ESI Corporation has issued a circular/notification directing that where the wages of contract employees are not available for assessment of contributions, a formula of 60% - 40% of contractors bills shall be adopted. Does any member has ca copy of that circular and if so can the member please share a copy of that circular/notification?
Adv. H.D. Gokhale

From India, Pune
Seasoned Ir Professional
Labour Consultant
Labour Laws Consultant


Please find the attachment. It is an old circular and I am not sure if the same applies even now.
From India, Kannur

Attached Files (Download Requires Membership)
File Type: pdf Conribution only on 60%.pdf (192.0 KB, 93 views)


The ratio of 60:40 is absolutely baseless. The Senior Officers of the Corporation who have decided this without applying their brain. Justification is given below:
PF Contribution : 14% Round figure i.e. Employer's Contr. Admn Chr. DLIS Contr. & Admn. Chr.
ESI Contribution 5% Round figure Employer's Contr. 4.75%
Gratuity 5% (4.81)
Leave Wages 5%
Bonus Minimum 8.33%
Uniform / PPE 1%
Welfare 2%
Paid Holidays 2%
Overheads 5%
Profit Minimum 10%
Bribes 1% (Labour License, PF/ESI inspection, Diwali gifts, grabbing contract etc.
Total around 58%* This is the minimum expenses incurred by any small scale company.
The Best justified way to assess the wages by multiplying the no. of employees with the applicable minimum wages to the respective industries. (No. of employees can be identified from gate entries of the Principal Employer and or the record available with them from billing / invoices etc.)
* % may vary from co. to co.
This is my way of justifying.

From India, Thane

Suresh, you can add all these expenses in your contract bill, no issue. ESIC's circular is about deciding the labour payment included in the total contract amount which shall include everything. Prior to this circular ESI was payable on the total contract amount/bill amount of the contract. 60% of the Bill value to be taken as ESI qualifying wages is only a rough calculation. Moreover this calculation applies only to such cases where the details of wages paid by the contractor are not available since he has left the establishment after finishing his work and submitting a total bill without showing how much he has paid as wages, how much is his spent on material/ consumable purchases, how much he has spent on hiring generator, concrete mixture etc and how much he has spent to bribe the inspectors. ( If you,the employer is perfect in all respect, you don't need to pay bribes to any of these Inspectors but when the employer requires a favour from them, naturally, you should also sound favours to them.). Again, you cannot expect that ESI shall be deducted on 60% every subsequent times. It does not apply to subsequent bills, against which the employer is expected to collect full details of wage payment from the contractor before paying the bill.
From India, Kannur
As Mr Madhu TK has attached the circular dated 09.08.2002 issued by the then Jt Dir (Rev) to clear doubts while assessing ESI contributions for Only Labour Contractor.
But how would the contributions be assertained when the contractor is supplying both labour and materials, i,e, job work with materials ?
Can any one clarify with some court judgement, if available.

From India, Durgapur

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