ESI Contributions for Outsourced Jobs: How to Stay Compliant and Avoid Legal Issues

Dear all,

In light of the recent judgment by the Honorable Madras High Court on the above subject, the ESI Corporation has issued a circular regarding the payment of ESI contributions for outsourced jobs.

A soft copy of the circular is enclosed for your reference.

Guidelines have been issued by the ESI Corporation to determine the level of supervision involved in outsourced jobs. Employers must ensure two things to avoid litigation:

a) The agency to which the jobs are outsourced should have separate ESI codes and comply with the provisions of the ESI Act, including timely payment of contributions.

b) There should be no direct supervision or control over the contract laborers by the Principal Employer.

Thanks & Regards,
Kalyan R
Manager - Personnel
Sundaram-Clayton Ltd
Brakes Division
Chennai

Mobile: 9840942232

Dear Kalyan,

Thank you for the precise summation. At last, outsourcing is now codified by this circular. The industry, as well as contractors, can move forward from this.

With Regards,

V. Sounder Rajan

Thank you very much, Mr. Kalyan,

The information shared by you is very practical to us because we have practiced with 2-3 outsourcing companies for job works. It is very useful to our concern. Once again, thankful to you.

K. Nagaraj HR Manager Salzer Electronics Ltd Coimbatore - 19. 98946-68788

Hi,

I need help preparing questionnaires for an interview and also guidance on how to introduce a new joiner via email.

Thank you.

Dear All,

Here is an interesting update on this. We had a recent ESI inspection, and the inspectors directed us to pay 6.50% of the labor component of all outsourced work. I showed them the circular. The inspectors were actually unaware of this and maintained that they have not been instructed about this! Further, they said that we should produce proof of returns filed by the contractor which shows the names of the employees of the contractor who actually did the work at our premises.

Regards,
Mahesh T Nair