of the vendor), you can utilise this code number itself. Please ensure that every employee employed in your premises and drawing a wage below Rs.15000/- per month is covered under the ESI. The liability as a principal employer is on you. Moreover, they work in your premises under your supervision and hence you are liable for all statutory payments.

Generally vendors do not spell out the wages being paid by them as this will reveal their profit margin.

If he is unwilling to share the wage structure owing to the above reason, then you have to inform him that you will deduct 4.75% of the charges payable to him.

As regards PF in my opinion if the vendor comes within the scope of PF coverage then it becomes the vendor liability. However, if under the guise of employing people of the vendor, you carryout regular jobs of your establishment then these employees have to be covered under your PF code.

Trust the matter is clear

Section 2(9)(i&ii)defines the meaning of employee. For your case the ESIC applicable to the vendor and you have to deduct the ESIC @ 6.5% on 40% of the total value of the bill,in case of uncover age vendor/contractor. The ESIC IS Not applicable if the vendor is registered under the ESIC Act and asked to produce the latest Payment challan and the half yearly returns
Thank to kannanmv & RV PERUMAL for valuable support.
Here I have query, our company's employee strength had just increase above 10, So we are eligibale for ESI. In this case contractor' employees are not enclude in company staff, They may 4 to 7 person in contractor. In this case contractor is eligible for ESI or not?
Contractor did not register in ESI & PF because strength of that contractor is not more than 10.
Please guide me in this case.
Greetings Hardik,
Mr.Perumal's answer for ESIC is self explanatory as regards vendor employees.
As far as PF is concerned, in my opinion they need not be covered as the vendor does not come within the purview of PF coverage.
The coverage position of a establishment/factory under ESI Act, 1948 is decided by adding the employees engaged through contractor also. Kindly see sections 2(12) of the aforesaid Act. If on any day by adding persons employed through contractor(immediate employer), the strength of persons so engaged reaches 10 or more, than the said factory is coverable under said Act from that very day.
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