Understanding ESI Act for Work Contracts: Am I Responsible for Separate Contributions?

Dear All,

I am seeking information and further clarification regarding the applicability of the ESI Act on "Works Contract" such as Fabrication, Renovation, etc. If any nationwide application/notification has been provided on this matter, please mention its information (it would be very helpful). The only contract made in this case was for the completion of work, and none of the monthly fixed payouts have been agreed upon. The contractor will manage all the material and labor payments and raise invoices ultimately.

Clarification Needed on ESI Contributions

I need clarity on the following:

1. As an employer, am I liable to provide separate ESI contributions?

2. If yes (question 1), then on what basis and what compliance should I maintain as I have not contracted for the same?

3. If no (question 1), then are there any other similar liabilities on the employer, and are there any obligations to confirm the same?

References/notifications quoted in the response would be very helpful in preparing this case study.

Regards & Thanks,

Rahul Sah

Social Security Measures for Principal Employers

For the purpose of social security measures such as PF and ESI, a company as a principal employer shall have the responsibility to ensure that the crew working in the establishment, whether they are principal contractors' employees, sub-contractors' employees, or even the company's own staff, are covered under the relevant Acts (PF and ESI). Those who are earning wages up to Rs. 15,000 need to be covered under PF, and those earning wages up to Rs. 21,000 need to be covered under ESI.

Ensuring Contractor Compliance

It is advised that before awarding the work contract, care must be taken to ensure that the contractor has valid code numbers under the relevant statutory laws. You can also advise them to submit a copy of proof supporting their payments to the relevant authorities.

Contribution Responsibilities

Additionally, apart from your own employees, you should not make contributions directly to the authorities for your contract employees; instead, advise your contractor to do so.