Can Contractors Split Employee Coverage Between Workmen's Compensation and ESI Acts?

Can anyone please elaborate on whether a contractor working under a principal employer can cover his laborers under the Workmen's Compensation Act as well as the ESI Act? In other words, can he cover half of his employees under the Workmen's Compensation Act and the other half under the ESI Act?

Coverage Under ESI and Employees' Compensation Act

Those who come under the definition of an employee as per the ESI Act shall be statutorily covered under ESI if they are working in an implemented area. Others meeting the definition of an employee as per the Employees' Compensation Act may be covered under an EC policy, but it is not mandatory.

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

In normal cases, all workers in a single location will be covered under ESIC if the factory is in an ESIC zone. There is no option for selective coverage.

However, if there are workers earning more than 15,000 per month, they are outside ESIC. In these cases, the contractor should provide insurance under the Workmen's Compensation Act. Alternatively, the factory may include it in their public liability insurance. The former is a better option, but the latter will be cheaper.

Understanding the Workmen's Compensation (WC) Act and ESI Coverage

The Workmen's Compensation (WC) Act applies to all employees who fall under the definition of workmen. It is designed to provide compensation in the event of a fatal or injurious accident while on duty.

ESI coverage is primarily for medical treatment and is not necessarily limited to incidents occurring while on duty. Although ESI includes some elements of insurance, it cannot be directly compared to the benefits provided under the WC Act.

Understanding ESI and Workmen Compensation Acts

ESI and Workmen Compensation are two different acts. ESI is applicable only in notified areas, whereas the WC Act is applicable to all organizations and covers the workmen defined therein. Also, the objectives of both these acts are different. It is not possible in either of these acts to split the employees into parts and cover only some of them.

Further, the principal employer is always responsible for entire compliance, including subcontractors under them. Now it is up to the principal employer as to how compliance with both these acts is handled. If a contractor is already registered under ESI and also taking responsibility for the WC Act, then the principal employer is not required to make double payments.

The persons engaged through contractors are mostly low-paid employees, i.e., paid at least minimum wages, which are less than Rs. 15,000/- in the majority of cases. Therefore, concerning those contractor employees working in implemented areas and in covered units under the ESI Act, 1948, there is hardly any need to obtain any insurance for the Employees' Compensation Act or public liability insurance. However, the employer must ensure that his regular employees, who are not covered under the ESI Act, are at least insured for compensation under the Employees' Compensation Act.

However, concerning those contractor employees, as well as regular employees working in non-implemented areas (not covered under the ESI Act), the employer may obtain insurance policies for his liabilities under the Employees' Compensation Act.

Thank you.