Is ESI Registration Required During Construction with Limited Eligible Employees?

Dear all,

Our site is under construction, and I have 12 employees on the payroll. As per ESI regulations, if an organization has more than 10 employees and is operating a construction site, ESI is applicable. However, when I approached the ESI office, they denied our registration citing the following reasons. Please clarify if their reasons are valid.

1. Our plant has not yet commenced production, and it is still in the construction phase. Is it mandatory to have trial production or reach full production for ESI registration?

2. The ESI office mentioned that ESI registration is only possible if at least 10 employees are eligible for ESI benefits. If we have 2 to 3 employees eligible for ESI, can we still register?

Please provide clarification on these two queries at your earliest convenience.

Regards,
Dev

Dear Dev, when you met the officer of the department, he cannot be wrong. It is, in fact, that you must be using power and must have a minimum of 10 employees drawing a salary of Rs. 10,000 or less to be eligible for ESI coverage in your factory. So, if you have not started your factory, you are not liable for coverage. What you should do is opt for Workmen's compensation coverage insurance policy for the period you are employing people in your construction site until you are eligible for ESI coverage and safeguard yourself.

Hi,

For your question no. 1, yes, trial production should be carried out to obtain normal ESI registration. You can opt for workmen's compensation coverage. Alternatively, you can voluntarily register under ESI. Please meet with senior officials of the department.

For your question no. 2, once you exceed a count of 10 employees, you should obtain an ESI registration number. When the 11th person joins with a salary less than 10,000/=, the regular returns need to be activated. Until then, nil returns should be filled. However, obtaining the ESI registration number is essential. It appears that some individuals in the department are confused about this. I recommend meeting with senior personnel or obtaining a written confirmation from them.

Please let me know if you need any further assistance.

Dear Sundaramr/Kirankumari,

In your first paragraph, you mentioned voluntary coverage. However, under ESI, no voluntary coverage is provided to any establishment. Only under EPF, voluntary coverage is offered under Section 1(4) of the PF Act.

Regarding Kirankumari's question, the usage of power for lighting, fan, AC, etc., does not constitute "usage of power" as defined in the Act. The actual definition stipulates that "manufacturing with the aid of power" alone qualifies as a factory and is therefore covered under Section 2(12) of the ESI Act. The power must aid the manufacturing process. In your case, the manufacturing process can only commence after the factory is built and the machinery is installed. Until then, even if you employ 1000 construction workers, your unit is not covered under Section 2(12) of the ESI Act.

Workmen's compensation is optimal and is determined by the altitude of the project—the higher the altitude, the higher the premiums. Additionally, the respective state governments have "construction workers welfare boards," and a cess is imposed with every building plan approval from the town planning department. This cess contributes to the insurance premium for the exclusive coverage of construction workers.

Thank you.

Dear Mr. Ramesh,

Thank you for clearly defining the usage of power and for mentioning that I have paid 1% of the civil construction under the BOCW act.

Regards,
Kiran

We have employed several casual construction workers for the construction of our additional factory building. Could you please confirm whether this will attract the ESI? Please clarify as soon as possible.

With warm regards,
N. Govarthanan.

The additional factory building is not on the same premises, including the precincts thereof. In this case, is ESI applicable or not?

With warm regards,

N. Govarthanan.