How Does the ESI Act Extension Impact Construction Workers and Employers?

In continuation of the earlier Press Note dated 17/7/2015 regarding the coverage of Site Construction Workers, ESIC has now issued instructions dated 31/7/2015 advising that with effect from 01/08/2015, all construction workers working at construction sites will be treated as covered under the ESI Act, 1948, and rules/regulations framed thereunder.

http://esic.nic.in/backend/writeread...37aedb666d.pdf

ESIC Headquarters has advised its field offices accordingly. For the kind information of experts and functionaries in the field of labor laws.

Dear Harsh Kumar ji, now the question is, how is this unorganized sector going to comply with this? To date, the PF scheme has not been fully implemented in this sector. The Government is introducing new schemes and enactments, but the big question remains: how many of these are actually being implemented?

Challenges in the Construction Sector

In the construction sector, every record is manipulated, leading to issues with implementation such as beneficiary registration under BOCW, PF implementation, UAN activation, KYC upload, etc. This sector is reluctant to adhere to any laws, with no labor being paid according to the minimum wage rate. Implementing this scheme in the construction industry will prove to be a challenging task.

Regards

1. Sir, you have raised a very pertinent question. As far as I understand, ESIC will be required to face two main problems for the extension of provisions of the Act to site construction labor, which I have mentioned in my remarks in a thread initiated by you a few days earlier.

First Problem: Separate Class of Establishment

The first problem will be that ESIC considered in the past such employees of construction sites as a separate class of establishment (unorganized sector) for which, I think, a separate notification under section 1(5) is required to be issued. I am doubtful whether the construction sites qualify as a factory or not under section 1(3) of the said Act. Therefore, it is doubtful whether by revising instructions only, the scheme can be extended to such employers without any notification under section 1(5) by the appropriate government.

Second Problem: Double Contribution Concerns

The second most important problem will be that under BOAC, there is some cess collected from the employers and spent on the welfare of construction workers. The employers will, I guess, raise objections regarding double contribution, i.e., cess as well as a contribution of 4.75% under the ESI Act, 1948, as ordered by ESIC.

4. Sir, you may be aware of how the system is working under the present Government. Problems are likely to arise for the implementation of the said instructions dated 31/7/2015, and I think you are totally correct.

Thank you for your contribution. Yes, I read your remarks in one of the earlier threads initiated by you, but I could not respond at that time due to some reason. Basically, there are two issues that I feel you have in your mind.

Is Construction Activity a Factory or a Commercial Establishment?

The construction agency/office is treated as a commercial activity by the Corporation. However, due to the nature of employment and the workplace, enforcement of ESIS to construction workers was not possible. Therefore, by instruction 4/99, such construction workers were kept out of coverage under ESIS, but the regular employees of construction agencies were not exempted from ESIS coverage. (It should be noted that, in reality, the construction agencies kept the entire project site out of ESI.) Under the circumstances, a separate notification under section 1(5) is not required, in my opinion.

When is the BOCW Act Applicable to Construction Activity, and How Can ESI be Made Applicable?

The ESI Act and the BOCW Act are two different enactments with different objectives. Additionally, the ESI Act cannot be superseded unless the benefits provided are better than or equivalent to ESIS in all respects. I hope you will agree with my views.

Regards

Dear Korgaonkar ji,

Thank you for the above remarks. Sir, I would like to know whether construction sites are covered under the Factory Act? I have some doubts and am not clear on this issue.

Dear Harsh Kumar ji,

Thanks for your question. Construction sites are not covered under the Factories Act unless there is an installation of RMC/Batching Plant at the construction site. ESI also is made mandatory at construction sites where RMC/Batching Plants are installed.

In continuation of my earlier post in response to your question, I would like to say the following:

It is a fact that construction sites are not covered under FA. However, in my view, construction activity should fall under the FA. If you carefully read the definition of the manufacturing process, there is scope to interpret that construction activity is a manufacturing process. Another thing to consider is that it is a NIRMAN. It is a MAKING. Building structures involve the combination of various raw materials or welding activities, which are part of an engineering activity. Any activity carried out there falls under the manufacturing process, which typically involves more than 10 workers.

It is also important to note that according to sub-clause v to section 2(k), when construction, reconstructing, repairing, refitting, finishing, or breaking up ships or vessels is considered a manufacturing process, then why wouldn't building construction activity fall under the scope of FA?

Sometimes, you may find authorities visiting construction sites and leaving happily.

Regards

Sorry, I am in a different mood today.

Even you find the shop inspectors visiting construction sites and going happily. When a construction site does not have a factory license, then it should fall under the commercial establishment. The shop inspector is very right in visiting the construction site in this case.

To my knowledge, no construction site is issued a GUMASTA license by any authority all over India.

YEH MERA INDIA!!!!! MERA BHARAT MAHAAAAAAAN!!!!

My understanding is that construction workers with regular company/contract are eligible for ESI, and definitely not the workers who work for short periods. If construction workers work with different agencies for varying periods and are members of the BOCW WELFARE BOARD, then BOCW benefits apply. The application is for the concerned workers only with an ID card and with only one organization.

Dear Sirs, my concern continues as I work with a real estate developer. Although my current employee strength is below the eligibility criteria, having registered employees under different companies, what about the workers under subcontractors? A practical issue is the high attrition rate among laborers; hence, covering them under ESIC to extend the benefits is going to be a real challenge. If the corporation can introduce something like UAN in ESI too, hopefully, that will help.

Regards, Anil Richhariya

The ESI Corporation has also rolled out IT. When you appoint an employee covered under the scheme, you need to register him under your establishment on the ESI portal. While registering, you will have to choose an option - already IP or not. If you choose the option - already IP, you need to submit his insurance number, and the same number will carry forward in your employment. The insurance number remains the same even if an employee changes his employment. This was the case even before the IT rollout.

Regards