Struggling with ESI Compliance in a Small BPO: Can We Find a Solution Together?

Dear All,

I am working as a Senior HR Executive in a start-up BPO in Chennai. From the beginning, we have had a problem with ESI implementation in our company. My understanding is that every organization has to pay ESI if they have more than 20 employees. However, the management in this company wants to avoid this if possible. So, I am trying to find out if there is any way to address this issue.

I would be grateful if anybody can help me out with this.

Regards,
Srinivas

Hi, I am sorry to say one thing: please remain loyal to the HR profession. We are not living just for management but primarily for the welfare of the labor force. Cheating the government is not acceptable. Please do not attempt to deceive the employees who are working for their daily bread and sustenance. I apologize if my words come across as harsh or critical.

Hi Srinivas,

As far as statutory issues go, you can't overrule them. If you have employees who come under ESI coverage, you ought to contribute to ESI; otherwise, your company will be penalized by the ESI Corporation. It is always better to follow the statutory rules.

Regards,
Srihari Rao

If your management wants to avoid paying ESI, then ask them to pay a minimum salary of 10100 and above to all the employees. Otherwise, they should shift to a non-ESI coverage area. These are the only legal ways to avoid contributing towards ESI.

Sriniwas,

Non-compliance with the ESI Act is a serious issue that may lead to heavy penal fines and damages. Please apprise your employer of the consequences.

Meraj

Hi Srinivas,

I don't know much about BPO, but I assume BPO employees would be more concerned with pay, appraisal, monetary benefits, and since they earn good amounts, it doesn't matter to them whether they come under the purview of the ESI act or not.

However, when I was working with an MNC manufacturing company, I observed that workers knew all the benefits of ESIC. If anything new was introduced, they informed us. Even the HR manager had information about all ESIC rules and the latest amendments. If I am not mistaken, until December 2006, it was 6500, and from then onwards, it has been increased to 10000. So, if any of your employees are earning below 10000, you need to take the necessary steps to enable ESIC for them.

ESIC is very important from the workers' point of view as they need it for medical facilities and cannot afford costly private doctors. Hence, the ESIC aspect is active in our company. However, even after complying with almost all laws, we received a notice from the ESIC office, and we had to pay a fine of around 4-5 K rupees for some delay or oversight. Therefore, even though our HR department is knowledgeable about all ESIC regulations, we had to pay a penalty. If your company appears to be ignorant about ESIC, it may face heavy penalties or legal action if noticed.

It's better to be clear from the beginning. Seek the help of a legal consultant.

Thank you.

Hi Srinivas,

I have gone through your query. First of all, find out whether your organization falls under the purview of the ESI Act. That means your organization is in a notified area of the ESI Act. The second issue would be if all of your employees are receiving more than ₹10,000 in wage/salary per month. Based on these points, you can avoid ESI.

Maheswara Rao.CH
09848308694

Hi Srinivas,

Please check Section 87, 88, and 91A of the ESI Act, which deals with the application for exemption from the provisions of the Act. However, to claim any exemption, the company will have to satisfy the government that your company has arranged better medical facilities and other associated welfare measures for its employees, which are more feasible and convenient for employees than the ESI Corporation. Considering your case in the BPO industry, I assume that hardly a few employees will come under the purview of the Act.

Sreeja

Hi, it is our duty to pay all the statutory dues to the government. Intentionally trying not to cover the company under the ESI Act is not fair and just to the country and its concerned individuals. Therefore, please do not advise your management to do so.

Thanks,
Madan Singh
HR Professional - NOIDA

Srinivas,

I am working in HR in a KPO. I would advise the same. Don't try to play around the laws. It's always beneficial for employees with a salary of less than ₹10,000 to be covered under ESI. Please check if your company has been covered under the Establishment. What else?

We have recently finished covering a few of our employees under it. It has an impact when you think further, especially concerning legal bindings and even during HR audits. It will certainly help you. Make sure to inform management about this and the potential complications ahead.

Bharat

Hi,

You can avoid ESIC only if you pay all your employees a salary above Rs. 10,000 a month (gross).

Let me also add, the ESI Act of 1948 applies to factories employing 10 or more employees when using power and non-power factories after employing 20 employees.

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

Hi!

I think ESI is applicable to your establishment as you employ more than 20 persons. Even in BPO, there will be some staff below the 10,000 slab as the ESI ceiling was raised to 10,000 on 1st October 2006. It is difficult to manipulate records in an industry like this. The same thing, as other people said in an industry so big and doing well, one must try to find ways to get rid of it. In fact, how much is 1.75% + 4.75% is a very small amount and is to be paid on a very small part of your total employee strength. Alternatively, you can take an exemption from the act by justifying that you have arrangements for better medical facilities than ESI, and that is a very long process. For example, I.O.C. has taken exemption from the applicability of ESI as they are providing medical benefits to their employees on their own.

From, Abhinav

Dear Friend,

Listed below are the rules for ESI & PF. Please read carefully:

- Any establishment with 20 or more employees - ESI & PF are compulsory.

- For all employees with a salary up to Rs 6500 per month, it is compulsory. Beyond that, it is optional.

- The rate is 12% employee contribution and 12% employer contribution.

- The count of 20 includes your security staff, casual workers, housekeeping, etc. So, add all of them to check if you have twenty or not.

- If you meet the criteria as given, then there is NO ESCAPING ESI and PF.

- These guys will come to know sooner or later, and when they do, they WILL slap you with a PENALTY OF 1.5 TIMES THE ORIGINAL AMOUNT.

- The best solution is to please go to the nearest labor/EPF office. There are many labor consultants there, or check the yellow pages. They will provide you with correct advice.

- My advice is that since you are in this position, your job is to find complete details, provide complete details to your bosses, and then let them make the decision; otherwise, later, when you are slapped with a penalty, your boss will turn around and ask, "Why didn't you tell me earlier?"

If you have any more queries, please feel free to ask or refer to the website:

epfindia.nic.in

Riyaz

Hi Srineevas,

Please note that the only way out of ESI is to ensure that your company brings all the employees outside the purview of the act by paying more than Rs. 10,000. Also, note that we may have to pay a heavy price in the form of fines, which would be time-consuming and costly. Therefore, find out if your company comes under the purview of the act initially and advise management accordingly, with good citations if necessary.

Regards,
Prasad.

Ya sir, the rule also says that, and it's bound to give. I think your company is trying to cheat its employees. Ya, I am Manoj, doing my Human Resource Management in Madurai. This is the 3rd semester. So please motivate your company to provide ESI.