Is ESIC Contribution Needed for Short-Term Daily Service Jobs? Seeking Expert Advice

A vendor has been awarded a job in an organization where ESIC is applicable, but the nature of the job is such that the service provider workman is required for a specific time period of less than an hour on a daily basis in an organization.

Now, whether for such service, remittance of ESIC contribution is required or not? Kindly provide expert opinion on this.

Regards,
Vipul

Nature of the Job

The nature of the job involves only one hour of work, specifically the addition of chemicals to the cooling towers of the plant. However, the paid services are also well below the minimum wages. The vendor is in the chemical supply business and has provided these services upon the plant's request. The cost is very low at Rs. 18,000 per annum for this job.

Company Activities

Regarding the company activities, the company is involved in the manufacturing of chemicals.

Kindly advise urgently.

Regards,
Vipul Rana

It appears that he is an independent service provider offering you a service for a fixed amount under an annual service contract. In my view, the relationship between your establishment and his unit is business-to-business. Therefore, the amount paid by you does not acquire the character of wages, and hence no contribution is payable. However, you should not treat him as an employee at any time and pay him time-rate wages.

Regards,
B. Saikumar
Mumbai

Query on Liability and Insurance Coverage

I agree with you, but now the query raised by the Corporate Compliance and Safety department is: if something happens to that fellow while rendering service to our plant, who will be responsible? Secondly, when ESIC is applicable, can he be covered under the Workmen's Compensation Act by taking an insurance policy? Since he has to work only for 1 hour.

Regards

We have to recover the ESI contribution for even a 1-hour job of the contractor or employee. Since he is doing a hazardous job every day, you have to register his name in the ESI online and recover the ESI. If the wage is below Rs. 100.00, please contribute the employer's contribution of 4.75% without fail, which may safeguard you in case he is involved in an employment injury. Hence, it is better to register his name and recover the ESI or pay the employer's contribution.

Regards,
Alphonse
[Phone Number Removed For Privacy Reasons]

When the service provider is an independent contractor and is not your employee under the ESI Act or within the meaning of the Employees' Compensation Act, the question of your liability as an employer for an employment injury does not arise. However, you should be prepared to argue this on the facts if any dispute arises in the future.

There is no harm in covering him under ESI by way of abundant caution to meet any risk of compensation arising out of employment injury. Then, you will be accepting him as your direct employee on a part-time basis since he is not employed through any contractor, and you may possibly have to face any consequences arising out of an employer-employee relationship.

You can also explore the possibility of covering him under an accident policy with an insurance company independently. You may take a prudent decision keeping in view the costs and benefits of covering him under ESI. You can consult a consultant should the need arise.

Regards,
B. Saikumar
Mumbai

Thank you very much for your expert opinion. We have decided to provide coverage for him under ESI. Additionally, we will ensure that no direct relationship as an employer and employee arises in the future, as we are only making payments to the contractor (Chemical Supplier) for the supply of chemicals and dosing.

On-Call Services and Liability Concerns

In cases where on-call services are involved, as a company, we do not verify if they have valid ESIC or PF codes. For example, Xerox Machine Repairing on call. In such a scenario, if something happens to the service engineer at our site, the following questions arise:

1. Is it the responsibility of the Site Employer?
2. What about the compensation payable to that individual?

Regards,
Vipul

As explained in my earlier reply, it is a safer proposition to enter into an annual service contract for providing service on a call basis for a fee to be paid yearly. Such a contract acquires the character of principal to principal, not principal employer and contractor or employer-employee. This way, you would have no liability as an employer for any injury caused to such a person on your premises. However, as an added precaution, you may explore the possibility of covering him under an independent accident policy on a yearly basis.

Regards,
B. Saikumar
Mumbai