How to Ensure ESIC and WC Coverage for All Construction Workers on Site?

Query Regarding ESIC Applicability on Construction Workers

I have one query related to ESIC applicable to construction workers. My factory is covered under the Factory Act 1948, and now we are constructing one more building on the same premises through contractors. The contractor has engaged around thirty laborers for the new building construction, of which 10 are permanent type laborers, and the rest are engaged through daily market labor, which changes every day. The contractor has his own ESIC number but has taken ESIC numbers for only the 10 permanent laborers at the site. The rest of the laborers are not covered under ESIC or the Workmen's Compensation Act 1923. Please suggest what to do to cover all construction workers in case of an accident.

ESIC and WC Policy for Construction Workers

Please advise if ESIC is applicable to our factory, then can we/contractor also opt for a WC policy for construction workers parallelly? In our area, all companies are covered under ESIC.

Regards,
PS

Dear,

You have not mentioned whether you are covered under ESI or not. If you are not covered, then there is no need for the contractor to cover his workers. However, if you are covered under the ESI Act, the contractor has to cover his employees too; otherwise, ESI officials are not going to spare you.

KK

As a matter of fact, your factory might have been covered under ESI. If so, then you must cover all the workers engaged in the same premises in construction activities. If the salary is above the stipulated limit, then you can opt for any Group Personal Accident Policy from any insurance company in place of a WC Policy. If you are not covering them in the WC Policy (GPAP), then in case of any accident or untoward incident, your factory should bear the cost of medical and compensation part.

Clarification on ESI Act Coverage and Compliance

1. You have not disclosed whether your unit is covered under the ESI Act, 1948. In case your unit is covered under the said Act, you are required to ensure compliance with construction work activities or the extension of building work on your premises.

2. The said Act makes no distinction between permanent, casual, or temporary persons employed for any work in a factory or unit premises. All persons working in connection with or relating to the work of the covered unit or factory are employees within the meaning of the said Act. The only distinction is between employees receiving wages up to and including Rs. 15,000 per month (covered employees) and employees receiving wages exceeding Rs. 15,000 (non-coverable) under the said Act.

3. Regarding compliance with coverable employees, you have mentioned that you have engaged one contractor who has an ESIC Code Number. The responsibilities of the principal employer always remain, even if the work is carried out through any contractor who has his separate ESI Code number. Please ensure that your contractor complies regularly with all coverable employees. After the work is completed, you can retain copies of ESI challans, returns of contributions, and other records related to the employment and payment of wages of such contractor employees with you. This way, during record inspections, you or your staff can produce them before the Social Security Officer to demonstrate compliance. Failure to produce the required records, or if the contractor fails to produce them during record verification, will lead the assessing authority to recommend contributions on the total amounts incurred for such a project. In my opinion, there is no need to take any WC Policy for any of the coverable or covered employees as mentioned above since coverage under the above Act is mandatory.

4. Regarding the insurance of non-covered employees (i.e., those receiving wages exceeding Rs. 15,000), I believe Boss 2966 Super Moderator, in his remarks, has correctly suggested obtaining a Group Accident Insurance Policy from any commercial insurance provider. In my opinion, such a policy must align with the value of compensation as stipulated in the Employees' Compensation Act, 1923.

Regarding the applicability of ESIC, construction work (purely construction work within a specific periphery) is exempted from ESIC liability. However, for this exemption, your establishment must be registered under the BOCW Act (Building & Other Construction Work) with the Labour department. An establishment that is exempted from ESIC is automatically covered under the Workers' Compensation Policy, but it is advisable to also obtain a Group Personal Accident (GPA) Policy, preferably from a government agency.

Regards,
Manish Gupta Lucknow

Clarification on ESIC Exemption for Construction Work

It will be of immense help if you could elaborate on the basis of the statement "Construction (Purely construction work within a certain periphery) work is exempted from liability of ESIC."

Regards,
KK

There are two types of work orders being raised in the construction industry. The first is the supply of manpower work order, which will attract PF and ESI (if the client establishment is covered under ESI). The second is the hire of machinery/equipment, for which PF and ESI will not be deducted. For them, as per the work order, TDS only is deducted.

As far as BOCW is concerned, it is nowhere mentioned that ESI is not applicable. If the Factories Act or Mines Act is applicable in any place, the BOCW Act will not be applicable.

If we are involved in construction work within the existing factory premises, then we have to take clearance from the BOCW Commissioner (pay the 1% Cess), and after that, our construction activity will be covered under the Factories Act. Hence, if the factory is within the covered area, obviously we must pay the ESI for the construction workers also.

Furthermore, there was some draft memo released during 2011 regarding ESI coverage for construction workers. Even some states are trying to implement the same. The same memo was available on this site (CiteHR).

Regards.

With due respect, I would like to share my personal experience as I have been associated with a construction company. We have been dealing with both cases, which include machinery rental and construction work within a premises.

Rental Services

In terms of rental services, we have provided various machinery such as transit mixers, rollers, pumps, JCBs, and hydraulic piling rigs to esteemed clients like Lafarge, ACC, L&T, and Ultratech. We have been requested to submit wage sheets, ESI, and EPF challans to settle our rental bills every month. This is contradictory to your statement that PF and ESI will not be deducted for hire of machinery/equipment, where only TDS is deducted as per the work order.

Applicability of ESIC over BOCW

Regarding the applicability of ESIC over BOCW, I have learned from documents and practical experience at our project site (where we collaborate with the State Government) that "ESIC is neither applicable nor suitable for construction work at such project sites."

If you have any updates or memos related to my current knowledge, please share them with me. I would greatly appreciate it.

Thank you.

Best regards,

Working without a valid and comprehensive insurance policy against the EC Act of 1923 is not without risk. Should any accident occur resulting in injuries or the death of a worker, a substantial amount of compensation will be required to be paid. Accidents may happen at any time and in any place. Therefore, it is important to have the policy in place to protect against any liability that may arise.

Importance of ESIC Registration

It is important for a registered organization to have ESIC registration. Both permanent and temporary employees must be covered under ESIC or have a Workers' Compensation policy in accordance with the minimum wages to avail maximum benefits in the event of any casualties.

Regards,
Harvinder Remotra

Personal Experience with Machinery Rental and Construction Work

With due respect, I would like to share my personal experience as I have been associated with a construction company, and we have been dealing with both cases: Machinery Rental and Construction work within a premises.

Concerning Rentals, we have provided various machinery such as Transit Mixers, Rollers, Pumps, JCB's, and Hydraulic Piling rigs to renowned clients like Lafarge, ACC, L&T, and Ultratech. We have been requested to provide them with undertakings for wage sheets, ESI, and EPF challans to clear our Rental bills every month. (Contrary to your statement: The second is Hire of machinery/equipment, for which PF and ESI will not be deducted. For them, as per the work order, TDS is the only deduction required.)

Applicability of ESIC over BOCW

Regarding the applicability of ESIC over BOCW, I have learned from documents and practical experience at our project site (where we have been working with the State Govt) that "ESIC is neither applicable nor suitable for construction work at such project sites."

If you have any memos related to updates that could enhance my current knowledge, please share them. I would be grateful for that.

As a matter of fact, Lafarge, ACC, L&T, and Ultratech are considered as manufacturing units since they produce concrete, even though they are involved in construction activities. Hence, wherever concrete production is involved for selling outside the premises, the Factories Act will apply, and ESI will also be applicable to the workers.

Thanks,

Regards