Navigating Compliance: How to Handle Factory, ESI, and PF Acts for a Growing Business?

Hi, If a company is governed by the Shop & Establishment Act and after some years, the company starts a new manufacturing unit with 15 employees (including workers). Suddenly, it merges both units, and now the total employee strength of this unit becomes 30 (including workers). However, six months have passed, and this company does not comply with the Factory Act, ESI Act, and PF Act. As an HR professional, I need to proceed further. I want to know how to proceed for these three acts. Are there any penalties? Should I contact the factory inspector? Please, seniors, help me out in this situation as soon as possible as I lack experience in statutory compliances. My email ID is [Email Removed For Privacy Reasons]. Regards, Mamta Agrawal

You have to take both Factory as well as Shop & Establishment registration. At the same time, you have to get PF registration. For ESI, if your factory and office are situated within the ESI covered area, verify that.

For more details, please see the link [KVJ RAGHUNATH: LABOUR LEGISLATIONS](http://labourlaws-4u.blogspot.com/2010/04/labour-legislations.html).

KVJ Raghunath

[Link outdated-removed] ([Search On Cite](https://www.citehr.com/results.php?q=KVJ%20RAGHUNATH) | [Search On Google](https://www.google.com/search?q=KVJ%20RAGHUNATH))

[Phone Number Removed For Privacy Reasons]

Thank you for your reply. I agree with your response, but this company was established 1.5 years ago. Now, my query is, this company has 30 employees with more than 10 HP power supply in the MIDC area. Are there any offenses or penalties? In this case, how do we apply for the Factory Act and PF Act? Should we first search for a factory inspector, or should we do the necessary documentation beforehand?

Regards,
Miss Mamta Agrawal

Mr. V. Syamprasad,

I would like to hear your views on this matter as you are an ESI Inspector. 🙂

Regards,
Mamta

ESI and PF Coverage for Your Establishment

Your company was established 1.5 years ago. Your establishment will be covered under the ESI from the date your establishment has attained a minimum of 10 employees drawing wages up to Rs. 10,000 per month. You have to pay the ESI contribution from the date it becomes applicable to your establishment.

Your establishment will be covered under the PF from the date the number of employees reaches 20 in your establishment.

Regards,
Dinesh P. Rajbhar Consultant

Dear Mamta,

First, you have to approach the concerned Area SSO (Insurance Inspector) or the Regional Office along with Form-01 - Registration form under ESI. All the columns are self-explanatory. You have to submit the form along with all documentary evidence. After allotting the ESI Code No., you have to comply under ESI as per provisions. In case of any specific queries, feel free to call me at [Phone Number Removed For Privacy Reasons].

Please act speedily, since otherwise, you will have to bear interest and damages for late compliance.

Hope I clarified your doubt.

Regards

Mr. VSP,

I am concerned whether the SSO (Insurance Inspector) will also be the factory inspector. Can we approach the concerned Area SSO (Insurance Inspector) or the Regional Office For ESI before the implementation of the factory act since we do not have the factory act in place yet?

Regards,
Mamta Agrawal

Understanding ESI and Factory Inspector Roles

No... No... ESI SSO will be different from the factory inspector.

First, you apply for registration under the Factory Act, duly applying for a license from the Office of the Inspector of Factories. I hope it's a little lengthy procedure, which you must face.

Thereafter, only you have to be covered under ESI with evidence of the manufacturing unit.

Otherwise, as you mentioned, you are covered earlier under the Shops & Estt. Act. Until you get the factory license, you can approach the regional authorities with evidence of shops & estt. registration. Since your unit has crossed 20 employees, you can apply for an ESI Code number based on the Shops & Estt. Act.

Due to the recent amendment in the ESI Act, the concept of 'power' has been deleted from the definition of the Act. Only ESI will concern 'some manufacturing' and whether '10' persons are working on the premises or not.

I hope you understand the point. As per my perception, I have given this suggestion. You can proceed accordingly.

Dear Mamata,

Please find attached a few documents regarding PF, ESIC, and labor laws. I have collected them from this forum only. I request you to kindly go through a similar post. You can get lots of information apart from these as well.

Most of these documents have been downloaded by me from this forum only.

Understanding Compliance Requirements for Merged Units

As I understand:

• Your firm was registered under the Shops & Establishments Act. Now, your company has started a manufacturing unit and has merged it with the establishment that was registered under the Shops Act. From what you have stated, it is very clear that you will have to apply for registration under the Factories Act since manufacturing activity is happening in your unit.

• Irrespective of whether you are covered under the Shops Act or the Factories Act, provisions of the ESI & PF Acts, and also other labor laws will continue to apply to your company. The only major shift will be coverage under the Factories Act.

Trust I have answered your query. For any further clarification, please feel free to call me on my mobile: [Phone Number Removed For Privacy Reasons] or contact me via email: [Email Removed For Privacy Reasons].

Best Wishes,
Vasant Nair

Dear Mamta,

If your company is merged and earlier you were covered under the Shop and Establishment Act, now in this case, you have to submit your Shop and Establishment license to the concerned labor department and have to apply for a license under the Factories Act.

This company has 30 employees with more than 10 HP power supply in the MIDC area, as stated by Miss Mamta Agrawal.

However, to my knowledge, units in the MIDC area are not covered under the Shop and Establishment Act. Kindly correct me if I am mistaken.

Thank you.

Dear Mamta,

I have gone through all the posts, and everyone has provided correct information. I recommend that you consider hiring a labor consultant who can liaise with all the concerned departments in your organization and take care of all the necessary registrations as per the different Acts applicable in your state. In addition to the registrations required under the Factory Act, ESI, and EPF, there may be other registrations mandated by the laws governing your state or municipal limits.

Regards,
Bipender Gupta

ESI Act, EPF Act, and Factory Act - all these are separate departments. Therefore, for coverage under these, you have to apply separately. You may proceed for coverage under these Acts simultaneously.

Dinesh Rajbhar
Consultant
9322503549

Hi,

Could we deduct PF below minimum wages? Also, could we bifurcate minimum wages into (basic + DA + HRA) for PF deduction?

It is not gross wages that should be equal to minimum wage. It is Basic & DA which should be equal to minimum wage. For purposes of PF deductions, it will have to be on the statutory minimum wage.

Vasant Nair

PF is deducted on the Minimum Wage. If you bifurcate the statutory minimum wage into Basic, DA, HRA, then the basic and DA will be less than the minimum wage. That would be incorrect.

Dear Mamata, Do not worry. People learn everything as they work. First, you have to get the factory plan approved by the Directorate of Factories. For this, you may seek help from a technical person to create the plan. Apply through Form 1 of the Factory Rules. Then, apply through Form 2 for Registration and the granting of a License. You may meet with the factory inspector in your region, and he will assist you.

For PF and ESI, meet with the respective inspector in your region. Do not get tense. I assure you they will guide you in all matters.

Regards,
Anindyo