What Happens if a Company Skips ESI for Employees Earning Under 10,000?

If a software company has more than 100 employees, where half of the employees earn gross income of less than 10,000/-, and the company does not provide ESI to anyone, what can be the consequences? Is the penalty/fine amount less than the yearly ESI return amount?

If the management is willing to pay the ESI amount but is not prepared to deal with the administrative hassle of managing ESI due to a lack of manpower and time, how can this be avoided?

Hi,

ESI will be applicable to your organization. If you want to avoid administrative nuisances, you can appoint a PF and ESI consultant. They will handle all your admin-related work regarding PF, ESIC, etc.

Regards,
Harshad

Dear Sonai,

You are working as an HR executive, so why have you not reviewed the provisions of penalties under the ESI Act, 1948 on your own? For your second query, you may exceed the wages limit for the non-applicability of the ESI.

Regards,
R.N. Khola

(Labour Law & Legal Consultants)
09810405361

Dear Sonai,

There is a way you can avoid paying ESI and not bear administrative nuisance. You can ask your employer to shift your factory to a non-specified zone. Some areas do not have ESI dispensaries and ESI facilities are not provided there. If you shift your establishment to that place, then you are not required to pay ESI.

J.S. Malik

Dear Sonali,

ESI is a statutory compliance, and you simply cannot avoid it. This may lead to a lot of legal implications, and as an HR person, you should not allow this to happen. It cannot be avoided by merely paying a penalty.

Two things can be done: either you have to increase the salaries to the extent where all the people come out of the ESI purview, or you can outsource the activity to a consultant who can take care of it. You are only talking about ESI, but what about the PF part? The same is also not implemented. If so, it's better to outsource that activity.

With regards,
Kameswarao

Hi Sonai,

The administrative costs of maintaining ESI are quite low compared to the penalties, as well as the benefits provided by ESI. You may be aware that, as per the rules, the employer must provide medical and insurance benefits to employees. However, if the employee is covered under ESI, the employer may not provide these benefits separately and hence save the cost of 'administrative nuisance' (by the way, which it is not)!

Regards, Neeraj K Singh

Hi Sonai,

Calculating the ESI will not take much time. It might hardly take half a day to calculate and remit the challans to the bank. If you don't even have that time, you can outsource to consultants. Nowadays, all the statutory forms come along with Payroll Software packages in a single pack. So, there is no need to calculate the ESI and PF. Since you are already processing the salaries for the employees automatically, these forms will also be filled automatically. The only thing you will need to do is go to the bank to remit the amount and to the department to file the forms. These tasks will only need to be done once a month. Don't think of it as a nuisance.

Thank you!