Dear all seniors,
We are a Construction Company based in Delhi, and as a practice in the construction industry, most of the work is carried out by subcontracting. Now, being a compliance guy, I'm looking after the issues relating to labor laws.
Query: If contractors are being asked to cover their employees under the ESIC scheme, their first answer would be that ESIC is not applicable to civil contractors. Is that so? As a second option, they say that they are taking different insurance policies like CAR (Contractors All Risk Policy) and a policy under the Workmen's Compensation Act. Is it sufficient to cover all the risks of employment?
Kindly put in your valuable inputs.
Rahul Sethi
From India, Delhi
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11We are a Construction Company based in Delhi, and as a practice in the construction industry, most of the work is carried out by subcontracting. Now, being a compliance guy, I'm looking after the issues relating to labor laws.
Query: If contractors are being asked to cover their employees under the ESIC scheme, their first answer would be that ESIC is not applicable to civil contractors. Is that so? As a second option, they say that they are taking different insurance policies like CAR (Contractors All Risk Policy) and a policy under the Workmen's Compensation Act. Is it sufficient to cover all the risks of employment?
Kindly put in your valuable inputs.
Rahul Sethi
From India, Delhi
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Dear Rahul,
ESIC Scheme protects all "employees" engaged on a monthly remuneration not exceeding Rs. 6500/- in a factory/establishment to which the Act applies. Persons employed for wages on any work connected with the administration of the factory or establishment or any part, department, or branch thereof or purchase of raw materials, or distribution, or sale of the product of a factory or establishment are also covered. Mines, Railway Running Sheds, Naval, Military and Air Force Workshops, and specified seasonal factories are excluded. The scheme also provides full medical cover to the dependants of insured persons. In the event of the death of an insured person due to employment injury, dependants become eligible for cash benefits.
Rahul, your second question is if the CAR policy is sufficient or not? The answer is no because this policy only covers accident and death cases. It does not cover sick benefits for the employee. ESIC covers many benefits, which is why the contractors are arguing for ESIC.
Regards,
Dipali
From India, Ahmadabad
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ESIC Scheme protects all "employees" engaged on a monthly remuneration not exceeding Rs. 6500/- in a factory/establishment to which the Act applies. Persons employed for wages on any work connected with the administration of the factory or establishment or any part, department, or branch thereof or purchase of raw materials, or distribution, or sale of the product of a factory or establishment are also covered. Mines, Railway Running Sheds, Naval, Military and Air Force Workshops, and specified seasonal factories are excluded. The scheme also provides full medical cover to the dependants of insured persons. In the event of the death of an insured person due to employment injury, dependants become eligible for cash benefits.
Rahul, your second question is if the CAR policy is sufficient or not? The answer is no because this policy only covers accident and death cases. It does not cover sick benefits for the employee. ESIC covers many benefits, which is why the contractors are arguing for ESIC.
Regards,
Dipali
From India, Ahmadabad
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Dear Dipali,
Thank you for the reply.
Now, contractors have started arguing on this matter. None of them is ready to enroll themselves in ESIC. Their latest argument is that they are also covered under the Building & Construction Act 1996, and people are benefiting from it.
Anybody from the same industry or consultancy, please confirm a simple question: Are building contractors in different construction industries paying ESIC? If yes, is it irrespective of the number of employees? If no, are they required to provide any kind of exemption certificate?
Regards,
Rahul
From India, Delhi
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Thank you for the reply.
Now, contractors have started arguing on this matter. None of them is ready to enroll themselves in ESIC. Their latest argument is that they are also covered under the Building & Construction Act 1996, and people are benefiting from it.
Anybody from the same industry or consultancy, please confirm a simple question: Are building contractors in different construction industries paying ESIC? If yes, is it irrespective of the number of employees? If no, are they required to provide any kind of exemption certificate?
Regards,
Rahul
From India, Delhi
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The answer to the question raised can be submitted appropriately by somebody from the construction industry. However, in the case of the construction of the new factory, ESIC will not be applicable until the factory is covered under the scope of work, i.e., the manufacturing process and requisite minimum numbers. Until ESIC is applicable, even though the site falls under the coverage limit of ESIC.
Regards, ACCHR
From India, Mumbai
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Regards, ACCHR
From India, Mumbai
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Dear Rahul ESIC is not applicbale in constrction company .you can take insurance policy and these workers will be covered under workmen compensation act. tks j s malik
From India, Delhi
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From India, Delhi
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Hi Rahul!
