Does Hiring Contract Laborers Mean My Friend's New Construction Company Falls Under the ESIC Act?

Dear All,

One of my colleagues has recently started his construction establishment. They get projects from builders and then they start their pre-engineered steel building systems (PEB). As they are going to hire laborers on a contract basis, I would like to know whether his company comes under the ESIC Act or not. Also, what should be the employee joining formalities of a newly established company.

Thanks & Regards,
Meenakshi Kiran

Dear Meenakshi,

If the number of employees is 10 (directly or indirectly), he has to complete the registration formalities under the ESIC Act.

I believe that stating the threshold for coverage of construction companies/units in Maharashtra as 10 or more may not be correct. I suggest confirming this information with the ESIC nearest office where your unit is located to verify if the State Government has issued a notification under section 1(5) reducing the threshold of coverage to 10 or more persons for shops and other establishments. To the best of my knowledge, the previous threshold of coverage under section 1(5) of the Act was 20 or more employees, but I am uncertain about the current status.

Types of Coverage under the ESI Act

The coverage under the ESI Act, 1948, and the rules/regulations framed under it are of two types based on the coverage of the main builder/unit/establishment. Firstly, if the main builder/unit/establishment is already covered under the ESI Act, 1948, the contractor(s) must also ensure compliance even if they have employed only one eligible person. If the contractor construction firm does not have its own code under the ESI Act, 1948, they can comply using the code number of the principal employer, i.e., the code number of the main builder/unit. Secondly, if the main construction unit/principal employer is not covered, the contractor firm/construction company can independently seek coverage under section 1(5) of the Act by employing the minimum number of persons required by the State Government notification under said section.

Therefore, it would be beneficial to discuss this issue with the principal employer and the officials at the nearest office of ESIC.

Thank you.

Dear member,

I think your unit should also consult the nearest office of ESIC, i.e., their Social Security Officer, as per the opinion I expressed above. It has been observed that sometimes the officials of the principal employer are also not having complete and correct information on ESI-related matters.