Dear All,
There is a great difference between "the Construction company" and "all other company" with regard to ESI.
Suppose your company's core activity is construction (like DLF, Parsvnath etc.), then you need to pay ESI only for your office staff alone and not for the construction workers like masons, etc. They have to be covered under WC Act.
However, if your company is not a "construction company" (i.e., you are a manufacturing company or a service company), let us say you are engaging the services of a construction company/contractor for construction/extension of a facility at your factory/office, then you have to pay ESI even for the construction workers.
Many HR managers are of the opinion that if the construction company they engage for construction has to be covered under ESI and should have a code number, then they feel that they are absolved of the ESI liability because they think that the company would pay ESI in respect of its construction laborers. This is an absolutely false notion. The construction company can neither register its laborers under ESI nor pay any contributions in respect of them. Under the ESI Act, they are only bound to cover their office (administrative) staff and not the laborers.
The contribution is taxable in the hands of the client (principal employer) who is engaging the construction company. Because every person engaged for wages directly or through a contractor inside the premises of the company is coverable under ESI as per Section 2(9) of the ESI Act.
Hence, HR managers are cautioned that, especially in the case of civil construction contractors, even if they have independent code numbers under ESI, you are advised to deduct the contribution on the wage element out of the total payment made to the contractor. Because once the work is over, he is gone, and you cannot catch hold of him. Then you have to pay from your pocket.
The statutory authorities usually assume 1/3 of the total bill value as the wage element and deduct 6.5% on that wage element. Practically speaking, 2% of the entire bill value can be deducted from the construction contractor/company before releasing the payment (like TDS). Then the amount must be remitted under your ESI code and not under the construction contractor's code.
Prevention is definitely better than cure.
Regards,
Ramesh
Regards
From India, Madras
1There is a great difference between "the Construction company" and "all other company" with regard to ESI.
Suppose your company's core activity is construction (like DLF, Parsvnath etc.), then you need to pay ESI only for your office staff alone and not for the construction workers like masons, etc. They have to be covered under WC Act.
However, if your company is not a "construction company" (i.e., you are a manufacturing company or a service company), let us say you are engaging the services of a construction company/contractor for construction/extension of a facility at your factory/office, then you have to pay ESI even for the construction workers.
Many HR managers are of the opinion that if the construction company they engage for construction has to be covered under ESI and should have a code number, then they feel that they are absolved of the ESI liability because they think that the company would pay ESI in respect of its construction laborers. This is an absolutely false notion. The construction company can neither register its laborers under ESI nor pay any contributions in respect of them. Under the ESI Act, they are only bound to cover their office (administrative) staff and not the laborers.
The contribution is taxable in the hands of the client (principal employer) who is engaging the construction company. Because every person engaged for wages directly or through a contractor inside the premises of the company is coverable under ESI as per Section 2(9) of the ESI Act.
Hence, HR managers are cautioned that, especially in the case of civil construction contractors, even if they have independent code numbers under ESI, you are advised to deduct the contribution on the wage element out of the total payment made to the contractor. Because once the work is over, he is gone, and you cannot catch hold of him. Then you have to pay from your pocket.
The statutory authorities usually assume 1/3 of the total bill value as the wage element and deduct 6.5% on that wage element. Practically speaking, 2% of the entire bill value can be deducted from the construction contractor/company before releasing the payment (like TDS). Then the amount must be remitted under your ESI code and not under the construction contractor's code.
Prevention is definitely better than cure.
Regards,
Ramesh
Regards
From India, Madras
Dear Ikhan,
As per your presentation, I have come to know that there are a lot of discrepancies in drafting. For example, the administrative charge in ESIC, which you have mentioned as 1.16 percent, is not applicable. Additionally, you mentioned employer exemption from ESIC contribution when a worker's daily wage is less than Rs. 50. This is not mentioned in the ESIC Act.
Please take care of all these types of issues in your posts as they create confusion. Ensure that you confirm information before posting and mention the reference for the same.
Thank you.
From India, New Delhi
As per your presentation, I have come to know that there are a lot of discrepancies in drafting. For example, the administrative charge in ESIC, which you have mentioned as 1.16 percent, is not applicable. Additionally, you mentioned employer exemption from ESIC contribution when a worker's daily wage is less than Rs. 50. This is not mentioned in the ESIC Act.
Please take care of all these types of issues in your posts as they create confusion. Ensure that you confirm information before posting and mention the reference for the same.
Thank you.
From India, New Delhi
Plese let me know whether they should cover under ESI (problem is that every day labours are shuffling - Going & coming new labours) .
From India, New Delhi
From India, New Delhi
Well, the rule was recently amended, and Rs. 15,000/- per month is the new limit for people to be covered under ESI. It is very important for an organization to comply with this rule as failure to do so can lead to serious legal consequences.
If you are facing an attrition problem, one solution is to hire a contractor and have your daily workers employed through that party. This is a practice that my organization follows. You can search on Google or visit Cite HR for more information on this topic.
I hope you are doing well.
Nikki
From India, Delhi
If you are facing an attrition problem, one solution is to hire a contractor and have your daily workers employed through that party. This is a practice that my organization follows. You can search on Google or visit Cite HR for more information on this topic.
I hope you are doing well.
Nikki
From India, Delhi
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