Are Short-term Construction Workers Really Covered by the ESIC Act? Let's Discuss

Dear Sir,

Kindly forward your opinion on whether the ESIC Act is applicable to the construction workers (contract laborers) who perform work for a limited period only, i.e., 5 to 10 days in a month or not more than 3 months in a year (30 days). Since the establishment is covered under the aforementioned act, and the concerned authorities are insisting on coverage.

Regards,
RNSwamy

Dear Narayanswamy,

In general, the ESI Act is not applicable to construction workers or the industry. However, nowadays, on a case-by-case basis, the ESIC authorities are also covering the construction industry under the ESI Act.

Preet

To this effect ESIC instruction 4/99 casts:
References have been received from Regional Directors seeking clarification regarding coverage of construction agencies/offices of builders particularly on the point as to whether the construction workers working in the construction sites are to be taken into consideration for the purpose of the coverage of the construction agencies/offices of builders under Section 1(5) of the ESI Act as a ‘shop'.

The matter was examined at Hqrs. Office and it is informed that it has been the policy of the ESI Corporation not to cover the workers engaged by the construction agency who belong to the unorganized sector due to the peculiar characteristics of the construction industry and the peculiar nature of employment of workers engaged in it. In construction industry the work is carried out through the construction workers at the construction sites where the projects are situated. The workers engaged in it are mobile and migratory in nature. The criteria and duration of employment also vary from the work to work. Due to the nature of employment and the nature of work place involving the construction workers, enforcement of the ESI Act in respect of such workers and organizing Medical and other facilities for them which are normally available under the ESI scheme will be difficult. Therefore the existing scheme under the ESI Act is neither applicable nor workers engaged in construction sites. Hence, the following actions may please be taken for coverage of construction agency/offices of the Builders:-

• Such construction agencies which are employing 20 or more persons in their offices and the offices are situated in implemented areas are coverable under the Scheme. However, it may be ensured that the criterion of 20 or more persons is applicable to such employees only who are coverable under Section 2(9) of the ESI Act.
• Such workers who are engaged by construction agencies and are working on the site of the project should not be considered for the purpose of coverage of an establishment dealing with construction activities.
• Such construction workers are to be taken into consideration for coverage under Section 2(9) as ‘employee' who are engaged directly in a covered factory by the principal employer or through an immediate employer.
• Only employees of the construction agencies who are posted in the office are to be taken into consideration for the coverage of the unit.
• Some of the regular employees of the construction agencies mostly technical staff such as Engineers, Supervisors etc. who are regular employees of the construction agency but are normally sent to the work-site periodically, are to be taken into account for the purpose of coverage of the establishment under Section 1(5).

In respect of those employees who are though regular employees of the construction Agency but remain on tour at the Site(s) of the construction in non-implemented areas for a period of more than 7 months in a year, contribution may not be charged subject to the employer seeking exemption under Section 88 of the ESI Act in respect of those employees.

Sunil Sethi

Dear Sir,

I am working in a construction company undertaking construction works in industrial projects (where the Factory Act is applicable). Will the ESI Act be applicable to employees on the rolls of the construction company whose salary is below 10,000?

Dear Viswanath,

Please go through the explanatory note on the applicability of the ESI Act to the construction industry by Sh. Sunil Sethi for your query.

Regards,
R.N. Khola
(Labour Law & Legal Consultants)
09810405361

Dear Swamy, Please refer to the circular issued by ESIC dated 03/01/2011 to extend the coverage of construction site workers under ESIC. ESIC services will be available to these mobile and migratory workers with no geographical restrictions with the implementation of IT rollout "Anytime and anywhere".

Furthermore, the scope of medical care is now broader and can be availed by site workers. In other words, the ESI Scheme is not limited to our own dispensaries; medical services can be accessed at empaneled private dispensaries and diagnostic service centers where ESIC is unable to provide the services.

If any construction worker at the site cannot avail of the ESIC scheme, they can be granted exemption in suitable cases.

Thanks & Regards,

V R RAO PULIPAKA

ESI Coverage

Ours is a hospital covered under the ESI area since 2012. We are incurring significant expenses on building repairs and have recently constructed new buildings. The ESI inspector claims that ESI is payable on the labor portion of building bills (which include material, labor, and contractor profit) since the workers are employed by us as the principal employer. The contractors argue they are not under the purview of the ESI Act due to risks, and migrant laborers are employed at the site. A letter issued by ESI on 14th June 1999 exempts construction agencies from covering ESI due to the employment of migrant labor. One of the clauses states that "Such construction workers are to be taken into consideration for coverage under Sec 2(9) as employees who are engaged directly in a covered factory by the principal employer or through an immediate employer."

My Query

1. Can we inform the ESI inspector that ours is a hospital and does not fall under the above clause, which applies only to a covered factory?
2. As a principal employer, do we have to deduct ESI and remit it?

Please clarify.

Regards,
C.V. Narasimhan
GM-F&A

Dear sir,

Greetings for the day.

Enclosed is the circular to address any doubts and provide clarification.

Thanks & Regards,

Sumit Kumar Saxena

Sir, the paragraph-wise reply to your questions, in my opinion, should be as follows:

No, the objection of the Social Security Officer of ESIC is correct. When your hospital is covered under the ESI Act, 1948, you are required to cover and comply with all employees, including those engaged in repair, maintenance, construction, or extension of the premises of your hospital. It makes no difference if your hospital is not a factory. Once covered under section 1(5) of the said Act, all employees as defined under the Act are coverable, and compliance is required. The only exception is employees earning wages exceeding the coverage limit, which is presently Rs. 15,000 per month.

Yes, however, you cannot deduct employees' contributions from the wages of employees engaged in repair, maintenance, and extension of buildings, etc., for past periods. For past periods contributions, both employees' share and employers' share are to be deposited by the principal employer. For future periods, you can comply with all such employees on the same pattern as you are with your other employees. Regarding the employer's share of contribution for repair, maintenance, and construction workers, you can recover the same from contractors if agreed upon.

In my opinion, the said Act does not make any distinction between migrant or non-migrant workers. All employees are required to be covered, and compliance must be made irrespective of whether any employee is from another state.

Thank you.