ESI Coverage for Contractors with Less Than 20 Employees: Can Someone Clarify?

If the company is covered under the ESI Act, is ESI applicable to its contractors who have fewer than 20 employees? Can you clarify?

Regards,
MK Kilaru

Clarification on ESI Act Coverage

The ESI Act of 1948 and the rules/regulations framed thereunder do not make any distinction between regular, casual, or employees engaged through a contractor (immediate employer).

The minimum number of employees required for coverage under the said Act is 10 for a factory and 20 for certain notified establishments.

Regards

Even though the contractor has fewer than 20 employees, they are eligible for an ESI code because the rule now states that 10 employees are sufficient.

Regards,
V. Subbarao

If any Social Security Enactment is applicable to a factory or establishment, all employees, including contract laborers, are covered under such enactment. This includes counting the number of employees for coverage under these enactments, where all employees, including contract laborers, are considered.

Accordingly, if a company is covered under PF/ESI, contractors' laborers are also coverable under PF/ESI. Even if a contractor has only one employee, they must be covered.

Regards,

Thanks to all. If we provide consultancy rather than maintenance or deploying manpower for gardening in your work order, will statutory obligations still be applicable?

Regards,
MK Kilaru

The ESI Act has been amended, and the ESI Scheme is now uniformly applicable to a factory or establishment that employs or has employed 10 or more persons on any day in the last 12 months.

The threshold limit of the number of employees for coverage of ESI has been well discussed in this forum several times. However, to correct you, this threshold number is not uniformly applied throughout our country. Except in Maharashtra, Assam, and HP, there is a lack of uniformity. Please find some of the discussions on this topic:

- [ESI Registration Gross Salary](https://www.citehr.com/463346-esic-registration-gross-salary.html)
- [Civil Contractor PF Registration](https://www.citehr.com/470754-civil-contractor-pf-registration.html)
- [Information Regarding ESIC, PF](https://www.citehr.com/474562-want-some-information-regarding-esic-pf-pg2.html)

Thank you.

I would like to point out to Sh. Mahabir Dhaiyaji that the provisions of Section 1(5) of the ESI Act, 1948 were not amended to align with the provisions of Section 1(3). Implementing the ESI Scheme in selected establishments falls well within the powers of the appropriate State Government under Section 1(5). However, there are still some State Governments, such as Maharashtra, that have not issued fresh notifications under the above provisions to bring the coverage of certain establishments in line with Section 1(3). There may be a few more states facing similar situations.

I would also like to correct Sh. Korgaonkarji that the State Government of Assam possibly issued a notification under Section 1(5) in 2012, reducing the coverage threshold of certain establishments to 10. If needed, I can conduct further research on this matter. It is worth mentioning that to the best of my knowledge, there are certain states, such as Gujarat and Pondicherry, that have not issued notifications under Section 1(5) covering medical or educational institutions. Hence, in my view, there is a lack of uniformity concerning the coverage of medical and educational institutions. The accuracy of this information needs to be verified with the relevant Regional/Sub/Divisional Office of ESIC.

Thank you.

ESI Applicability for Contract Employees

The contract employees are applicable for ESI because the factory is already covered. As such, it is immaterial that the contractor has workers below 10. The ESI authorities will consider the factory workers and contract workers for the purpose of ESI coverage. The employer has to cover them in his code number if the contractor does not have the ESI Code.

Your question is if a company is covered under the ESI Act, in that case, whether ESI is applicable to its contractors' employees having less than 20 employees. As far as the legal position is concerned, my respected senior colleagues have already explained in clear terms regarding its applicability.

In simple language for your understanding, I would like to submit that ESI is applicable for employees engaged through contractors even if they employ less than 20 employees since they have been working in your establishment/factory.

If contractors are registered and have obtained an ESI code from ESI authorities, then the liability of paying ESI on the part of the principal employer is excluded. It is advisable, as a principal employer, that you should keep strict vigil to ensure that ESI contributions are deposited by contractors under their respective codes.

If contractors fail to deposit the ESI contribution for employees engaged by them in your establishment/factory, it will be the responsibility of the principal to deposit the same.

A company covered under the ESI Act is liable to cover all the eligible employees working under it, including contractors' employees. The company should ensure that no eligible employee, including those of contractors, enters its premises without being covered under the ESI Scheme.

Dear seniors, I have a doubt regarding the situation where, as a contractor, there are more than 50 employees. Can we cover some of the workers under ESI only without PF? Please suggest if we can cover...

If a company is covered under PF/ESI, contractors' laborers are also coverable under PF/ESI. Even if a contractor has only one employee, they are to be covered.

My simple answer is yes. Even if a contractor has only one contract employee, they must be covered under PF/ESI, etc., as per the law of the land.