ESI Applicability: Does It Apply When Contractors Work Off-Site?

If the contractor, under an agreement, is carrying out our work at their own or rented premises, which do not belong to us, is ESI applicable in that scenario? Thank you.

Contractor Relationship and ESI Applicability

It depends on the contract and the manner in which it is executed and the supervision involved. If the contractor is buying the materials from the market, using his workers to make it, and then supplying it, there is no master-servant relationship between you and the workers of the contractor. But if the contractor collects materials, engages workers to convert the said materials into finished goods as per your specification, and then supplies it back to you, then the contractor is said to use his workers exclusively for you.

Moreover, when you supply the raw materials, it is expected that there is a high degree of supervision by you in each and every stage of its conversion (the process of converting the materials into the finished product), and therefore, a master-servant relationship would be established. In such a situation, the contractor will be raising an invoice for the labor service only. Then it will become your responsibility to ensure that the workers who work for you are paid salaries on time, at rates not below the statutory minimum wages fixed by the government, and are given protection of social security like ESI and EPF.

In the former case, obviously, the contractor will be raising a SALES bill.

If it is a job order and the contractor is doing many other jobs of the same or different nature, then no ESI will be attracted.

Apex Court Verdict for Bidi Workers

So far, I can remember there is one Apex court verdict for Bidi workers that states it is an extension of premises when the contractual workers are manufacturing Bidis at their premises and only manufacturing Bidis for one PE, PF & ESI will both be applicable.

Motor Garage Scenario

A motor garage where many cars from different sources are coming will not be covered under PF & ESI. However, the individual contractor will be covered under PF & ESI through the contractor's code if applicable.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in

Contractor's Responsibility for ESI and PF

The contractor, with the help of his family, is involved in the de-shelling of almonds. The raw material is provided by the party to the contractor. The contractor utilizes their own resources to carry out the work and then sends the finished goods back to the party. The contractor also undertakes similar work for other parties.

If a written agreement is executed stating that the party is not accountable for ESI, PF, etc., would it be acceptable, or does the party still hold responsibility for ESI, PF, etc.?