Navigating ESI Inspections: What Compliance Areas Should We Focus On?

Dear All,

Recently, an ESI inspection was carried out in my organization, and the inspector checked all the required details, including the annual report. From the report, he identified several areas such as repair and maintenance, service charges, technical and consultancy services, legal and professional expenses, management fees, and miscellaneous expenses.

Could anyone help me understand the areas where we need to ensure compliance under the act?

With Regards,
Naseem

Mr. Naseem, you have to go personally to meet the ESI PRO. They will explain all the matters regarding ESI inspection.

Thank you.

Dear All,

Recently, an ESI inspection was carried out in my organization, and the inspector checked all the required details, including the Annual report. From the report, he identified several areas such as repair and maintenance, service charges, technical & consultancy services, legal and professional expenses, management fees, and miscellaneous expenses.

Can anyone help me understand the areas where we need to ensure compliance under the act?

With Regards,
Naseem

Dear Naseem,

The ESI Inspector checked the documents you mentioned to frame charges and calculate dues based on the annual report. In ESI, all contractors engaged in the organization, whether contracted internally or externally for any work, require deduction of ESI at 4.75% and 1.75% to be remitted into the ESI accounts of the contractors. If the contractor does not have their own ESI account, the company can remit the amount using the company's ESI Code. For external work contracted to any party, you can deduct ESI on 25% of the bill amount.

Please feel free to email me at vip_rana2003@yahoo.com for further assistance.

Regards,
Vipul

Dear Naseem,

Make sure that once you employ any contractor, they have an ESI code. Also, check their challan to verify that ESI is being deposited on a regular basis. For any uncoded contractors, ask them to break the bill into Material & Labour Cost. Deduct 6.5% from the labor cost and deposit the amount through a challan. Write the contractor's name at the top of the Challan for future reference and also mention on the bill that ESI has been deducted.

Also, note that no ESI needs to be deducted if the work has been performed outside the factory premises.

Regards,
Subrato

Dear Subrato,

Are you sure that persons working outside the factory premises are not required to make any kind of ESI contribution? If so, could you please provide me with any references regarding this?

Thank you,
rrtpan

Hi,

Only in the case where the employer has direct supervision of jobs, ESI is payable. If you can prove to the ESI Inspector that the job was done outside the factory premises without any supervision of the management, you will not be liable to pay ESI. However, you must keep the proof of, say, Gate Pass, etc., to authenticate your statement. I am very sure of what I am saying as I have attended many hearings. However, if you still have any doubt, you may consult the ESI Inspector of your area.

Regards,
Subrato

ESI deduction does not depend on whether the job is supervised by the principal employer or the work is carried out inside or outside the factory. ESI is not applicable only to greenfield projects. If an establishment is covered under ESIC, then all workers, whether regular or contractual, should be covered under this scheme subject to the salary limit.

Suvajit

Hi,

I am not in agreement with Mr. Subarto. Whether the activity is done inside or outside, ESI will be applicable. An example of a manufacturing industry:

1. Manufacturing unit is covered under ESI.
2. They subcontract work to a third party.
3. The above-said subcontractor has his own factory and does work for many principals; he needs to get ESI for his factory.
4. If the above-said vendor is exclusively carrying out work for this unit, then the onus lies on the Principal to cover all his employees.

There are many similar situations that can be answered based on this principle.

Siva