Understanding ESIC Obligations for Contract Labor: Compliance and Coverage

Dear All,

My company is not covered under the ESIC scheme. However, we do employ contract labor, and our contractor falls under the ESIC jurisdiction.

To the best of my knowledge, ESIC contributions are mandatory only for establishments that are within the ESIC coverage area. In essence, the location of work is crucial when considering ESIC obligations.

Could you please clarify if we are required to contribute to ESIC for the employees of that specific contractor?

Regards,
Resh

Dear Sir,

The answer didn't clarify the question: why pay ESI (contractors' employees) if the area does not come under ESIC?

Regards,
Rajesh Kumar

If your factory is under ESI coverage, then you need to comply with ESI for directly and indirectly employed persons (if the total exceeds 20 persons).

Please let me know if you need further clarification or assistance.

Dear Rajesh,

The workmen working for the contractor are covered under the ESI Scheme. They are covered because they work for the contractor who is in the coverage area. The workmen go wherever the contractor posts them for work, hence they are covered.

Hi!

If the contractor's establishment is located in an area where the ESI Scheme is in force, his establishment stands covered under the ESI Act, provided he is employing 20 coverable employees, including those working at various sites. He has to obtain a code number from ESI and comply in all respects.

If some of his employees are working on a regular basis in areas where there is no ESI Scheme (non-implemented area), the contractor can seek exemption for them under Section 88 of the Act.

If the principal employer's factory/estt. which is engaging these contract workers is located in a non-implemented area, he is not liable under ESI either for his directly employed workers or workers engaged through the contractor. He has no liability for the contract workers under ESI. However, the employer is liable under the Workmen's Compensation Act.

Ramana Murty, Hyderabad

Yes, if the contractor's office comes under ESI limits, you have to pay. On the other hand, if you don't pay, you may strengthen the hands of contract labor in claiming permanency. They may claim that as I am working at your end, I am not covered under the ESI Scheme.

Generalist91

Sir,

I fully support the views of kvrm2002. It is up to the contractor to decide whether he wants to comply or seek exemption under Section 88 in relation to his employees. The principal employer is certainly not responsible for their compliance under the ESI Act.

Regards,
BNP Singh

Dear,

Yes, as a principal employer, you need to obtain EISC registration for establishments engaging contractors with 20 or more employees.

I hope the issue is solved by the following information.

COVERAGE UNDER THE ESI ACT, 1948

The Act is applicable to the factories employing 10 or more persons. Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings, and newspaper establishments employing 20 or more persons. Furthermore, under Section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational Institutions employing 20 or more persons in certain States. The existing wage limit for coverage under the Act is Rs. 15,000 per month (with effect from 01.05.2010).

AREAS COVERED

The ESI Scheme is being implemented area-wise by stages. The Scheme has already been implemented in different areas in the following States/Union Territories:

STATES

All the States except Nagaland, Manipur, Tripura, Sikkim, Arunachal Pradesh, and Mizoram.

UNION TERRITORIES

Delhi, Chandigarh, and Pondicherry.