Maternity Benefits for Contract Employees: Who Is Legally Responsible for Payment?
A woman employee works at a client’s premises through a manpower contractor. When she applies for maternity leave, an important question arises: Who is responsible for paying her maternity benefits—the contractor or the principal employer?
For HR professionals, manpower agencies and principal employers, determining responsibility requires a careful review of the employment arrangement, statutory coverage and the employee’s eligibility for maternity benefits.
1. Who Is Responsible for Paying Maternity Benefits?
Under the Code on Social Security, 2020, Section 2(26) includes employees engaged through a contractor within the definition of an employee. Section 2(27) also includes a contractor within the definition of an employer.
Further, Section 60 addresses the employer’s liability to pay maternity benefits to an eligible woman employee.
Therefore, a manpower contractor cannot automatically avoid its maternity-benefit obligations merely because the employee is deployed at a client’s premises. Where the contractor is the employer under the applicable arrangement, it must assess and fulfil its statutory responsibilities.
However, determining liability requires consideration of the actual employment relationship and the applicable legal provisions.
2. Can the Principal Employer Also Be Responsible?
It would be incorrect to conclude that the principal employer can never have any responsibility for maternity benefits.
The definition of an employer under Section 2(27) also refers to persons having ultimate control over an establishment and employment through another person. The inclusion of contractors in this definition does not, by itself, expressly exempt principal employers from every possible obligation.
Accordingly, responsibility should be assessed by examining the employment arrangement, the applicable statutory provisions and the circumstances of the case.
Principal employers should also maintain appropriate compliance oversight to ensure that eligible contract employees receive their statutory benefits.
3. Check ESI Eligibility Before Processing the Claim
Before deciding how maternity benefits should be paid, the employer and HR team should verify whether the employee qualifies for maternity benefits under the Employees’ State Insurance (ESI) framework.
ESI registration alone does not establish eligibility for maternity benefit. The employee’s insurance status, contribution records and applicable eligibility conditions must be examined.
Section 61 of the Code on Social Security, 2020 provides for the preservation of maternity-benefit entitlement under Chapter VI for an otherwise eligible woman until she becomes qualified to claim maternity benefit under Section 32.
The appropriate payment route should therefore be determined after checking the relevant statutory conditions and the employee’s eligibility.
4. Practical Compliance Checklist for HR Teams
| Point to check | Suggested action |
|---|---|
| Employment records | Review the appointment letter, payroll records and deployment documents. |
| ESI eligibility | Verify insurance and contribution records before determining the applicable payment route. |
| Claim documentation | Collect the maternity-benefit application, expected delivery date and supporting documents promptly. |
| Contractor coordination | Obtain a written payment plan and retain proof of disbursement. |
| Client agreement | Clearly document how maternity-related costs and reimbursements will be handled between the parties. |
5. Example: Maternity Benefits for a Housekeeping Employee
Consider a housekeeping employee deployed at a corporate office through a manpower agency. The employee submits an application for maternity leave and benefits.
The agency and the client’s HR team should coordinate promptly to:
- Verify the employee’s employment status and statutory eligibility.
- Determine whether the maternity-benefit claim falls under the ESI framework or the applicable maternity-benefit provisions.
- Identify the responsible party for processing and payment.
- Communicate the claim procedure and expected timelines clearly to the employee.
- Maintain supporting documents and proof of payment.
If the agency and the client disagree over billing or reimbursement, they should resolve the commercial issue separately and promptly. The employee should not be left moving between the two parties without clarity about her statutory entitlement.
6. Key Takeaways for Contractors and Principal Employers
Maternity-benefit compliance requires more than identifying the organisation that processes an employee’s salary. Employers must assess the employment relationship, statutory coverage and eligibility requirements before determining responsibility.
Manpower contractors should plan for maternity-related statutory obligations, while principal employers should maintain suitable compliance oversight for contract employees deployed at their establishments.
The objective is to ensure that every eligible woman employee receives the maternity benefits due to her under the applicable law, without unnecessary delays or disputes between the contractor and the client.
Disclaimer: This article is for general information and compliance awareness. Responsibility for a particular claim should be determined by reference to the applicable statutory provisions, rules, employment arrangement and facts of the case.