Understanding ESIC: Does the Rs. 15,000 Limit Apply to Gross Salary and All Employees?

Minimum Wage Limit for ESIC

The minimum wage limit for ESIC is set to Rs. 15,000 per month effective April '10. Does Rs. 15,000 refer to the gross salary?

Establishment Member Requirements

The act says at least a 20-member establishment. Does this refer to:
- 20 members whose salary is below Rs. 15,000 per month OR
- 20 members irrespective of what the salary is OR
- What if there are 100 people out of which less than 20 people's salary is less than Rs. 15,000 per month?

If an employee's gross salary is equal to Rs. 15,000/- or below, he will come under the ESI purview effective from 1st May 2010.

To my knowledge, if a company has 20 employees or more, and they fall under the ESI purview, the company should be registered under the ESI Act as per norms. Once covered under the ESI Act, even if the contributing members are below 20, the company still has to comply with ESI rules. This means the company has to deduct ESI from employees (1.75%) and contribute the employer's share (4.75%) according to ESI norms.

I suggest visiting the ESIC-Coverage site for more information. You can also search on Cite or Google for additional resources. I'm confident you will find sufficient information on this topic. Kindly use the search button as many similar questions have been previously posted on this forum, and you may find an appropriate answer to your query.

Wishing you all the best.

ESIC limit is Rs. 15,000/- gross salary, and it is applicable from May '10, not from April '10.

Regards,

Coverage of Employees Under ESIC

For coverage purposes, employees drawing Rs 15,000 only will be covered. Therefore, if all the employees, or less than 10 employees (20 for establishments not being a factory), are drawing more than Rs 15,000 per month as salary, then the establishment will not be covered. Salary for this purpose means actual monetary salary and not the "CTC."

Regards,
Madhu.T.K

The first two issues have already been addressed. Instead of experiencing tension, consider increasing the salaries of the others to above Rs. 15,000/- (Their families will shower their blessings upon you).

Challenges of Registering Under the ESI Act

If you register your company under the ESI Act, it becomes a challenge for us (IR People). We have to manage them constantly even though we are correctly paying the ESI dues. Inspections are conducted frequently for the submission of important documents. (You can refer to the concept of "Important Document" from the Tamil film "Indian" and the Hindi film "Hindustani" starring Kamal Haasan).

With warm regards,

Regards,
S. Bhaskar
[Phone Number Removed For Privacy Reasons]

Clarification on ESIC Eligibility

ESIC states that any employee earning less than ₹15,001 falls under ESI, and ESI deductions will be made on the gross salary. Only 11 persons are required to obtain the new ESIC number.

Thanks,
Sandeep Gupta

Amendment in the ESI Act

Please note that there has been an amendment in the ESI Act, effective from 01.06.2010. According to the amendment, a Factory or Establishment with 10 employees (irrespective of coverable employees) must register under the Act. Even if all the 10 employees are exempted, registration under the Act is still required, and a NIL return must be submitted every half year. Similarly, if only one out of the 10 employees earns below ₹15,000, you are required to pay contributions for that individual.

Thank you.

Regards,

To answer your query, I would say that ESI will be applicable to employees drawing a monthly salary of up to Rs. 15,000/- and the establishment/factory (excluding a seasonal factory) has to employ 10 or more persons (in case it is working with the aid of power) and 20 or more persons (in case it is working without the aid of power) on any day of the preceding 12 months.

So, to sum it up, suppose there are 25 employees in a factory operating without power, but out of them, if 16 people are earning more than 15k per month, i.e., (25-16) = 9 people are earning up to 15k, then ESI will not be applicable to that establishment and hence will not cover any of the employees.

Hope this information will serve your purpose.

Good luck.

Regards, Debasmita Nath

The Implications of Avoiding ESI Coverage

The act of increasing the salary of employees to avoid coverage of ESI is a foolish act on the part of IR departments. If the firm is not covered by ESI, there should be some other act, viz, Workmen's (Employees') Compensation Act, which makes it obligatory for the employer to take care of the medical expenses and compensation in case of employment injury and death. This would be higher than that payable to the ESI Corporation by way of contribution. On the other hand, if the employee is covered by ESI, the entire liability in case of injury and death resulting from an employment injury will be borne by the ESI Corporation.

If you increase the salary to avoid ESI and later on ESI also increases the wage ceiling for coverage (as it can do so), will you again go for a hike in tune with the ESI wage ceiling?

Certainly, there are some returns to be sent and maintained if covered by ESI, and there are some clerical works involved. Remember that an HR or IR person is paid for it also!

I do not think that any family will be so happy to be out of ESI. If you go through the facilities offered to the insured employees and their families, you will find that no other medical insurance schemes will be better than ESI's schemes, especially when you come across to meet with a major surgery or treatment for a major illness which can be done only in a super specialty hospital. Therefore, I do not think that getting out of coverage to become free from ESI inspections and filing of ESI returns is to be recommended.

Regards,
Madhu.T.K

[QUOTE=MADAN MOHAN VERMA;1357180]
Dear Anjana, ESIC Limit is Rs. 15,000/- gross salary, and it is applicable from May-10, not from Apr.-10.[/COLOR]

Clarification on ESIC Wage Limit

Yes, it is correct. But the wage limit is only Rs. 15,000/- and not Rs. 15,00,00/- as mentioned by Mr. Madan. I hope it is a typographical mistake. The ESIC enhancement of the wage limit is applicable from 01-05-2010 and not 01-04-2010.

Sanagapalli

Dear Mr. Nath,

Your suggestion in column No. (ii) is not correct. As per the new amendment Act that came into effect from 01-06-2010, for the purpose of coverage of any factory or establishment, all the persons, irrespective of their salaries, will be taken into account. Once the establishment is covered, only the persons drawing wages up to and including Rs. 15,000/- are liable to be covered and pay the contributions in respect of them only. In your cited case, the establishment is employing 25 persons, out of which 16 persons are drawing wages of more than Rs. 15,000/- and 9 persons are drawing wages of less than Rs. 15,000/-. In such a case, the establishment is definitely covered under the ESI Act; however, the employer is liable to comply in respect of 9 employees only. This is the new amendment. I hope you have followed the new amendment.

With regards,

Sanagapalli
Gr I Manager ESIC (Retd)

ESI Act Registration Requirement

Every factory with more than 20 employees must be registered under the ESI Act, irrespective of their salary limitations.

Regards,
PVVB KUMAR

Dear Mr,

It is correct what the ESI Inspector told you. For the purpose of coverage of an establishment or factory, the total number of persons working therein, irrespective of their salary, is taken into account. This also includes employees engaged through a contractor or immediate employer, even though that contractor or immediate employer is covered independently. This new provision came into effect from 01-06-2010. Please follow the correct suggestion.

With regards,
Sanagapalli