Senior Manager (legal & Administration)-cum-
Hr Manager.
Hr Practices
Rajeev Verma
Hr Professional
As A Hr Officer
+1 Other

Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
Dear All,
I need your help immediately. Since ESI's limit has been increased from Rs. 7500 to Rs. 10000, thus because of this 4 employees of ours have now to be convered into ESI, thus it means that we have to get ourselves registered into ESI. Please anybody of yours in Delhi & NCR region can give me your direct contact number or your ESi/PF consultants. I need an advise immediately. Our consultant is charging Rs 1000 for PF and Rs. 1500 he says now for ESI. Total he will now charge is Rs. 2500. Pls let me know whether is this amount fine or exceeds. If he is charging in access then would request you to please let me know. We have 25 employees working at our corporate office, i.e. in Vaishali, Ghaziabad.
Please help me out.
Thanks & regards,

non-seasonal factories using power and employing 20 or more persons; but it is now applicable to non-seasonal power using factories employing 10 or more persons and non-power using factories employing 20 or more persons.
so, according to your detail your compony is still not covered with ESIC.
sudhir srivastava

Dear Rekha,

Please go through the Brief Points under the Employees State Insurance Act (ESI Act), I hope you will find your ANSWER.

Brief Points :

The ESI Act has been passed to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance’ scheme i.e. employee gets benefits if he is sick or disabled.

ESIC - Employees State Insurance Corporation (ESIC) has been formed to supervise the scheme under section 3 of the Act. The Corporation supervises and controls the ESI scheme.

No dismissal or punishment during period of sickness - Section 73 of the Act provides that no employer shall dismiss, discharge or reduce or otherwise punish an employee during the period employee is in receipt of sickness benefit or maternity benefit. He also cannot dismiss, discharge or otherwise punish employee when he is in receipt of disablement benefit or is under medical treatment or is absent from work due to sickness.

This gives protection to employee when he is in receipt of sickness benefit or maternity benefit. Employer cannot take disciplinary action against employee in such cases. This provision is grossly misused by employees.

However, in Buckingham & Carnatic Co v. Venkatayya - AIR 1964 SC 1272 = 1963(7) FLR 343 = (1964) 4 SCR 265 = (1963) 2 LLJ 638 = 25 FJR 25 (SC), it was rightly held that this provision (of section 73) is applicable only in case of punitive action for all kinds of misconduct during which employee has received sickness benefits. This protection is not applicable in case of abandonment of employment or when termination is automatic as per contract. – followed in Rajveer Singh v. Judge 1996 LLR 61 (Raj HC), where it was hold that provisions of section 73 are not applicable when termination of an employee is automatic.

Applicability of ESI Scheme - The scheme is applicable to all factories. [section 1(4)]. The Appropriate Government can also make it applicable to any other industrial, commercial, agricultural or other establishments, by issuing notification and giving 6 month notice. [section 1(5)].

Thus, ESI Act can be made applicable to ‘shops’ also. However, since Government has to provide for hospitals and medical facilities, the Act can be made applicable to different parts of State at different dates. Thus, if a factory is at a place where ESIC is unable to provide medical facilities, ESI Act may not be made applicable to that area. Government can exempt a factory or establishment or persons or class of persons from provisions of ESI Act, if the employees are getting better medical facilities/ [e.g. if Government is convinced that the factory itself is providing very good medical facilities e.g. like TISCO].

Regional Offices / Branch Offices get covered - Regional offices of a factory, which have their connection to the factory and where the Principal Employer has control over the regional offices, the regional offices will be covered under ESIC - Hyderabad Asbestos Cement Products v. ESIC - AIR 1978 SC 356 = (1978) 2 SCR 345 = (1978) 1 SCC 194. If head office is covered under ESIC, branch offices are also covered when branch and principal office are inter-dependent and there is unity of relationship. - Transport Corporation of India v. ESIC 1999(7) SCALE 63 = 2000 LLR 113 = 83 FLR 970 = 1999 AIR SCW 4340 = AIR 2000 SC 238 (SC 3 member bench).

Outside agencies can be covered - In PM Patel v. UOI (1986) 1 SCC 32 = AR 1987 SC 447 = 1985 II CLR 322 (SC), workers were given work of making 'bidis' as home. Right of rejection of bidis was with employer. It was held that test of control and supervision lies in the right of rejection. It was held that employees working outside can be covered under ESIC, if there is master servant relationship.

Definition of ‘factory’ as per ESI Act - The ‘Factory’ means any premises where manufacturing process is carried out. If manufacture is without aid of power, the Act is applicable if persons employed are at least 20. If manufacture is with aid of power, the Act applies if persons employed are at least 10. [section 2(12)]. - - However, ‘mines’ have been excluded. - - ‘Manufacturing process’ has same meaning as defined under Factories Act. [section 2(14AA)].

One a factory or establishment is covered, it continues to be covered even if number of employees reduce. [section 1(6)]

Construction workers not covered – Construction workers employed in construction activities are not covered under ESIC. – ESIC circular No. P-12(11)-11/27/99 Ins.IV dated 14-6-1999. - - However, if administrative office employs 20 or more eligible employees, that establishment and employees working in administrative office will be covered.

Employer under ESI Act – ‘Principal Employer’ means * owner or occupier of factory * Head of department in case of Government department and * Person responsible for supervision and control, in case of any other establishment. [section 2(17)]. - - Employees working though contractor are also covered. ‘Contractor’ is termed as ‘Immediate Employer’. ‘Immediate employer’ means a person who has undertaken the execution, on the premises of factory or establishment to which this Act applies. He may do on his own or under the supervision of Principal Employer. The work should be part of work of factory or establishment of principal employer or is preliminary or incidental to the work of factory or establishment. [section 2(13)]. Primary liability of ESI contribution is of Principal Employer. [section 40(1)]. He can recover the contribution paid by him from the ‘immediate employer’ i.e. contractor. [section 41].

