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Dear Members,
Is it mandatory to deduct ESI from the payment of a contractor who has engaged for the job work outside factory/establishment premises and where no supervision was exercised, whereas contractor is not having independent Code No.
Apurba Mitra
27th May 2014 From India, Kolkata
Hi, How you are paying him salary per month on company payroll.
27th May 2014 From India, Mumbai
Interesting question
Please give us complete details. Its dangerous to answer these questions with assumptions and limited information.
Most important :
- Where is the work being done, what type of work is it
- Does it amount to outworking (since that is excluded from defination of contractor)
- Is that place covered by ESIC
- How many employees does the contractor have and whether he is liable for ESIC on his own right.

27th May 2014 From India, Mumbai
If the work is being done even outside factory/unit premises as per guidelines and specification of the principal employer, the element of supervision of principal employer is there and hence such contractor employees are definitely coverable under ESI Act alongwith main factory. However, home workers have not been covered under ESI Act.
As mentioned by Sh.Saswatabanerjee above there are many factors to be ascertained since facts of each case may differ.
27th May 2014 From India, Noida
Work done as per specification of the company does not, it's self, amount to supervision.
If that was the rule, every ancillary unit would be a contractor.
So we need to see if there was annually any supervision, or whether only quality control is being done.
A lot depends on the actual facts.
At this point I accept at face value the con tension of the original poster that there is no supervision

27th May 2014 From India, Mumbai
Thanks for responses.Further explanation in this context is as under-
Particular job contract is given to the contractors. They execute the job through their workers outside the office premises. There is no direct supervision by the principal employer only finished job is checked. The work is carried out at different locations of West Bengal. Most of the contractors do not come under the coverage of ESI Act due to their workers strength.
28th May 2014 From India, Kolkata
Dear apurva,
From the quoted facts, it is conveyed that if a contractor performing any manual job within the factory premises is definitely covered under the provisions of the ESIC and principal employer is bound to make / insure compliance.
In my opinion, if a contractor is performing job work outside the factory premises who is not covered / coverable independently under the ESIC scheme and is not totally dependent purely on such job work, no compliance to ESIC is required.
P K Sharma
28th May 2014 From India, Delhi
If the contractor is not having ESI Code No., it is your bounden duty
to deduct ESI contribution and pay to the ESI authorities along with your employees or separately in your code with the list of employees.
28th May 2014 From India, Hyderabad
Hi apurba
Since the contractors are not doing work in your factory or at a place that is not under your control or ownership, then the contractor is not a contractor as defined under the contract labour act. (Please see the definition in the act including the exclusion to ensure you fall squarely in it)
Since he is not a contractor under the act, you are not responsible for ensuring payment of wages and statutory dues to the concerned workers. In effect, he is not a contractor but an external vendor from whom you are getting some job work / processing done.
As such there is no need to deduct esic, pf, etc from the payment made to the vendor.
28th May 2014 From India, Mumbai

Following facts as desired by Sh. Saswatabanerjee in his earlier comments have not been replied by the starter of this thread:-

-" Where is the work being done, what type of work is it."

"Is that place covered by ESIC"

In addition, various other questions will also arise viz.-

1. Whether the contractors take semi-finished articles from the office/premises of company and after doing some finishing/job work on said goods, returns the same to principal employer. If so, whether there are gate-passes for such shifting of goods. If required by law, whether the contractors have their separate numbers for sales tax, excise etc.

2. Whether the contractors have their own premises where they work, whether the said premises are registered under shop and commercial establishment Act/rules framed thereunder.

3. Whether such contractors are also doing work independently for other similar type of units.

4. How the job charges paid to these contractors are being booked/reflected in the accounts books of the principal employer is also important. Whether the said charges are shown labour charges, wages etc.?

The coverage/non-coverage of any contractor with principal employer depends upon the facts of each case separately. It is for the assessing authorities to decide keeping in view the facts bases on verification of records. Therefore, in my opinion, it will be more better if the matter is referred to the appropriate Regional/Sub/Divisional Office of the ESIC with full facts and opinion of employer for decision on the issue.
28th May 2014 From India, Noida
Dear Apurba Mitra,
Greetings for the day,
Yes it is mandatory to deduct esic form the contractor payment but not on whole bill but only on a part i.e labor charges if there is no labour charges were mentioned in the bill the 60% of the total bill amount should be consider as labor charges and deduct 6.5% of that 60% and deposit the same with esic vide challan. Circular in the matter is enclosed for the reference.
Thanks & Regards,
Sumit Kumar Saxena
28th May 2014 From India, Ghaziabad

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Apurba needs to read the do unmentioned / notice in full and then figure out where they stand.
From what I understand, probably option f or G applies and therefore the company is not liable to pay ESIC

28th May 2014 From India, Mumbai
Dear all,
As already conveyed, Job work done outside the factory / establishment premises through factory/establishment engaging less than 10/20 employees which are not independently coverable, and where no supervision is exercised and who are undertaking the work for more than one employer, the employees of such Job Contractors are not coverable under the provisions of the Act.and as such no contribution is payable.
P K Sharma
29th May 2014 From India, Delhi
Dear Apurba,
In case the "contractor" is supplying your organisation with finished / semi-finished materials , why do you wish to cover him under ESI ? He is working in a remote location outside your premises & with no day-to-day supervision from your organisation. He should only be treated as a "Supplier" and should bill on materials supplied , he will be governed by the prevailing tax laws.
Take care,
Sourav Mukherjee
2nd June 2014 From India, Bangalore
i agree with Saswatabanerjee. because in a contract base they are supplying only finished goods to your end , not they wil be consider as a vendor.they not supplying an employee to your company. so need not to pay esi for them.
3rd June 2014 From India, Bangalore
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