Understanding ESI Applicability and Compliance for Employers

Dear All,

Our company is a biotech company, and we have never been covered under ESI previously. Since the slab has changed, I think the time has come for us to enroll in ESI. We have a total of 120 employees, out of which 17 employees' gross salary is less than 15000. Could you please guide me on whether it is mandatory to cover our employees under ESI? If yes, what is the procedure? We are based in Chennai. Please guide me.

Thank you.

As per the new act of ESIC, the limit has been increased from 10,000 to 15,000 which is effective from May 2010. So now it's mandatory to cover the employees below a salary of 15,000 under ESIC. Please check the new notifications on the ESIC website.

As per the present ESI rules, an employee who earns ₹15,000 per month is also covered under this act. Therefore, you need to apply for ESI for all employees in your organization.

Hi Prema,

If employees are working 10 or more in the company, the ESIC is applicable for enrolling the registration. So, please refer to the Tamil Nadu ESIC Act. They will guide you on all aspects of ESIC registration.

Please let me know if you need any further assistance.

Thank you!

Hi, If ESI is deducted from the salary of more than 10,000 (Gross) before May 2010, will that be a legal deduction? My gross salary was more than 10,000, and the company deducted ESI from June 2009 till June 2010. Please send me the update. Thank you, Suparna Dutta

Hi Prema,

ESIC deduction is a statutory compliance, so it is mandatory to deduct ESIC for the employees whose monthly gross salary is 15k or below. It's better if you go through the ESI Act.

Cheers! Sriparna

Dear Prema,

First, please mention whether any manufacturing activity (factory) is being carried out in your company. If so, then you are required to have a minimum qualifying strength of 10 for coverage under ESI.

Suppose your company doesn't manufacture but only provides services (establishment), then your minimum qualifying threshold would be 20.

As of 1/6/10, the ESI Act has been amended. Hence, there is no need to worry about the number of employees being above or below 15,000. Post-amendment, only the strength matters and not the wages. Since you have 120 employees, your company is coverable with effect from 1/6/10, irrespective of the salaries paid to your employees.

Regards,

Ramesh

Sir, yes, it is mandatory now to enroll for ESI and EPF in one challan. The ESI limit is now increased to Rs. 15,000. Hence, all employees from 0 to 15,000 are covered by ESI. For applying, please contact the Regional ESI office or download the form from the website www.esi.nic.in.

Regards

Please review the corrected text below:

First, please check out the area in which your company is situated to see if it is "NOTIFIED" by the appropriate government as the "ESI COVERAGE AREA." If so, you are required to contribute and deduct the employees' contributions from the eligible employee and subscribe to the same in time to avoid any penal charges.

Dear All,

I have been working with Tribhuvandas Foundation for the last 8 years. Tribhuvandas Foundation is a voluntary organization working for more than three decades to provide healthcare in the twin milk districts of Kheda and Anand in Central Gujarat. Our Trust is registered under the Public Trust Act of 1950. The Foundation has been recognized as a reputable health organization by the Government of India and many other agencies.

I would like to cover my employees under ESIC. We currently have 119 employees. Please guide me on whether we can cover our employees under ESI and provide details on the procedure.

Regards,
Saurabh
HR Department

Dear Ramesh,

We are into sales and marketing. Until now, around 5 employees were drawing below 10,000, so we did not bother about the ESI Act. However, after the revision, around 21 employees come under this bracket. Therefore, I have to start from scratch, including obtaining the code, etc. If the number of employees falling under this bracket becomes 17, is it mandatory to pay ESI, considering our overall employee strength is 100 plus? Please confirm.

I have been working in the leading Securities Pvt. Ltd. Company in Gujarat (Shares & Trading). There are around 50 employees working in this company. Kindly guide me on whether we are under the ESIC Act or not.

Thanking you, Malay Kothari

Hi friends,

I was in the same problem as discussed above. Your suggestions are like a boon for me. Now I can start my business with new beginnings.

Thanks for your suggestions!!

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COVERAGE UNDER THE ESI ACT, 1948

The Act was originally applicable to non-seasonal factories using power and employing 20 or more persons; but it is now applicable to non-seasonal power-using factories employing 10 or more persons and non-power-using factories employing 20 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings, and newspaper establishments employing 20 or more persons.

Hi Ramesh,

Could you please shed more light on post-amendment changes?

As per your explanation, regardless of the pay ceiling, are we required to cover all employees under ESI? Please correct me if my understanding is incorrect.

Sunil

As per the ESI Act, ESI coverage is applicable with a minimum of 10 members and without a minimum of 20 members who are drawing ESI coverage limits. If your company is a manufacturing company, then ESI is applicable since the number of employees is more than 10 members, covering ESI limits. If your company is other than manufacturing, then ESI is not applicable since the number of ESI coverage employees is less than 20 members.

Please note the following:

Check whether your company area is covered under ESI. If not, there is no need to cover it. If yes, you have to cover all those in the preview of ESI with effect from May 2010, irrespective of the numbers, since you have 120 employees on the rolls.

Regards,
Dr. Shiva Prasad

Dear Ramesh,

Can you please mail me the relevant part of the notification which states that the number of employees, irrespective of their salary levels, is to be taken into consideration for the purposes of ESI coverage? It seems rather unlikely. For instance, there are 100 employees in the organization, all of them are drawing gross salaries of Rs. 20,000 and above. What would be the relevance of obtaining a Code Number under the ESI Scheme and finding that the said Scheme is not applicable to any of the employees?

My ID is vasantnair10@gmail.com. I look forward to your response.