Employee under ESI Act - ‘Employee’ means any person employed for wages in or in connection with work of a factory or establishment to which the ESI Act applies. Employees drawing wages upto Rs. 7,500 per month can be presently covered under the ESI Act scheme. [section 2(9)].

Employees include * persons employed through contractor * Apprentices other than those covered under ‘Apprentices Act’ * Persons employed in administration office, department or branch for purchase or sale of products. * Casual workers engaged in work incidental to or connected with work of factory or establishment * Employees working at head office when factory is located at different place * Canteen staff, watch and ward staff are employees * Staff in hospital attached to factory are employees. - - Members of Indian Naval, Military or Air Forces are excluded.

If an employee is drawing wages less than Rs. 7,500 per month at the beginning of his ‘contribution period’, his contributions are payable for whole period of contribution period of six months even if in between his wages go above Rs. 7,500 p.m. [proviso to section 2(9)].

Following are not employees - * Persons drawing wages over Rs. 7,500 per month * member of Army, Navy or Air Force. * Partners of firm are not employees even if they are drawing wages - RD, ESIC v. Ramanuja Match Industry AIR 1985 SC 278 = 1985(1) SCC 218 = 1998(6) SCALE 38 * Persons employed in Government establishments. * construction workers engaged in raising additional building subsequent to initial set up of factory.

Contribution to ESIC Fund - Both employee and employer have to make contribution to ESIC. The employer has to deduct contribution from wages of employee and pay to ESIC both the employer’s contribution as well as employees’ contribution. [section 39(1)].

The contribution is payable for ‘wage period’ i.e. the period in respect of which wages are payable to employee. [section 39(2)]. Normally, ‘wage period’ is a month. The employee’s contribution is 1.75% of wages. It should be rounded off to next 5 paise. Employees contribution is not payable when daily wages are below Rs 15/-.

Employer’s contribution is 4.75% of total wage bill of all employees in respect of every wage period. Thus, it is not necessary to calculate employer's contribution separately for each employee. 4.75% of gross wages should be calculated and rounded off to next 5 paise. Employees drawing wages lower than Rs 25 per day do not have to pay employee's share. The contribution has to be paid within 21 days from close of the month. It is payable by a challan in authorised bank. - - If the contribution is not paid in time, interest @ 12% is payable. [section 39(5)(a)].

In addition, ESIC authorities can impose ‘damages’ varying between 5% to 25% of arrears of contribution u/s 85B.

Employer cannot deduct employer’s contribution from the salary of employee. [section 40(3)].

Liability of principal employer – In case of employees of contractor, liability is of Principal Employer. In Britannia Industries v. ESIC (2001) 98 FJR 520 (Mad HC), it was held that Principal Employer will be liable to penalty and damages also if contribution is not paid on due date. – same view in Padmini Products v. ESIC 2000(2) Kar LJ 369 (Karn HC).

Wage for purpose of ESI Act - ‘Wages’ means all remuneration paid or payable in cash to employee according to terms of contract of employment and includes any payment made to an employee in respect of period of authorised leave, lock-out, lay-off, strike which is not illegal and other additional remuneration paid at interval not exceeding two months. It does not include * contribution paid by employer to any pension fund or provident fund * Travelling allowance * Reimbursement of expenses made by nature of employment of the employee * gratuity. [section 2(22)].

Thus, wages include basic pay, dearness allowance, city compensatory allowance, payment of day of rest, overtime wages, house rent allowance, incentive allowance, attendance bonus, meal allowance and incentive bonus. However, wages do not include annual bonus, unilateral rewards scheme (inam), ex gratia payments made every quarter or every year travelling allowance, retrenchment compensation, encashment of leave and gratuity.

Contribution period and Benefit period - Contribution period is (a) 1st September to 31st March (b) 1st April to 30th September. The corresponding benefit period is (a) following 1st July to 31st December (b) following 1st January to 30th June. Thus, ‘benefit period’ starts three months after the ‘contribution period’ is over. The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period’. Thus, an employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.

Benefits to employees covered under ESI Act - An employee is entitled to get benefits which are medical benefits as well as cash benefits. He also can get disablement benefit.

So far as fees of consultant is concerned its depend from consultant to consultant.

You can also contact me on .


Arun K Mishra

Dear Arun, Is their any provision in ESI Act where the Employee can voluntarly request for not including him to the policy. Regards, Prasad
Dear Prasad The employee’s request can not be entertained for non inclusion in ESIC. Regards, Ranjeet Singh
construction workers working inside the factory premises under a construction company will also attract ESI. But the construction company does not have ESI code no. Factiry is liable. How to deduct and pay ESI based on their bills.
Dear Mallika,
Please check with the Contractor whats his employee strength, if it excedds 20 then You are required to force your contractor to get an ESI code.
This is the Principle employer's responsibility to confirm the same.
Amit Seth.

I think what Amit has said is the best option, but the contractor is not able to that than have attendance register made and make the wages through salary register and deduct the ESI and PF on their wages and keep that wages register with you till the ESI & PF inspection is over for tha period. Also you can attached the copy of the salary sheet with the Contractors Bills.
Yes, it is applicable to ESI Act, if your employee strength of covered employees has reached to 10. Ceiling for covered employee is rupees 10000/- gross per month. Regards, Amit seth.
This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2020 Cite.Co™