Understanding ESI Coverage: Do We Need to Register with Only 3 Low-Earning Employees?

Dear Seniors,

The total strength of our company (ITES) is 35. We have only 3 employees earning less than Rs. 10,000 gross per month. We have already registered under PF. Now, are we covered under ESI, or do we have to register when the total employees earning less than Rs. 10,000 GPM reaches 20?

Your reply is much awaited.

Thanks,
Darryl

Dear Darry,

Currently, you don't need to register under the ESIC, since the number of employees is less than 10. For ESIC, the minimum number of employees should be 10. For PF, the minimum number of employees should be 20.

Regards,
Jagdish Pathak

Thanks a lot Jagdeesh and Kumar,

Apart from these 3 employees, we have 2 employees appointed off roll. One is the security and the other one is the housekeeping lady. I understand from your reply that we are still not covered under ESI. Correct me if I'm wrong.

Thanks,
Darryl

Dear Darry,

It is advisable that whenever you outsource any employees, you should discuss with the vendor about the statutory compliances that should be fulfilled by them. Otherwise, it is the principal employer's responsibility.

Regards,
Jagdish Pathak

To come under the umbrella of the ESI Act, a minimum manpower of 20 is required (salary <= 10000) if no manufacturing activity is being carried out. For factories, the limit is 10 with the aid of power; otherwise, it is 20 without power. For BPOs, it should be 20 employees.

Please correct me if I'm wrong.

I am of the opinion that since the number of total employees exceeds the limit of the Act, the Act is applicable to the organization. Only those who draw less than 10,000/- will be covered, including those employed by your organization as well as contract employees and casuals.

ESI is also applicable to your organization as the total number of employees is 35. It does not mean that you have only 3 employees who are getting a salary less than 10,000/month. As you have informed us that your organization is already covered under PF, then why not go for ESI? Please fulfill your responsibility by sending a request to cover the 3 employees. If the authority denies registering your organization, it would be safe for your organization in the future.

Best Regards,

Sajid Ansari - Delhi

Any factory/establishment will be covered under the provisions of the Act if they have 10 coverable employees in the case of a factory and 20 coverable employees in the case of shops/establishments. These 20 and 10 include any immediate employers, i.e., they may not be directly under the principal employer, but they may be deputed by contractors, such as security/labor contractors or any service providers who depute their employees, etc.

SYAM/09043929423

Dear Darryl,

ESI is applicable to your organization. The act clearly states that it is based on the number of employees engaged, not on the employees covered. It is my advice for you to opt for ESI coverage and submit the returns accordingly.

Rajeshkumar Dogra
Email: rajdogra20@gmail.com

I agree with the members saying that your organization is coverable, and you will have to register under ESIC because you are employing more than 20 workmen. You'll have to pay ESI whenever you are appointing for a salary of less than 10K. But if you increase the salary of these 3 employees above ten thousand, then also you are not exempted. The only benefit is you don't have to pay ESI contribution for them.

Off-roll employees are not allowed because I have seen the ESI officials forcing some companies to pay ESI even when they expend on maintenance, carpentry, etc., which involves labor. Also, incentives given to employees are not left under ESI. So, it's better to be aware of the problems to face at the time of inspection.

The Act did not allow the establishments coverage if they do not fulfill the requirements laid down under Sec. 2(12)(ii). Here the total number of employees employed is not the criteria but the number of employees who are coverable under Sec. 2(9), i.e., up to 10,000 is the criteria after the Hon'ble Supreme Court Judgement in MS Suri vs ESIC. Hence, the establishment which is employing only 3+2 outsourcing is not amenable under the Act.

Dear,

Based on the facts mentioned by you, your establishment is not covered under the Act. This question has been raised earlier on this site.

Secondly, Sanagapalli is absolutely correct. If you require a copy of the judgment of the MM Suri case, please visit the link below on the same subject: https://www.citehr.com/170101-esic-query-urgent-2.html.

Regards

Dear Friends,

We may like to overlook the provisions of the ESI Act and do some progressive thinking. Please respond to my suggestion:

1. Get the Company registered under ESI.
2. Comply with the required statutory obligations under the ESI Act for the eligible employees.
3. By doing so, you will be doing them a favor at a very low cost. For just 4.75% of their Gross Wages, these employees will be entitled to a large suite of medical help. The administrative work involved would also be VERY SMALL. There are only three employees. I feel the effort would be more than worthwhile.

Today, any kind of medical treatment is extremely expensive. Coverage under the ESI Scheme may provide a smart answer. Please respond.

Cheers!!!!

Vasant Nair

Dear Darryl,

Considering your ITES Company employs only 3 direct and 2 indirect employees, it falls under the coverage of the ESI Act, 1948. The provisions of the said Act will not be applicable based on the Supreme Court Judgment in ESI Corporation V/s MM Suri reported in 1996 LLR 1106. As a Non-Manufacturing Company, only after employing 20 covered employees, either directly or indirectly, will your Company be covered under the ESI Act, 1948.

Shriniwas Inamati
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