Navigating ESIC in Manufacturing: Is There a Way to Opt Out When It's Not Used?

Hi Jyoti,

Can you please suggest if there is any way to get ESIC exempted for an organization? Ours is a manufacturing set up, and a lot of employees are earning below 10,000 per month, hence falling under ESIC. However, no one usually avails the facility. Can someone suggest to me if there is any alternate way to avoid ESIC?

Thank you.

Jyothi,

I don't think there is any way a manufacturing industry under the Factories Act in India can avoid ESI.

Regards,
Praveen

Hello Everybody,

Could anyone provide me with details about ESIC forms, such as which form needs to be submitted when joining? How can employees avail ESIC benefits?

Thanks & Regards,
Akshay.

Hi,

ESI contribution is mandatory for all the employees earning their gross wages below Rs. 10,000 per month, and there is no choice of absconding from the law.

Bye.

Dear Jyothi,

As per the provisions of the ESIC Act, as of the date, you cannot get any kind of relief from paying the ESIC. There is no shortcut to this... you don't have to break your head over this, please.

Good Luck,
HRkatalyst

Dear Jyoti,

In my opinion, you should consider adding your yearly benefits to your employees' monthly salary (e.g., LTA, Ex-Gratia, etc.). This approach can help increase their monthly salary.

Regards, Vilas Sawant

Hi Jyothi,

You cannot get exemption from ESI. In earlier days, the option was available only for Large Industries like ITI, HMT, etc., where they had established their hospitals. Subsequently, it has gone through several amendments, and you cannot seek exemption for ESI. Those who are covered under ESI can seek a lot of benefits from ESI, and it is not possible for the Industries to cover to that extent; hence, the ESI will deny. In fact, I was trying this for my current organization, and we got legal advice stating it is not possible to get exempted. However, if your company still seeks to go for ESI Exemption, you can make an application for exemption. This could only be an attempt.

Regards,

Amar.

Dear Jyoti,

As per the ESIC Act, ESIC coverable people must be 20. Also, the location of the factory is crucial for ESIC coverage; for example, Taloja is exempted from ESIC. However, if all conditions are fulfilled, it is mandatory to cover the organization under ESIC, and there is no option. Although the benefits are minimal, it is essential to cover firms under ESIC as it protects companies from compensation arising from accidental injuries and death during work. Therefore, it is good for an organization and mandatory.

It will be better if you convince your people more about the benefits and continue the scheme.

There is no way by which a manufacturing unit gets exemption from ESIC.

Regards, B. S. Negi

Hi Jyoti,

ESI is applicable to their specified areas. ESI covers areas where they can provide hospitals and all other benefits. So, if your industry falls in a location where ESI can't provide coverage, then it can be exempted. Additionally, it is a rule that where ESI is not applicable, the Workers' Compensation Act is automatically applicable. Please check accordingly.

Regards,
Chaitali

To come out of ESI, you can include all the payable components under ESI. If any employee's salary is in the range of 9500-10000, the management's contribution can be paid as an allowance, thereby allowing them to come out of ESI. Otherwise, they need to pay. Also, in the case of variable PA payable annually, it can be equated as regular monthly components, or else the management can pay advance increments. The management has to consider the economics of these permutations and make a decision. I agree that no white-collar worker is availing of this benefit. GK

Dear Jyothi:

While certainly there is no way out to get an exemption from the purview of ESI for employees under Rs 10,000/-, instead of looking into the possibility of coming out of the purview of ESI, please try to think and educate your employees on the numerous benefits that ESI provides - right from medical treatment of chronic diseases to availing special treatments.

By contributing 6.5% totally to the ESI, the members of ESI can certainly avail much more benefits than what they have contributed, especially in times of crisis.

Some of the ESI hospitals are really good - at least in Bangalore - where attention to the employees as patients and their family members is far better than that of any other government/normal hospitals.

Also, for any normal medical treatment, especially for hospitalization, the treatment charges are quite huge.

Considering the above, I would strongly suggest you educate much more on ESI benefits to the employees so that they derive full benefits from the same when in need.

Regards,

Dhinakaran

Hi,

It is true you can't avoid ESIC, but you can safeguard the employees who are drawing approximately 10K.

i.e. If any employee is drawing more than 9.5K, make their salary Rs.10050. By doing this, the employer pays an extra Rs.500. But in reality, it is only Rs.100.

How will I tell you? If an employee is drawing Rs.10000, ESI contribution from both the employer and employee is Rs.650 per month. If you are paying Rs.500 extra to the employee, he/she will be saving Rs.150 of their part. Ultimately, your employee will benefit, and it will help increase employee motivation.

