ESI in Software Companies: Is It Mandatory for Employees Earning Above ₹15,001?

Dear All, Please help me with ESI - Is it applicable for a software company? I have 16 employees whose salary range is more than ₹15,001, as mentioned by the ESI representatives. Only 2 employees are below this threshold. Do I need to take this into account? Is it mandatory?

Thank you.

If you have more than 20 employees working with your firm, then ESCI is applicable to you.

ESIC Applicability

ESIC is applicable to establishments where the total number of employees is 10 or more, with salaries below ₹15,000.

Regards,
Vikram

Dear All, Please help me with whether ESI is applicable for a software company. I have 16 employees whose salary range is more than ₹15,001, as mentioned by the ESI representatives. Only 2 employees fall below this threshold. Do I need to take this into account? Is it mandatory?

ESI Coverage Requirement

Your unit is covered under section 2(12) of the ESI Act, i.e., irrespective of the employees' wages, if your unit is engaging 10 or more employees. Please start compliance immediately.

Regards

Dear All, Thank you for your reply. I am a little confused. I have a total of 16 employees, 14 of whom have a salary of more than ₹15,000, and I have 2 employees earning less than ₹10,000. We are interested in getting a medical claim group policy for all employees.

ESIC Requirement Inquiry

Do I need to have ESIC, especially with 10 or 20 employees?

Thank you,
Shiv

Dear Shiv,

As per the ESIC Act, when ten or more employees are working with the aid of power (like in manufacturing companies where production is based on power) and receiving a salary less than 15K, or when twenty or more employees are working without the aid of power and receiving less than 15K, then ESIC is applicable.

1. 10 or more with the aid of power and receiving less than 15K (10 employees must have a salary of less than 15K).
2. 20 or more without the aid of power and receiving less than 15K (20 employees must have a salary of less than 15K).

If you have 60 employees and only 5 of them are receiving a salary less than 15K, then ESIC is not applicable. However, when the number of employees exceeds 10 who are receiving a salary less than 15K, ESIC becomes applicable. Once you are registered with ESIC and have been allotted an ESIC code, even if the number of employees receiving a salary less than 15K falls below 10 or 20, you are still required to deposit ESIC contributions.

Rajiv Singh

Dear Friends,

It appears that you are not aware of the latest amendment in the ESI Act. The definition of a worker/employee has been revised to include all individuals for the purpose of coverage under the Act. However, the financial liability for contribution is limited to 15k. An employee strength of 10 or more is now sufficient for this purpose. By complying, you can avoid incurring penalties and prosecution. Mr. Vsyamprasad's opinion is entirely correct. Wishing you good luck.

Mr. Rajiv Singh,

The opinion expressed by you as above is not correct due to the latest amendment made to section 2(12) of the ESI Act, which came into effect on 1-6-2010. According to the latest amendment, all persons working in the factory/establishment, irrespective of their salary, will be counted for the purpose of arriving at the figure of 10 or 20. Once the required number of persons is satisfied, the establishment is covered under the Act. However, you are liable to pay contributions only for those employees earning a salary of less than Rs. 15,000 per month.

Good luck.

Sanagapalli VR
Asst Director (Retd)
ESI Corporation

Dear Sir, thank you for your valuable suggestion and for updating my knowledge about the latest amendment in ESIC Coverage.

Thanks & Regards,

Rajiv Singh

Dear Friends,

One of my friends recently joined a construction company that has been in existence since 2003. However, until now, they have not provided any provisions for ESI or PF. Additionally, they do not have a proper workers' list for their past projects. My friend has been tasked with managing and streamlining the process in consultation with the PF and ESI. Can anyone provide ideas on how to address the past issues and proceed in this case?

RAY

ESIC coverage is for those who are earning below ₹15,000 gross and where 10 or more employees are working in any organization or establishment; they are eligible for ESIC.

Please see the amendment provided below.

Regards,
GOPI.

Dear Team Member,

ESI Corporation could adopt this methodology as the definition of an employee under section 2(9) where the phrase "employed for wages" is used. The Honorable Supreme Court held in the above case that in the light of this phraseology, the ESI Corporation cannot determine coverage by headcount. Instead, it should verify whether the employees fall within the prescribed wage ceiling, as stated in the proviso to Section 9 of the ESI Act. The number required to attract coverage for the factory/establishment should be 10/20.

With Regards,

Ashish K. Sharma
Team-HR

Dear Ashish, you are unnecessarily misleading the members. When we are in the HR line, we should update ourselves with the latest amendments and facts of various laws. In the recent amendments, ESIC has changed the definition of the factory in its definition under the Act as persons instead of employees, and the concept of power is also deleted. With this background, "Head Count" is enough for deciding the coverage of any factory/establishment. These amendments are effective w.e.f. 01.06.10.

All the best.

Dear Mr. SP,

The intention of resubmitting my email is not to mislead my colleagues but to discuss and clear the law point.

Kindly go through between the lines and revert, because ESIC is not applicable in sonseur case (Mr. Shiva).

In M.M. Suri & Associates Pvt Ltd v ESIC (1999 I LLJ 13 SC), the question was whether the ESI Corporation could adopt this crude methodology as the definition of employee under section 2(9) where the phrase "employed for wages" is used. The Hon'ble Supreme Court held in the above case that in the light of the above phraseology, the ESI Corporation cannot determine coverage by headcount but should rather verify whether the employees within the prescribed wage ceiling, as given in the latest Section 9 provision of ESI Act, must be 10 or more to attract coverage for the factory/establishment.

Can anyone provide more details on this case law or any amendments in the Act made by the Parliament after this decision?

If this is the latest finding of our Supreme Court, then I think the position is clear from what I briefed earlier.

With Regards,

Ashish K Sharma

Team-HR

"Courage is not the strength to go on, it is to go on when you don't have strength."

ESI Applicability for Software & Hardware Company

Please help me with whether ESI is applicable for a software & hardware company. I have 126 employees, with a salary range of more than ₹15,001 for some and nearly 86 employees with a salary below ₹15,000. As per ESI regulations, we are currently paying ESI for 86 employees.

For the above 126 employees, is mediclaim mandatory? Should the company provide it or not? Kindly assist me with this query.

Thank you,

Sam.T

For verifying the applicability, we should consider all the number of employees who are working under us. However, Deduction liability will only apply to those who have a Basic salary of less than Rs. 15,000, not Net pay. The rate of ESIC Contribution will be calculated based on Net Pay.

Dear Sir,

What is the minimum number of employees required for the applicability of ESI and PF?

Regards,
Vipan Jogi