Navigating ESI Deductions: Do We Need to Deduct for Newly Absorbed Workers Earning Under 15k?

Dear All,

We have 20 workers in our factory in Chennai who were working through the payroll of a 3rd party. All are adhered to ESI since the contractor is operating on a pan-India level.

In that factory, all workers in our payroll are earning above 15k and are exempted from ESI. Therefore, we have not registered this organization under ESI. Now, we have absorbed three persons from among the contract workers into our payroll.

My query is, do we have to deduct ESI for these three workers since they are also doing the same nature of work as the other contract workers and are earning less than 15k? Our workers in our payroll eligible for ESI are only these new three persons who were enjoying ESI benefits before absorption.

Please advise me on what to do.

With Regards,
Carmel

Dear Shyam,

Try to have patience in life. You posted your first query at 8.40 am and used some inadvisable words such as "NO ONE CAPABLE TO GIVE A WORD OVER THIS POST". Please show respect to our beloved members who might also be busy with other work.

Okay, now let's get to the point.

I will clarify your doubt. In any factory having employees, whether directly employed by the factory or through an immediate employer like contractors, if the total count reaches 10, then that unit is covered under the provisions of the Act.

Simply put, if all your employees are earning more than 15k and your contract employees are earning less than 15k, and the total strength is 10 or more, then your unit is automatically covered under the ESI Act.

Finally, you can conclude that you have to comply with respect to those 3 contract employees.

All the best in the future. If you have any queries, don't hesitate to call me at 09443434313 or email [Login to view].

Dear VSP,

Really nice piece of advice and guidance. Could you please spend some more time briefing the procedures to register our company under the ESI Act?

Regards,
Shyam

Dear Shyam,

First, please download the registration form attached below and fill in all the columns. Submit the completed form to the concerned Regional Office along with necessary documentary evidence (wherever required) for the allotment of the ESI 17-digit code number to your unit.

After receiving the ESI Code for your unit, you have to start complying with ESI regulations for all your regular/casual/daily/contract employees who are earning wages less than 15k per month.

Best of luck!

The reply given by Mr. Shyam is correct, but in this regard, I want to add something more.

As per your query, you are employing contract labor through an agency, and all those employees are covered under the ESI Act. However, your company's regular employees are not covered under the Act because they earn more salary as prescribed under the Act. In that case, your factory is still subject to the Act, even if you do not have any coverable employees, due to your contract employees under Sec 2(9)(ii) before taking over the 3 contract laborers onto your payrolls.

Once your factory is subject to the Act, all other temporary employees, such as those engaged in cleaning, repairing, gardening, even on a piece-rate basis, are also covered under the Act. Therefore, you are liable to comply, regardless of their work periodicity with you.

After taking over the 3 contract employees onto your payroll, the advice given by Mr. Shyam is correct.

All the best

Dear All,

Let me clarify one more doubt.

It is said that if a company has employed more than 10 workers of any type, the company has to pay the ESI or they are eligible for ESI.

Definition for NO 10 Workers:
1. 10 Workers who are falling in the bracket of ESI ceiling, 15 or below 15.
2. 10 Workers means the total strength of the factory consisting of above 15 and below fifteen as a whole.

Please let me know the correct definition, 1 or 2.

Regards,
MT.Carmel

Don't confuse yourself too much. Definition 2 is correct. The same can be interpreted based on the latest amendments of the ESI Act at Section 2(12) ........

Dear VSP,

We have one factory in Silvassa, a Union Territory, where we employ around 25 staff. In the nearby area, there are no local offices or hospitals where our factory is located. Do we need to register or observe workman's compensation?

Regards,

Mt. Carmel

Dear Shyam,

In case your area is in a non-implemented area, you have to comply under Workman Compensation only; no need to comply under ESI.

Dear Mr. Carmel,

Total number of employees employed for wages directly and through immediate employers on the date of application, whether manual, clerical, supervision connected with the administration, purchase of raw materials, distribution, or sale of product/service, whether permanent or temporary.

Also, go through Form 01 (Code number Application) Query No: 16. Head count 10 includes all the Employees in a Particular premise including the Security Guards.

I totally agree with Mr. Syamprasad with one correction: "You HAVE TO COMPLY IN RESPECT OF THOSE 3 DIRECT EMPLOYEES". Since you have absorbed those 3 persons, they will become your "DIRECT EMPLOYEES".

ESI Act is not mandatory for all commercial establishments to adhere to because there are certain areas not covered by the ESI Organization. Area coverage is also an exemption from the ESI Act. The Gazette Notification should be observed, and your area's ESI Department Enforcement Officer is the right person to contact. Sometimes, advice from friends at Citeman may differ from that of department officials.

Please check with the concerned ESI official/s to ensure compliance; otherwise, they may handle things differently.

Please check if Silvassa is a notified area under the ESI Act. If not, units in that area will not be covered under the Act.

Jagdish Patel

Please visit the ESI official website where you will find all the benefits available to the insured persons and the responsibilities and duties of employers who are covered under the Act.

Best of luck

ESI Coverage Clarification

In your payroll, nobody is under ESI, and you are not covered under ESI. Now, the three contract laborers are working in a permanent nature; still, they are covered under ESI. This is because, for ESI coverage, the total strength will be counted irrespective of whether they are covered or not. Hence, if the total strength is 10 or more, your factory is covered, even if one employee is earning less than ₹15,000.

Regards,
Siddhartha Guhathakurta GM- HR (Labour Advisor)

Workers' Compensation vs. ESI Facility

Where there is no ESI facility in that area, Workers' Compensation (W/C) is applicable. However, the benefits of W/C are not the same as ESIC.

If you need more information, please write to me.

Regards,
Siddhartha Guhathakurta
GM-HR (Labor Advisor)
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