ESIC Deductions for Temporary Contractors: Is It Necessary When Benefits Aren't Received?

Hello everyone, my question is about ESIC deductions. Is it compulsory to deduct ESIC from a temporary labor contractor's invoice if they provide services on labor charges, and the company submits omitted wages challan to the ESIC? However, the contractor's employees do not receive any benefits from this, leading the contractor to refuse to pay ESIC. What is the best practice in this situation? Please advise!

Understanding the ESI Act, 1948

1. The ESI Act, 1948 does not make any distinction between temporary labor, casual labor, regular employees, or ad hoc employees. All persons doing work for and in connection with the work of the factory and within the wage ceiling are considered "employees" within the meaning of the said Act and are entitled to benefits. In case of any eventuality, such as in accident cases, on the premises of the employer where the ESI Act is applicable/in force, and in the course and out of employment, the injured employee is entitled to disablement benefits. Therefore, the employer or immediate employer (contractor) is required to comply properly as per the procedures laid down in the said Act or rules/regulations framed thereunder.

2. If the employer fails to maintain records in respect of his casual/temporary employees, then it reflects the outlook of the said employer or his contractor. Consequently, in case of any eventuality as mentioned above, the injured employee will face difficulties in obtaining the benefits as mentioned earlier. Furthermore, the employer will also be liable under another law, namely the Employees' Compensation Act, 1937.

It is the responsibility of the contractor to pay ESIC contributions for their employees. If the contractor denies paying the contribution, then it becomes the responsibility of the principal employer to ensure the ESIC contribution of the contractor's employees is submitted. In your case, you have submitted the omitted challan to the ESIC for labor charges. This is correct because during an ESIC audit, the ESIC inspector will inquire about labor charges. You can show the challan at that time to avoid penalties and interest for your company. This applies whether the contractor's employees are temporary or permanent.

Thank you.

You will have to pay ESIC even for temporary employees.

Is anyone aware of how to calculate ESIC if fixed work is given? For example, work is assigned to a contractor for XYZ purpose, and it is agreed that Rs. ABC will be paid. It is up to the contractor to decide how many people he wants to deploy for the same.

If I am correct, your idea is to get the contractor's employees covered while ensuring that the principal employer does not get trapped. You can get the contractor a sub-code and remit the amount under that code. You can recover the employees' as well as the contractor's contribution from his bill. Remember that with this, PF will also get attracted.

The contractor already has an ESIC code to pay on the same; otherwise, advise them to get an ESI code for coverage.