Partner - Risk Management
Head - Outsourcing
Deputy Manager-hr
Korgaonkar K A
Srinath Sai Ram
Hr Manager
Labour Consultant
+2 Others

Respected seniors This is Ramu Working as DM-HR in manufacturing unit at Vijayawada. Our Factory is covered under ESI. We are offering some of the miscellaneous works on contract basis which is likely to be continued 10 to 15 days. The contractor shall not have valid license since it is temporary work. We are insisting the contractor to get WC policy for your workmen stating their wages above Rs.21000/- (crossing the ESI limits). Is it the right way if any legal complications arise?
But contractors are showing their wages in the policy below Rs.15000/- then WC policy is valid or not
I requested the seniors kindly advise me on this issue.
With regards
13th May 2017 From India, Vijayawada
Dear Mr Ramu
Basically even if the contract work is temporary, you may have to get the Certificate of Regn amended to include the new contractor (if the total strength of the contract workers exceed 50) and if the contractor engages 50 or more workers, he has to take a temporary licence. The earnings of the individual workers should exceed Rs 21,000/- to be out of ESI coverage and therefore the same amount has to be shown in the WC policy also. But the benefit under the WC policy is limited to Rs 8,000/- only (ceiling under WC Act). Regards.
N Nataraajhan, Sakthi Management Services (Hp : + 91 94835 17402 ; email : )
13th May 2017 From India, Bangalore
Dear Mr Ramu,
If your Factory is already covered under ESI Act, All contract Employees engaged in connection with the work of your Factory & whose Gross Salary is less than Rs 21,000/- & below, come under the Purview of ESI Act. The question of Obtaining WC Policy arises only in respect of Employees who are outside the purview of ESI Act
13th May 2017 From India, New Delhi
Dear Ramu ji,

You are Deputy Manager HR.

You are insisting the contractor engaged by you to get WC policy for his workmen stating their wages are above Rs. 21000/- as against wages are paid below Rs.15000/- by contractor.

You want to know legal complications out of this.

This is what I understood from your query.

Such query by non-HR guy can be appreciated.

I have some questions to you Sir.

1. How you can ask your contractor to show wages above Rs. 21000 when it is not a fact?

2. How your contractor will maintain his records to justify that he is paying to his employees above Rs. 21000?

3. After compulsion of payment of wages by cheque or through bank transfer, is there any scope to manipulate the records now?

4. Are the Insurance companies there for you to just distribute the money when they get claims without any investigation?

5. When your claim / your contractor's claim is rejected by the Insurance company, what you will do?

6. Don't you feel that if you are caught in manipulation of records by the Insurance company and or any authority, it will be a serious offense against you and your contractor?

My tone in this post you may find it bit harsh but you will get answer to your query hopefully.
14th May 2017 From India, Mumbai
Dear Seniors,
I intend to know that the employee whose gross salary is up to Rs, 21000/- covered under ESIC Act. However , Whose gross salary is more than Rs. 21000/- for them, what is the suitable and best policy to adopt.
Pranab Chakraborty
14th May 2017 From India, Delhi
Dear Pranab ji,
The employee who is not covered under ESIS, to him Employees Compensation Act is applicable. Employer is liable to pay compensation under this Act in case of employment injury or employment disease rendering the employee disable to work or he dies.
Having any policy in case Employee Compensation Act is applicable, is not mandatory. But, to absorb the liability under the Employees Compensation Act, the employer is advised to have Employees Compensation (EC) policy covering such employees who are not covered by ESIS.
As a welfare measure, employer can have group personal accident policy, group mediclaim in addition to EC policy.
14th May 2017 From India, Mumbai
You need to see the Andhra Pradesh rules under contract labour act.
Some states provide for temperory registration for work of less than a month. If your state rules have that provision, then you do not need to change your registration.
Please note that under AP rules, license is required for contractors with more than 10 workers not 50
If your factory is in an area covered under the ESIC them the contractor needs to cover their workers unless each of them is getting wages of more than ₹21000 (which is rare). If esic is applicable then WC policy is not applicable. Your post does not make it clear what the actual salaries of contract workers is
14th May 2017 From India, Mumbai
Dear Ramu,

Pls note that whether the contractor is holding contract labour license or not is immaterial, if his workmen are getting salary less than Rs.21,000/-, their ESI contribution is deductible. If the contractor is having ESI registration (Code no.) ask him to pay the contribution under his code no. if not, you are liable to pay under your code no. as a Principal Employer.

Even you insist on contractor to obtain Employees' Compensation Policy (WC Policy) ESI Corporation has right to claim damages from you as your factory is covered under ESI Act and you alongwith your contractor are liable to pay the contributions as the labourers are working in your premises. This is advisable when the workmen are working in remote area (Non implemented area), where ESI is not applicable.

It is not only ESI the contractor is also liable to deduct PF, Prof. Tax etc.

If you are engaging contractor/s on a regular basis ask them to get themselves covered under the ESI & PF and appoint only those contractors who posses valid ESI PF registration numbers in order to pay the contributions under their code no.

Deploying contract labour thru contractor with valid labour license is a precautionary measure and internal arrangement to safeguard your company from direct employment of labour. It doesn't protect you from the statutory compliance.

Hope the above will clear your doubts.


15th May 2017 From India, Thane
Dear Mr Banerjee
As like Maharastra, AP Govt has also increased the contract labour strength to 50 for Regn Certificate and licence (copies enclosed). Regards.
N Nataraajhan, Sakthi Management Services (Hp : + 91 94835 17402)
15th May 2017 From India, Bangalore

Attached Files
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File Type: pdf AP - Contract licence 2017.pdf (82.2 KB, 92 views)
File Type: pdf AP - CLRA Act - Amendment.PDF (34.4 KB, 70 views)

Natraj sir,
Thank you for the update. I was not aware of AP following this path
For some reason it didn't come up in the searches I had done.
My apologies for contradicting you when you were right
16th May 2017 From India, Mumbai
Dear Seniors, What is the minimum strength required to get Contract labour licence in telangana state
16th May 2017 From India, Hyderabad
Respected seniors Thank you very much for your valuable advises on this issue Ramu
16th May 2017 From India, Vijayawada
Thank you very much for your valuable advises on this issue Regards Ramu
17th May 2017 From India, Vijayawada
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