Is It Possible To Provide ESIC Cover For Non Employees .

Dear All,

Our company has received a new project, which has necessitated hiring some labor through a contractor. The client specifies that the labor involved in the project must be covered under ESIC and not under any kind of mediclaim policy.

Currently, the contractor has fewer than 10 employees and is not registered, nor are any of the employees covered under ESIC. I have consulted with a few individuals, and they have suggested that we bring these laborers onto our payroll (i.e., issue appointment letters) and then provide ESIC coverage.

However, the challenge is that these laborers will only be needed for the project for less than a month. Additionally, bringing them onto our payroll may pose a risk to the company in case any of them are involved in any criminal activities or accidents. Verifying the details of such laborers can be quite difficult.

Is there a way we can ensure they are covered under ESIC without officially employing them or are there any alternative solutions?

Please provide your advice.

Regards,
AS

Hi,

We have done this for one of our suppliers. They had only 8 people on rolls, and we insisted that they register in PF & ESI. Since they don't have enough numbers, we suggested that they include an excess number of employees to reach the count required by PF & ESI, and they got registered. In the consecutive month, they showed the rest of the people (we added in excess) as having left, and now with 8 members, they are continuing without any problem. So, if you think you have to cover your employees under PF & ESI, one month you have to bear a few hundreds, and from then on, you could cover them in actual.

Dear Christopher,

Thank you for the reply. The supplier does not want to get registered. We have ESIC registration, but to cover those laborers, they have to be our employees. Is there any way out where they are not taken on rolls but are still covered under ESIC?

Regards,
AS

If you have a genuine contract with the contractor for the supply or deployment of manpower, then why do you worry? If the contractor does not have ESI and EPF registration, you can register his employees under your ESI and PF Registrations. For that, the employees of the contractor need not be brought under your rolls but just registered under your number. Just by registering the employees under your registration will not make them your direct employees as long as the contract is not a sham one.

Madhu.T.K

Hi there,

Presently, you can't do that. The ESI authorities have instructed us to provide work for contractors who have an ESI code. Previously, there was an option for Omitted wages, where we used to pay all ESI deductions but employees covered were unable to receive any benefits because they were not registered. We don't currently have contractors in our process, but we are working on obtaining a sub-code where we can include all the non-process contractors who do not have an ESI code. I will come back to you with all the relevant details in a day's time.

I am not clear about what Christopher has put in. What I have pointed out is that if your contractor does not have ESI registration, being the Principal Employer it is your duty to register the contractor's employees under your registration. By doing so, you are complying with both the ESI Act and the CLRA Act. There is no risk as long as the contract is genuine. Creating a sub-code exclusively for enrolling the contractor's workers is not possible because a sub-code is allotted when the original plant/establishment has a branch in another area that is not under the jurisdiction of the Local Office where the establishment is registered.

Madhu.T.K

Hi Mr. Madhu,

I slightly differ from your thought process. The duty of the employer is to ensure the payment of ESI is made for any contractual work carried out. Why does the principal employer have to register on behalf of a contractor? Instead, the employer could hire a contractor with an ESI code, which would be safer. Whom can we trust in this aspect? Not everyone will be genuine, and no employer will accept to do this either. Perhaps a few, but not all.

Anyways, I will accept your thoughts as you are a senior member and a super moderator of this forum. Let me check once again with the local office and get back to you if there is an update in this regard.

Dear Sir,

As a Principal Employer, we have to deduct the ESI Contribution of 6.5% from the Contractor bill, which we have to pay to ESIC. What Mr. Christopher Sir said is correct; currently, the omitted wages are something we are unable to pay. To rectify this, please log on to the ESIC Account. You will find the Contractor Mapping option there; click on it and proceed to create a Contractor List. Enroll the Employees in your Code, and then you can obtain the IP No for each person. Simply map the IP in the Contractor List. This is the procedure we are following in our company.

Thank you.

In respect of contract labour, the primary responsibility of payment of ESI and PF lies on the Principal employer only. It is on the basis of this responsibility that the Acts have made him pay the contributions in the first instance and then recover it from the contractor.

As Christopher said, the employer should engage only those contractors who have their own ESI and EPF registrations. Also, we should engage only those contractors who can obtain a valid contractor license. However, things will not always work as we wish. If we are to follow the law, we will not engage contract labour in perennial nature of activities. We will not engage them in operations directly connected with the business of the company.

Taking the case of new generation establishments, most of them are knowingly engaging in such practices. Even banks hire contract employees to carry out key operations. Sometimes, public sector companies may be the top employers of contract labour in operations of perennial nature. But once the Contract Labour (Regulation and Abolition) Act is properly enforced, the system will change. The contract labour engaged in perennial works may also be regularized, depending on the reason for the contract creation or whether it was just a camouflage or smoke screen.

In such situations, the contract labour will essentially become the responsibility of the employer, even if the ESI and EPF contributions have been separately deposited by the contractor under their own registrations. This means that the purpose behind the contract is crucial in deciding the risks involved. That is why in my previous posts, I categorically stated that there is no risk provided the contract is genuine.

Madhu.T.K

Hi,

There is a way you can take a medical insurance group policy for the 10 members. I think it will be the best way.

Regards,
Srihari

Hi,

For a group insurance/mediclaim policy, you need to have a minimum of 100 enrollees. Anyways, you have to deduct ESI for the work carried out by them. Why don't you try the method as suggested by Gandhi in the earlier thread.

Dear Christopher,

I will be applying Gandhi's method. Thanks, everyone. I will keep you posted if there are any changes. Once again, thank each one of you for your suggestions.

Regards,
AS

Dear Sir,

The same problem occurred in our company. Regarding this issue, I approached the ESIC Regional Office. They only instructed me to follow this method.

Thank you.

Dear Amby,

Please let me know first whether your establishment is covered under the ESIC Act.

Hi all,

Same issue. Contractor does not have ESIC and EPF registration. These are one-time and only a few days jobs. Please let me know:

1) Does the method told by Gandhi work? If yes, then it may resolve the ESIC issue.
2) What should be done with EPF registration as a principal employer? Is there any possibility to get a sub-code with the same address?