Confused About Labour Cess? Seeking Advice on Compliance and Billing Issues

We are a Civil Repair Contractor and have currently undertaken repairs for a particular Principal Employer. We have the following query:

Issue with Labour Cess Requirement

The Principal Employer is asking us to add Labour Cess to our bills, although this was not discussed during the finalization of the work, nor is it mentioned in the Work Order. We have fewer than 20 laborers working at the site, so we are not covered under the Contract Labor Act. Also, since our organization has fewer than 20 employees, we do not have any ESIC or PF numbers.

1. How can we add labor cess to our bills if we do not have a contract labor license?

2. Can the Principal pay the labor cess on our behalf? If so, how?

3. The Principal Employer is stating that paying labor cess is mandatory, so kindly guide us on how this can be done given the above conditions.

4. If the Principal Employer is engaging more than 100 employees, is it compulsory for all contractors to have a contract labor license and other compliances regardless of the contractor's manpower strength?

Please guide and advise. Our payment is being held up due to no clear picture on the above issues.

Thanks!

Clarification on Labour Cess and Contract Labour Act

First of all, I would like to clarify that Labour Cess is payable under the Building and Other Construction Workers' Welfare Cess Act 1996, not under the Contract Labour (Regulation and Abolition) Act 1970. From your query, I see a misconception.

The BOCWWC Act mandates a 1% cess on the total construction cost by the Employer under the BOCW Act.

The BoCW Act is applicable when 10 or more building workers are deployed in any establishment. According to the Act, the cess must be paid by the owner of the establishment directly or through the contractor engaged by him, as the "contractor" is also considered an employer under the BOCW Act.

The Labour Cess that the Principal Employer is requesting to be added to the bill, post-completion of work, must be submitted to the welfare board established under the BOCWW Act.

The contract labour license is unrelated to the cess. The applicability of a contract labour license is for 20 workers or more in most states, but in some states like Andhra Pradesh, Gujarat, and West Bengal, it is 10 or 5.

The BOCW Act applies to establishments with 10 or more workers. If you have deployed fewer than 10 workers, the BOCW Act does not apply to you, and there is no need to include the cess in your bill.

Regards

Thank you for the reply. This was very helpful. We have 12-15 workers working on the site, so we need to add labor cess to our bill as suggested by you. We are working in the state of Maharashtra. So, I have the following questions:

1. If we pay the labor cess to the Welfare board after collecting it from the Principal Employer, what compliance is required from us (the contractor)?
2. Do we require any kind of registration or any number to pay the labor cess to the Welfare Board? If yes, then what?
3. If the Principal Employer pays the labor cess on our behalf, do we (the contractor) require any kind of compliance like ESIC/PF, etc.?

Kindly clarify.

Thanks a lot!

You should obtain a Registration Certificate under the Building and Other Construction Workers Act from the Labour Office, and your civil construction workers should also be registered under the Act and comply with the said Act. PF and ESIC are different issues. ESIC is not applicable to construction workers, whereas PF is applicable. The Contract Labour License under the Contract Labour Act is not applicable to you as the deputed employees are less than 20.

Regards,
Dilip Nandanwar
For Vidarbha Industries
(Labour Law Auditing, Consulting, Statutory/Legal Compliance, Payroll Outsourcing & Management, Manpower/Staffing, and Government/Railway Contracting)
Navi Mumbai
Branch Office - LGF-69, Sanskritik Sankul, Zansi Rani Square, Sitabuildi, Nagpur.
Mail Id - [Email Removed For Privacy Reasons]
Phone: [Phone Number Removed For Privacy Reasons]

Thank you for the reply. This was very helpful. We have 12-15 workers working on the site, so we need to add labor cess to our bill as suggested by you. We are working in the state of Maharashtra, so I have the following questions:

1. If we pay the labor cess to the Welfare Board after collecting it from the Principal Employer, then what compliance is required from us (the contractor)?

2. Do we require any kind of registration or any number to pay the Labor Cess to the Welfare Board? If yes, then what?

3. If the Principal Employer pays the Labor Cess on our behalf, do we (the contractor) require any kind of compliance like ESIC/PF, etc.?

Kindly clarify. Thanks a lot!

As suggested by a fellow member, if you have more than 10 employees working for civil construction work, then you need to get a registration certificate under the BOCW Act. For the assessment of Cess, labor authorities may ask for a registration certificate under the BOCW Act. All compliance under the BOCW Act has to be done by you in respect of workers employed for such construction activities.

PF and ESI are two different issues, as the ESI Act is not applicable for construction site workers. If you have more than 20 workers as a whole in your organization, maybe working for other clients (as at this site you have 10/15, PF not applicable), then PF shall be applicable.

Regards

Valuable feedback by all of you. Noncompliance may result in legal actions such as penalties, suspension of licenses, imprisonment, etc., and other forms of poor corporate governance. Obtain registration under the BOCW Act from the labor authority and ensure compliance accordingly.