RBP

We have around 40 outsourced agency personnel, and all of them are covered under ESIC. Last week, one of them met with an accident while coming to the job. Immediately, he was shifted to a private hospital and discharged the very next day. Now, what compliance says:

1. Will he get any compensation from the Agency/ESIC?
2. What is the role of the agency?

Kindly advise.

Regards,
Manish Shukla

As the person met with the accident during the course of employment, the contract employer will have to take all the responsibilities. If the contract employer covered the employee under ESIC, the benefits available under this act the employee is entitled to both medical and cash benefits. If the contract employer is not covered under the ESI act, then the principal employer needs to cover them and recover the contribution from the contractor. In any event, the employee cannot deprive the ESI benefit. He can approach the ESI local office for more details.

Dear friends,

As we all know, there is no provision in the law through which you can be exempted from ESIC. The best thing we can do is to encourage our employees to go for ESIC registration if the ESI amount is being deducted from their salaries. This way, they will be able to avail of medical facilities.

Finally, friends, I think this is the time when we should not try to exempt ourselves from ESIC. We need to take the initiative in this matter and ensure the welfare of our employees.

Regards,
Sitaram

Hi Jyothi,

Most people are not using ESIC facilities, but we are paying money. I think you are in a manufacturing company, so why don't you go for the Workmen's Compensation Act?

With regards,
Nagendra
Hyderabad

Hi Jyoti,

You cannot exempt ESI as you, as a citizen of India, are not supposed to break laws. If in your organization people don't want to avail it, the best way is to teach them about it and tell them its benefits. Once they know and understand its significance, they might start availing it.

Neha

Hi Jyothi,
as everyone said being a manufacturing concern u cannot exempt from ESI. As per this act the following comprises the wages of a person
• Basic pay
• Dearness allowance
• House rent allowance
• City compensatory allowance
• Overtime wages (but not to be taken into account for determining the coverage of an employee)
• Payment for day of rest
• Production incentive
• Bonus other than statutory bonus
• Night shift allowance
• Heat, Gas & Dust allowance
• Payment for unsubstituted holidays
• Meal/food allowance
• Suspension allowance
• Lay off compensation
• Children education allowance (not being reimbursement for actual tuition fee)
As most of the benefits are covered under the term Wages as per this act, you cannot alterate it with the Flexi Benefit Plans (most of the companies provide)
So You have to follow this act.
regards,
Mamta.S.Khandelwal

Dear Jothy,

As per the ESI Act, it is mandatory to avail ESI facilities for those earning less than 10,000. In that sense, you cannot be exempt. However, what you can do is add all the benefits and display them in the payslip so that your income will increase. Then, you have to be careful about your taxes.

Regards,

Rajesh M
Manager HRD
rajeshm@bajajcapital.com

RBP is absolutely right. You can bring borderline cases out of ESI, such that you can at least reduce unnecessary paperwork. If they are availing ESI facilities, then you do not have to worry.

Regards,
Sathya

Though ESI is a good social security benefit for employees, compliance for the employer can be very difficult. Tasks such as obtaining a sub-code and securing an insurance number pose challenges. If the department were to establish a uniform code of procedure similar to the unexempted PF trust, employers could assign insurance numbers to employees. Subsequently, employees could register with the authorities to avail of benefits. Additionally, this system would enable employers to file monthly returns instead of half-yearly returns.

Thank you.

Hi Jyoti,

Your company can get an exemption only if it is not covered in the notified area, which is decided by ESIC. The Workmen's Compensation Act (WCA) is applicable.

Regards & Thanks,
Nitin Mehandiratta

Hi,

For any legal requirement, you can make an application for exemption. You need to substantiate your exemption.

In the case of ESIC, if you have a better scheme than ESIS, which is acceptable to all employees, you can make such an application to the corporation with a copy to the appropriate government.

Please note that you will have to be assertive about this. It's not impossible. Lilawati Hospital in Mumbai has obtained an exemption. FYI.

Regards,
Jitendra

Dear all,

Please tell me about ESI calculation. I want to know how to calculate ESI.

For example, one of my employees receives a gross salary of Rs. 8000 per month. In a particular month, he also receives an extra amount of sales incentive of Rs. 6000. How do I calculate the ESI amount as his gross salary has increased to Rs. 8000 + Rs. 6000?

Please revert.

Trilok Bisht
Bisht802003@gmail.com

Hi,

Is there any minimum amount where if an employee's wages are below this threshold, the employee would be exempt from paying ESI contributions?