Thank You, Vasant Nair

Dear Prema,

First, please mention whether any manufacturing activity (factory) is being carried out in your company. If so, then you are required to have a minimum qualifying strength of 10 for coverage under ESI. Suppose your company doesn't manufacture but only provides services (establishment), then your minimum qualifying threshold would be 20.

From 1/6/10, the ESI Act has been amended; hence, no need to worry about the number of employees above or below 15000. Post-amendment, only the strength matters and not the wages. Since you have 120 employees, your company is coverable w.e.f. 1/6/10 irrespective of the salaries paid to your employees.

Regards, Ramesh

Hello friends,

I am working as an HR Executive in an IT company. It consists of nearly 15 people. Do we have to deduct ESI from employees' salaries? Awaiting your advice.

Thank you.

Hi,

I also had the same doubt and got clarification from my CA. The answers provided by my CA are as follows:

If the company has 15 employees with salaries ranging from 10k to 15k per month, there is no need to opt for ESI.
If the number of employees exceeds 17 (excluding interns), it is advisable to opt for ESI.
Choosing ESI would entail a significant amount of administrative work, and both the employer and employee would need to contribute towards the ESI fund.
I believe it would be beneficial to seek advice from the ESI authorities in your location.

Dear Friend,

Do not worry. Please contact the Enforcement Officer at the Regional ESI office. He will guide you.

Regards,
Alphonse

Dear Prema,

ESI coverage is mandatory for employees whose gross salary is less than Rs. 15,000/-.
You may contact the local ESI office to obtain the necessary forms and start enrolling your company for coverage of employees under ESI.
For clarifications, the respective ESI authority will guide you.

With regards,
L. Kumar

Hi friends, I am working as an Assistant Officer (HR & Admin) in a construction company. I have a small doubt, i.e., is the ESI Act applicable at the site places where projects are running? If not applicable, why? Please tell me the reason.

Thank you.

Dear all,

Ours is a biotech company. We have never been covered under ESI previously. Since the slab has changed, I think the time has come for us to enroll in ESI. We have a total strength of 120 employees, with 17 employees whose gross salary is less than 15,000. Now, please guide me on whether it is mandatory to cover our employees under ESI. If yes, what is the procedure? We are based in Chennai. Please guide me.

If your company is not covered under ESI until now, first, you should apply for a code number with the ESI authority. Meanwhile, you should get the declaration/nomination forms from the 17 employees and start deducting ESI contributions from their salary at 1.75%. Deposit the same along with the company's contribution at 4.75% of the total salary on which ESI has been recovered from the 17 employees into the State Bank of India.

On the ESI challan, under the code number, you can write "applied for" to avoid late remittance interest and damages.

Dear Vasant,

Can you please mail me the relevant part of the notification which states that the number of employees, irrespective of their salary levels, are to be taken into consideration for the purposes of ESI coverage?

It seems rather unlikely. For instance, there are 100 employees in the organization. All of them are drawing gross salaries of Rs. 20,000 and above. What would be the relevance of obtaining a Code Number under the ESI Scheme and finding that the said Scheme is not applicable to any of the employees?

My ID is vasantnair10@gmail.com.

I look forward to your response.

Thank You,

Vasant Nair

Dear Vasant,

The details given below were originally posted by Shri K V Ramanamoorthy, Dy. Director (ESIC), and an authority on this subject.

Factory definition under ESI Amendment Act 2010:

In the amended definition of Factory under Section 2(12), the concepts of 'wages' and 'power' have been deleted. Section 2(12)(a) has been modified, and 2(12)(b) has been deleted.

The amended definition reads as follows:

Factory: "factory" means any premises, including the precincts thereof, whereon ten or more persons are employed or were employed on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act 1952 or a railway running shed.

The effect of this amendment that came into existence from the 1st day of June 2010 is that premises engaged in a manufacturing process and employing 10 or more persons stand covered under the Act. With the deletion of the words 'wages', all employees employed irrespective of payment of wages can now be counted for the minimum number of 10.

Deletion of the words 'power' and deletion of clause (b) make all manufacturing units coverable irrespective of the usage of power if they employ 10 or more persons.

With this amendment, more units are expected to come into the fold of ESI from 1st June 2010.

Hope this would dispel your doubts.

Regards,

Ramesh

Hi Suparna,

As per the earlier act, the threshold limit for ESIC was ₹10,000. For employees having less than ₹10,000, the company has to deduct the employees' share and also pay the employer's share for ESIC. If your salary was more than ₹10,000 in the last financial year, then there should be no ESIC deductions. But from this year, it's mandatory. The company has to deduct 1.75 percent from your salary as an employee's contribution.

If for any region ESIC is applicable, can the Employee Compensation Policy be taken? Or should ESIC be taken? Are there any rules for ESIC? Does it apply to both permanent employees and contract labor?

Thanks a lot for the update!!!

I worked for Infosys BPO, and they deducted ESI from June 2009, even when my gross salary was more than 10,000. Can you please advise me on the way I can take action against this.

Thank you.

Dear Prema,

Since the employee strength of your company is 120, your company needs to be covered under ESI.

Regards, L. Kumar

Dear Premcitehr,

As per the Tamil Nadu ESI Act updates, you have to submit the ESI for those employees whose salary is below 15000, and there are no extra activities required. Please follow the previous procedure.

Thank you.

Dear Sir,

ESI is applicable when there are more than 20 members in a manufacturing unit. As you have not specified your activity, the ESIC Act has amended the coverage from Rs. 10,000 to Rs. 15,000. Therefore, you are required to pay ESI only for the employees falling below the limit. For any clarification, you can visit the website www.esic.nic or locate your local ESI office that covers your area. You can directly approach them to get the necessary information on what further steps need to be taken before making a decision. If needed, you can also contact consultants for assistance.

Regards,
Jaithacker