The Central government has notified that a 1 per cent construction worker welfare cess will be levied on total construction costs, excluding land and compensation costs, to support schemes such as health benefits, education support, and insurance for workers managed by welfare boards of states.
It came into effect from May 1 when the Ministry of Labour and Employment notified it along with other notifications related to four labour codes in the Official Gazette.
The welfare boards find a place in new labour codes which have replaced the erstwhile Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.
The old BOCW framework has been split into two labour codes. The welfare board, worker registration, 1 per cent cess, welfare fund and benefit delivery now comes under the Code on Social Security, 2020, while safety, health and working conditions at construction sites move into the Occupational Safety, Health and Working Conditions Code, 2020.
“..The Central Government hereby specifies a cess at the rate of one per cent of the cost of construction incurred by an employer on building or other construction work,” read the notification.
The cess, deducted at source from the bills paid to the contractors by the employer, has to be paid within 30 days of the completion of the project.
The challenge, however, remains in the distribution of welfare cess to hapless workers though the codes are well intentioned, experts believe.
“So the 1 per cent cess is very much continuing. It is not a general tax and it cannot be treated as government revenue. It is money collected in the name of construction workers and it must remain ring fenced for them. But, the real issue is whether the worker will finally see the benefit of that cess,” Pratik Vaidya, MD and Chief Vision Officer, Karma Management Global Consulting Solutions Pvt Ltd, told businessline.
States have always collected BOCW cess but have over the years found wanting in converting that cess into visible social security for the construction worker standing at the site.
The latest consolidated national data publicly available in 2026 showed around 5.73 crore BOC workers were registered across India as on September 30 2024. Around ₹1,17,507 crore was collected as cess and of that, close to ₹67,670 crore was spent on welfare schemes, Vaidya said.
“That means roughly ₹49,800 crore is still unutilised. When nearly ₹50,000 crore meant for construction workers is lying unspent, this is not a minor administrative gap. It is a governance and social justice issue,” Vaidya pointed out.
The Labour Codes structure improves on the previous architecture as it seeks digitised collection and stricter compliance measures on the welfare of workers. It also talks about eShram integration, UAN based identification, portability of benefits, facilitation centres, and direct benefit transfer.
According to the Code, an employer is liable to pay an interest of 2 per cent per month for every month if they fail to pay the cess within the stipulated time.
But the transformation will matter only if the system moves from a passive welfare fund model to an active worker linked delivery model.
“Every construction project paying BOCW cess should also be required to upload a contractor wise worker roster, days worked, bank details, BOCW registration, eShram or UAN linkage and migrant worker portability details. Otherwise, we will again have the same contradiction: money collected efficiently from builders and contractors, but benefits delivered inefficiently to workers,” he observed.
Published on May 11, 2026