Navigating ESIC Responsibilities: How Should We Handle Contractor Coverage and Liabilities?

Dear Seniors, We have some contractors who come on a need basis, perform the work, and go. We pay them accordingly. Some of the contractors do their job on their own, while others deploy manpower for the same tasks (e.g., cycle repair, glass cleaning, carpenter work, electrical works, courier, AC maintenance, etc.). Please help me understand the applicability and liability regarding the ESIC for these contractors. My queries are as follows:

1. What is the liability of the principal employer in the ESIC and PF?

2. In case the contractor is not covered under ESIC as they may have fewer employees, should we cover them under our ESIC code?

3. If we cover them, how do we obtain the ESIC card and submit Half-Yearly returns?

4. We are thinking of deducting 6.5% on 30% from the total bill amount by considering the labor charges of the total contract amount and paying to the ESIC. If we do that, how do we pay the contributions in their name?

Please answer my queries as we need to work on this urgently.

Thanking you in advance.

Regards, Ram.

As per your query, you can register their names in ESIC on the basis of the principal employer. You should deduct from their salary and contribute to ESIC. For more details, please contact.

Understanding ESIC Deductions for Contract Labor

Hi Ram, as per your posting, what I understand is if you employ any labor on a contract basis, then first, you have to consider one point: whether they are on a daily basis or a monthly basis. If you employ the labor on a daily basis, then your payment is made daily or weekly. If you are doing it on a weekly basis, then how long the work is going to be should be checked with the concerned department. If it is a long-run process and the same employee is continuing, then you need to deduct only 1.75% from their daily wage. At the time of applying for an ESIC card for registering an employee, you need to mention on the application form your ESIC registered number only and then process the form if the contractor doesn’t cover the labor. If the labor you employ is on a monthly basis, then you need to deduct only 1.75% from their wages at that time. When filing a return into ESIC, you need to show them separately.

You cannot deduct 6.5% from the wages you are paying.

Regards,
Siva Kumar Tata

Hi Siva Kumar, my question is: how do we submit the ESIC forms for these employees who are not regular employees? These contractors work on a need basis only, such as for cycle repair, glass cleaning, carpentry, electrical works, courier services, AC maintenance, etc. We can't submit their ESIC forms since none of our regular employees are covered under ESIC, even though we have 1 lakh employees, all of whom are above the ESIC bracket. Therefore, we are submitting nil returns.

My query is regarding how we should pay ESIC for these contractors since we do not pay them fixed wages but rather based on the work involved.

Regards, Ram.

Thanks, Siva Kumar, but my question is how do we submit the ESIC forms as these employees are not regular employees. Also, these contractors come and work only on a need basis. We can't submit their ESIC forms as none of our regular employees are covered under ESIC, even though we have 1 lakh employees. All are above the ESIC bracket; hence, we are submitting nil returns.

My question is how do we pay ESIC for these contractors, as these are like, for example, cycle repair, glass cleaning, carpenter work, electrical works, courier, AC maintenance, etc. The amount we pay is not as wages; we pay based on the work involved.

Regards,
Ram.

If they aren't regular employees, then it is not necessary to deduct any ESIC amount for them.

Regards,
Siva Kumar

ESI Deduction on Maintenance Payments

It is okay if you are not deducting ESI on the maintenance payment if it is paid under an AMC. However, in other cases, the payments, whether regular or not, will be construed as labor payments, which will attract ESI.

These are casual payments, and on those, you are expected to pay ESI contributions in full. However, if the bill charged by the person engaging the work includes any element of materials, like nuts and bolts, then you need to get it bifurcated and pay ESI on the labor charges only. The onus to prove this is with the employer only.

If none of your employees is under ESI, then also you have to pay it in respect of those who are engaged on a casual basis. You can register the casuals under your ESI code itself, and the payments deducted and contributed should be reflected in the returns.

Regards,
Madhu.T.K

Thank you, team members. I would like to add that the principal employer has the responsibility of ensuring that the contractor maintains applicable wage, attendance, and workmen registers. These registers are used to calculate the contributions that need to be deducted from the bills payable to the contractors.

Thanks and regards,
SVS Ram

Dear Mr. Ram, Your question is very good. To my understanding, ESIC authorities need revenue only; there is no need for form submission and workers' names. Authorities ensure revenue only. If you are not paying contributions on those bills, then they will issue a recovery, including interest. In case of any query, you can call me.

Regards, A.K. Gautam [Phone Number Removed For Privacy Reasons]

As per the ESI or PF Act, if the principal employer is covered under these acts, any contract work being carried out in your unit is automatically covered for those contract workers as well. Therefore, before engaging any contract services on your premises, you must ensure that those awarded the contract works have the PF and ESI registration codes. This is a necessity. If not, as the principal employer, you will be held responsible, and the entire labor force engaged by the respective contractor's workers' PF and ESI contributions should be deducted from the pay using your registration number.

For your clarification, please refer to the recent ESI notification attached.

Regards,
PBS Kumar

Dear Mr. Ram,

Guidelines for Managing AMC Vendors and Service Providers

As per my view, you should follow the following exercises in regards to AMC vendors or service provider vendors:

1. You should insist the vendor remit ESI contributions for their employees under their own ESI code and submit details like challans and ESI contribution details to you.
2. You should also ensure that ESI and PF codes are mentioned on their respective invoices.
3. If the vendor does not remit ESI or does not have an ESI code, you should deduct the ESI contribution from their invoices and remit it under your own ESI code. The calculation should assume 25% of the total bill amount as labor charges/salary and deduct 6.5% as an ESI contribution on that 25% of the bill amount. At the time of inspection, the ESI authority should also follow this system.
4. To be safer, you should insist that all service provider vendors mandatorily mention ESI and PF codes on their invoices.

Regards,
Manoj Prasad

[Phone Number Removed For Privacy Reasons]