Is ESI Applicable for Employees Earning Rs 10K or Less in a Small IT Company?

Dear Seniors,

I am working in an IT Company. The total strength is 38, among which 7 employees are drawing a salary less than or equal to Rs 10K. Could you please advise on whether ESI is applicable?

Hi Suji,

As you mentioned, ESI is not applicable right now at your organization. Whenever 10 or more employees are drawing a salary of 10K or below, then you have to register your organization with ESI.

If the salary is below 10k, then ESI is applicable. If the number of employees is less than, the firm need not pay the ESI. If the number of employees is less than, ESI is applicable.

Rama

Dear Suji, Nilesh, Rama, Pankaj,

In this case, ESI will be applicable as they have 38 employees. Dear, it is not the number of eligible employees; it is the number of total employees. Please read Section 2(9) and Section 2(12) regarding employees and factory managers drawing a salary more than the prescribed limit for eligibility of membership. Is an employee, for the purpose of computing the strength of an establishment or factory, to be covered under the act? Yes.

Thank you,
J.S. Malik

Dear Malik Js,

ESI is not applicable if an organization doesn't have more than 10 employees (office staff) or 20 employees (Power unit/technical staff) under the prescribed limit of ESI, i.e., Rs. 10,000/-. No matter the company's strength in the case of ESI.

Example:

Case-1
If the company has 40 employees:
Employees having less than Rs. 10,000/- = 5 Nos. (On company's role)
Employees having more than Rs. 10,000/- = 35 Nos. (On company's role)
ESI is not applicable in Case-1.

Case-2
If the company has 40 employees:
Employees having less than Rs. 10,000/- = 5 Nos. (On company's role)
Employees having more than Rs. 10,000/- = 15 Nos. (On company's role)
Employees having less than Rs. 10,000/- = 20 Nos. (On contractors' role)
ESI is applicable in Case-2.

Regards,
Pankaj Chandan

Dear Malikjs,

I was refused ESI registration by the ESI authorities in one of my previous organizations since the number of employees drawing a monthly gross salary of Rs. 7500 (that was the limit at that time) was less than 10.

Regards,
SC

Dear All,

I am really thankful for the replies. If I add something more, among the 7 employees, 6 are trainees and 1 is an office assistant. All are confirmed employees. In this case, is there any change? Please guide.

Applicability:

The ESI Act extends to the whole of India. It applies to all factories, including Government factories (excluding seasonal factories), which employ 10 or more employees and carry on a manufacturing process with the aid of power (20 employees where the manufacturing process is carried out without the aid of power). The act can also be extended to shops and establishments. Generally, shops and establishments employing more than 20 employees as defined by the act are covered by the Act.

The act does not apply to Mines covered under the Mines Act, Indian Naval, Military, or Air Forces, Railways running sheds, and Government Factories or establishments whose employees are in receipt of benefits similar or superior to those provided under the Act.

All employees, including casual, temporary, or contract employees drawing wages less than Rs 6500 per month, are covered. Apprentices are not covered.

A factory or establishment to which this Act applies shall continue to be governed by its provisions even if the number of workers employed falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power subsequently.

Where a workman is covered under the ESI scheme:
(a) Compensation under the Workmen's Compensation Act cannot be claimed in respect of employment injury.
(b) No benefits can be claimed under the Maternity Benefits Act.

By the above source, I agree with Mr. Mallik.

Regards,

Suraj Varma

Source: [Employment Law In India](http://www.erlaws.com)

Hello!

The existing wage limit under this act is Rs. 10,000/- per month w.e.f. 01.10.2006.

In the manufacturing industry, where powers are used, at least 10 persons are required, those drawing equal to Rs. 10K or less. In establishments or shops, there must be 20 persons who draw less or equal to Rs. 10k. In your case, ESIC is not applicable.

Please let me know if you need any further assistance.

Dear Mr. Pankaj,

I agree with your point, but at the same time, you have to look into whether your company falls under the jurisdiction of Nagar Nigam as per ESIC. Sometimes, companies are not covered by ESIC due to this.

Regards,
Ravi