Navigating ESIC Deductions: Should We Deduct 6.5% from a Contractor with 5 Workers?

We have a contractor deputed for stenciling of drums at our plant. The contractor is not registered with PF or ESIC. He employs only 5 laborers for the stenciling job. Should we deduct 6.5% of the amount from his bills and pay to ESIC? Are we entitled to do so? What is the correct procedure?

Can anybody help out please?

N. Sivakumar

The minimum number of employees for registration is 20 and above. So, there is no need to register with ESIC and P.F.

You have not mentioned the staff strength of your company. If your total strength, including the contractors and employees, crosses 20, then your establishment will be covered under the ESI Act.

The company employs about 20 people, but their salaries are above Rs. 10,000/-, and hence, we do not pay any ESIC for the employees.

What we want to know is whether we should deduct ESI from the payments to the contractors who do not have ESIC registration. The contractor has only 5 people working under him. As a principal employer, should we deduct ESI and remit it on his behalf? The ESI authorities are not accepting the practice of deducting the ESI from the bills.

Please clarify.

You need not accept the ESIC's offer if you have not remitted on behalf of the contractor from their bills. Then, you shall pay from your own pocket. Is it possible? Otherwise, you force the contractor to take an ESIC number.

We have a contractor deputed for stenciling of drums at our plant. The contractor is not registered with PF or ESIC. He employs only 5 laborers for the stenciling job. Should we deduct 6.5% of the amount from his bills and pay to ESIC? Are we entitled to do so? What is the correct procedure?

Can anybody help out, please?

N. Sivakumar

Dear N. Sivakumar,

If your company has more than 20 employees (i.e., covered under ESIC), you must deduct 6.5% from the contractor payment and deposit it to the bank in a separate challan mentioning it as Contractor payment.

Madan Mohan