Most of the comments and suggestions given are right. As the principal employer, your company is fully liable. My suggestions are:
1. Ensure that the contract has a PF code and an ESI code. This must be done at the time of enlisting the contractor or changing a contractor or if your present contractor does not have the codes, insist that he get it immediately.
2. Before paying the bills for the month to the contractor, insist on production of original / copy of challans of remiittance of PF / ESI contributions. Without this you should never pay the contractor.
3. You are supposed to witness the payment of wages to the Contract Labour and you must check the wages register whether the components of EPF/ ESI contributions / recoveries are mentioned against each name of the Contract Labour.
4. In a classic and landmark judgement the Supreme court has dealt with the Subject of ESI in great detail. The contracts or job works done through contractors fall into different categories: (A) those who work inside your establishment having their own ESI code (B) Those who work inside your establishment but not having their own code (C) Those who work outside your establishment and having their own ESI Code (outsourced jobs done outside) (D) Those who work outside your establishment but there job work is fully supervised by the Principal employer; (E) Those contractors who work exclusively for you and none else; (F) Those contractors who work outside but without supervision by the Principal Employer (G) Those contractors who by themselves Government Agencies or contractors who have their establishment in non-notified areas/ Zones.
5. If the contractor has his own code under ESI, the principal employer is NOT LIABLE AT ALL UNDER ANY CIRCUMSTANCES.
From India, Madras
71. Ensure that the contract has a PF code and an ESI code. This must be done at the time of enlisting the contractor or changing a contractor or if your present contractor does not have the codes, insist that he get it immediately.
2. Before paying the bills for the month to the contractor, insist on production of original / copy of challans of remiittance of PF / ESI contributions. Without this you should never pay the contractor.
3. You are supposed to witness the payment of wages to the Contract Labour and you must check the wages register whether the components of EPF/ ESI contributions / recoveries are mentioned against each name of the Contract Labour.
4. In a classic and landmark judgement the Supreme court has dealt with the Subject of ESI in great detail. The contracts or job works done through contractors fall into different categories: (A) those who work inside your establishment having their own ESI code (B) Those who work inside your establishment but not having their own code (C) Those who work outside your establishment and having their own ESI Code (outsourced jobs done outside) (D) Those who work outside your establishment but there job work is fully supervised by the Principal employer; (E) Those contractors who work exclusively for you and none else; (F) Those contractors who work outside but without supervision by the Principal Employer (G) Those contractors who by themselves Government Agencies or contractors who have their establishment in non-notified areas/ Zones.
5. If the contractor has his own code under ESI, the principal employer is NOT LIABLE AT ALL UNDER ANY CIRCUMSTANCES.
From India, Madras
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Gratuity case laws.pdf
ESI & EPF REGISTRTION DOCUMENT.doc
ESI & EPF.xls