Understanding ESI Liability: Are You Responsible for Labor on Building Repairs?

When a builder is hired to repair a building, he employs his labor for work. Later, he gives an invoice of, say, 1 lac. He is not registered under ESI law. Are we liable under ESI for that labor? And how will the liability be determined and paid? Please guide.

Thank you,
Manish Kumar

Dear Mr. Manish Kumar, in the absence of a separate ESI code for the contractor, as the principal employer, you will have to recover 6.5% on 25% of the bill amount and remit the same to the ESI authorities. (Some case laws are mentioned below for your reference).

• When the employer fails to give a breakup of the amount spent on construction, repair, etc., 25% of it will be treated as 'wages' for ESI's contribution purposes.
Shree Sivakami Mills Ltd., Madurai (represented through Managing Director) v. ESI Corporation, Madras (through its Regional Director) Madras, 2001 LLR 370 (Mad HC)

• Employees engaged by the contractor in an establishment are liable to be covered under the ESI Act.
Employees' State Insurance Corporation v. Vijayamohini Mills, (1990) II LLJ 464: 1990 LLR 305: 1990 (1) LLN 902 (Ker HC)

• The principal employer will be liable to pay the ESI contributions of the employees employed through the contractor.
Standard Fabricators (India) (Pvt.) Ltd. v. Regional Director, ESI Corporation, Bombay, (1994) 69 FLR 785: 1994 LLR 869 (Bom HC)

• The respondent company is liable to make a contribution at 25 percent in respect of labor charges of the total cost of the buildings.
Madras High Court - Regional Director, Employees' ... vs Sundaram Clayton Ltd. And Ors. on 10 December, 2003 Equivalent citations: (2004) IILLJ 30 Mad.

Regards, N Nataraajhan, Sakthi Management Services [Phone Number Removed For Privacy-Reasons]; [Email Removed For Privacy Reasons]

What is the process of payment for these labours on the ESI portal?

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In the absence of individual coverage for the workers, you will have to remit the contribution to ESI under the 'Misc' heading in lump sum.

Regards,

N. Nataraajhan
Sakthi Management Services
Hp: +91 94835 17402

Thank you for your prompt reply.

So on the online portal of ESIC, it should be paid using the "Omitted Wages Challan." Right!?