ESI Act Confusion: Does It Apply to Branch Offices Outside Implemented Areas?

What if a company's HO is situated in the implemented area but the branch office is not? Will the ESI Act be applicable to the branch office as well?

Further, on what basis has a demarcation been made between exempt and non-exempt areas?

Doesn't matter if your H.O. is registered with ESIC, the Act is, however, applicable to all the branches, anywhere in India. In your case, the employer has to go with the WC policy (where employees are deputed in a non-implemented area). The employer's legal liability under the W.C. Act is to pay compensation to employees not covered under the E.S.I. Act for bodily injury or disease sustained/contracted out of and in the course of employment, which is covered by this policy. Liability to employees under the Indian Fatal Accident Act 1855 and at Common Law are also covered under the policy.

However, not many areas in India are now (except northeastern India) non-implemented. The ESIC network is growing, and many companies are preferring ESIC because WC covers only IP, not family/dependents.

Classification of Implemented and Non-Implemented Areas

The classification of implemented and non-implemented areas is based on majorly demographic, geographic, population, economic/industrialization, and various other major factors, which also include the connectivity to that area and the availability of medical/pharma and other emergency services too.

Regards,
M S V R K S

In a similar case, my firm is a contracting company, and our office area is an implemented area. We have 20 employees, and out of them, 17 are deployed in the non-implemented area. How do we get an ESI code because the required employee strength is less than 10 in the implemented area? Even if we get registered, do we have to subscribe for these three persons or the entire 29 persons? Kindly clarify.

Dear Vijay, In your case, however, the employer has to get registered with the ESIC and obtain a code to provide coverage to all its employees (if all the 20 employees are working on your rolls and not contract workmen/women). Please, for some time, forget about implemented or non-implemented areas. Managements/Employers try to deceive/manage the authorities/employees to save the amount that would incur for the registration process and contributions.

ESIC Coverage Requirement

ESIC Coverage should be provided to all employees as per the law's point of view. Otherwise, provide the remaining employees with WC coverage! Whatever the case, an employee (be it permanent, contract, or apprenticeship, trainee) has to have that insurance cover.

If all the workmen/women are on a contract basis and working in a non-implemented area, you can go with a WC policy.

Importance of Employee Protection

Being into IR, I firmly believe that a workman/woman must not be deprived of his/her rights and must be guarded/protected by the employer in all possible aspects. That would definitely make an employer "THE BEST" employer.

When an employee feels totally protected/safeguarded by the employer, their productivity increases, their commitment and dedication enhance, they become highly motivated, and a totally positive atmosphere would prevail in that organization, leading the market.

The truth is, many organizations are not like that! They just focus on the money going out today but forget about the returns they may get tomorrow!

I remember a couple of such organizations where excellent personnel management practices are applied. TISCO and INFOSYS are some of the best in employee welfare practices.

Regards, M S V R K S

Thank you, Ravi, for the useful information. However, I still have a doubt. In my present organization, we have around 40 branches on a PAN India basis. Salaries are processed from Mumbai. What if ESIC is not applicable in some states, but WC is? Do we not deduct ESIC employee contributions from the salary in those cases?

Regards,
Gauri

Yes, you need not/cannot deduct the ESIC contribution, but you have to take a WC, and you must be aware that WC is only the employer's responsibility. The employer must pay the premium, and not a single paisa is deducted from the employee in the WC policy. As mentioned earlier, not many states are under the unimplemented category, except for major parts of northeastern India. Please follow the attachment; it may be useful. The non-implemented list is old and not updated. 

Case Study: ESIC Deduction and Compliance Issues

Lately, I came across a case where ESIC was deducted by the employer, and the employee was working in a non-implemented area (the payroll system was centralized and managed from Bangalore). The management thought he was covered with ESIC (as deductions were happening), so a WC policy was not taken. On a fateful day, the employee met with an accident at the working location. The employee did not get the coverage benefits of either ESIC or WC. The labor inspector's involvement saved him but cost the employer Rs. 8 lacs (excluding the hospital charges) as compensation to that employee (fatal accident on the work site - backbone injury - more than 1 year bed rest). Adding to that, the ESIC deduction/contribution of the employee was reimbursed by the employer with 3 times as a penalty. Employers have to be very cautious about these statutory compliances.

Thank you very much, Ravi, for clearing my doubt and for the additional information you have provided. A true employer must be very cautious and alert about statutory compliances.

Regards,
Gauri

We are starting our new company in Mangalore, Roorkee, Uttarakhand. We want to know if ESIC is applicable in this area. If yes, then where is the ESIC Sub-Regional Office (SRO) located? If not, can we receive a notification regarding this?

Regards

Sir, can you share the details of this case where ESIC has refused benefits in a non-implemented area, as ESIC inspectors insist on the contribution of employees in non-implemented areas also?

ESIC Exemption for Non-Implemented Areas

Is an employer who is otherwise registered with the ESIC required to apply for an exemption to the corporation in respect of persons employed in non-implemented areas?

Regards.

In Madhya Pradesh District Singrauli, is ESIC applicable or not? Please confirm.

Mahesh

Sir, please clear a doubt arising from a real situation I'm dealing with.

Whether security guards engaged by a principal employer (having an office in implemented areas) through a security agency (not having an office in implemented areas/having an office in an implemented area) for patrolling cross-country pipelines that pass through both implemented and non-implemented areas across many states will be covered by ESIC.

1. Sir, yes, in my opinion, such employees will be covered.

2. In case there are any contractor employees who are permanently posted in non-implemented areas for more than 7 months, you can seek their exemption from coverage under the ESI Act, 1948, and rules/regulations framed thereunder.

3. If you have any doubt, I think it will be safe to consult in writing with the appropriate Region/Sub Regional Office of ESIC to which your unit is attached.

Hi Sir,

Please find the attached document.

Thank you.

Please, can anybody confirm whether Tal. Mulsi, Dist. Pune - 412115 is already implemented under ESIC, or if it has been effective from 01/08/2016?

Establishment situated in a non-implemented area with the registered office also in a non-implemented area, and branches are in an implemented area. The question is whether I have to deduct ESIC from all employees or only the employees situated in the implemented area.

Thank you.

Sir, although the contribution is required to be deducted for employees working in units located in implemented areas, ESIC has recently started implementing the Act in all districts of a state. Therefore, it would be more appropriate for you to correspond with the relevant Regional/Sub-Regional Office of ESIC to which your unit is attached. Inform them about the units in your establishment that fall under non-implemented areas and request confirmation from them.