EPF & ESI Applicability on Contractor for Civil Construction at premises

Dear Sirs,

With reference to the above, our factory has been registered under EPF & ESI act. Now we are doing some civil construction work at our premises. We just need to know if we are responsible for paying EPF & ESI on the bills charged by the contractor. Our contractors are not registered under the EPF & ESI act. The bill value is about 2 to 3 lac.

Generally, 30% of the total bill is deemed as labor charges. Based on that calculation figure, you need to pay PF & ESI accordingly on your PF & ESI code.

1. Sir, it would be more appropriate if you asked your civil work contractors to maintain proper records of employment and payment of wages for the construction workers and ensure timely and accurate payment of contributions under the ESI Act, 1948. ESI contributions are required to be paid based on the records of employment and wages, not solely on the amount of bills. If the contractors or principal employer fail to pay the contributions, the ESIC can and generally does claim contributions based on the total amounts of the contractors' bills.

2. I also understand that there is no set formula for considering 30% as wages out of the total bill amounts. Even if there have been instructions issued by the department in the past, they are often not followed due to discretion, clarifications, and conditions outlined in those instructions.

You can refer to the Standard Schedule of Rates for construction followed by CPWD/Delhi, which is considered a standard reference as the basis.

Sir, if the employer of the contract workers inside your factory does not have a separate PF and ESI Code, then your organization is deemed to be an establishment for the purposes of the said legislations.

In case your Contractor does not have separate PF/ESI codes, and if these Acts are applicable to you, it is obligatory on your part to discharge these statutory obligations.