Is Using a Workmen's Compensation Policy Instead of ESIC Legal for Temporary Contract Labor?

Clarification on Workmen's Compensation Policy

This is Ramu, working in the manufacturing industry. I need some clarification on the WC policy. When we engage contract labor for temporary works, i.e., 3 or 4 months of miscellaneous works, is obtaining a workmen's compensation policy instead of registering under ESIC valid or not?

Is the WC policy valid instead of ESI even if the industry has ESI coverage? Many contractors in our surrounding industries are following this practice. Is it legally valid?

Please provide me with valuable advice on this matter.

With regards,
Ramu

If the premises where you employ contract labor are covered by the ESI scheme and their wages are below Rs. 15,001 per month, they have to be insured under ESI. If not, the EC Act is applicable if they are employees under Schedule II of the Act. Note that insurance under the EC Act is not mandatory.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Since the work is performed at an ESI-covered location, the fact that the work is for a limited period or that the contractor has a Workers' Compensation (WC) Policy does not absolve you of the liability under the ESI Act. Whenever an ESI Inspector comes for verification, they can insist on the payment of contributions for the past period for such contract labor, as it is the Principal Employer's responsibility to ensure this. This is particularly important since the contractor does not have independent ESI registration.

Regards,
KK

It is absolutely correct, as mentioned by Sh. KK Nair, that if any industry is covered by ESIC, the contractor's employees will also be required to be covered under ESIC irrespective of the period of his contract. The ESIC Inspector, during his inspection, will certainly ask for the payment of contributions in respect of such contractors for the period of inspection in spite of having their WC Policy.

Regards,
RKB

Please note that WC Insurance is not a substitute for ESI. Where employees are to be covered under ESI, they must be covered. WC insurance is only useful where employees are not covered under ESI, though it is not mandatory.

Regards

Dear friends, it is noted that the establishment/factory covered under ESIC is exempted from complying with the Employees' Compensation Act.