This is Haritha, working in Prasiddhi Group of Companies (Bangalore) as an HR. Ours is a property development, infrastructure, layouts business. We also go for subcontracting. We have faced a similar situation in our company. Then our auditor (specialized in labor law) suggested going for ARC (Accident Relief Care). It is better to go for insurance under the Labor Act and register your company as a principal employer. The subcontractor will do the same. They will file a return of Form V. If my reply is confusing, consult any civil lawyer or auditor who is good at labor laws. All the best.
Regards,
Haritha
From India, Delhi
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This is Haritha, working in Prasiddhi Group of Companies (Bangalore) as an HR. Ours is a property development, infrastructure, layouts business. We also go for subcontracting. We have faced a similar situation in our company. Then our auditor (specialized in labor law) suggested going for ARC (Accident Relief Care). It is better to go for insurance under the Labor Act and register your company as a principal employer. The subcontractor will do the same. They will file a return of Form V. If my reply is confusing, consult any civil lawyer or auditor who is good at labor laws. All the best.
Regards,
Haritha
From India, Delhi
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ESI coverage is applicable when the number of employees is more than 10 or 20, depending on whether the factory/establishment is using power or not. Construction workers are generally not covered under the ESI Act.
The BOCCA Act is different. The 1% CESS deducted from contractors' bills is submitted to the labor department. This amount is to be utilized for the welfare of the workers, but its effectiveness in practice is still lacking.
Subcontractors are automatically registered under the BOCCA Act when they apply for a Labor License.
Ideally, a workmen's compensation policy is the best solution at a construction site. Additionally, providing accident policy coverage, which is cost-effective, would be beneficial. In the unfortunate event of a worker's death, their family can be appropriately compensated.
The CAR or Construction All Risk policy is expensive but comprehensive, and ideally, the principal employer should have a CAR policy in place.
Implementing safety measures at the site is crucial, although it can be challenging to execute in practice.
From India, Calcutta
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The BOCCA Act is different. The 1% CESS deducted from contractors' bills is submitted to the labor department. This amount is to be utilized for the welfare of the workers, but its effectiveness in practice is still lacking.
Subcontractors are automatically registered under the BOCCA Act when they apply for a Labor License.
Ideally, a workmen's compensation policy is the best solution at a construction site. Additionally, providing accident policy coverage, which is cost-effective, would be beneficial. In the unfortunate event of a worker's death, their family can be appropriately compensated.
The CAR or Construction All Risk policy is expensive but comprehensive, and ideally, the principal employer should have a CAR policy in place.
Implementing safety measures at the site is crucial, although it can be challenging to execute in practice.
From India, Calcutta
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Dear Mr. Rahul,
ESI will not be applicable to construction sites where the greenfield project is ongoing. However, if the construction is happening in the existing factory (which is covered under ESI or in the notified area) or for the factory expansion work, the contractor should pay ESI.
The CAR policy and WC policy are general coverage policies. As per the Contract Labour Act, WC policy is mandatory, and the CAR policy provides insurance coverage.
If you require the ESI notification regarding the applicability to construction sites, I will send it to you.
Regards,
SVS
From India, Coimbatore
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ESI will not be applicable to construction sites where the greenfield project is ongoing. However, if the construction is happening in the existing factory (which is covered under ESI or in the notified area) or for the factory expansion work, the contractor should pay ESI.
The CAR policy and WC policy are general coverage policies. As per the Contract Labour Act, WC policy is mandatory, and the CAR policy provides insurance coverage.
If you require the ESI notification regarding the applicability to construction sites, I will send it to you.
Regards,
SVS
From India, Coimbatore
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Dear Friends,
To all the members who claim that the ESI Act is not applicable to construction companies, I kindly request you to provide relevant case laws or sections that support your comments. This is an important subject that can enhance the knowledge of all involved.
Thank you, Rahul, for starting this discussion.
Thanks and regards,
Datta.
From India, Mumbai
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To all the members who claim that the ESI Act is not applicable to construction companies, I kindly request you to provide relevant case laws or sections that support your comments. This is an important subject that can enhance the knowledge of all involved.
Thank you, Rahul, for starting this discussion.
Thanks and regards,
Datta.
From India, Mumbai
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Dear all,
I appreciate the comments of all the people who answered the query. I fully agree with Mr. Datta that whatever we quote on the site or answer a thread, it will always be helpful and supportive to provide a proof like a description or reference of a case. More suggestions are welcome.
Regards, Rahul
From India, Delhi
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I appreciate the comments of all the people who answered the query. I fully agree with Mr. Datta that whatever we quote on the site or answer a thread, it will always be helpful and supportive to provide a proof like a description or reference of a case. More suggestions are welcome.
Regards, Rahul
From India, Delhi
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ESI - Construction site workers.pdf
ESI- Construction workers.doc