Is Our Small IT Company Required to Register for ESI? Seeking Clarity on Employee Limits

Our company is a software & IT company with an employee strength of less than 20. We need to know the applicability of the ESI for our company. Some say that companies coming under the Factory Act require a minimum of 10 employees for registration, while companies under the Shop and Establishment Act require a minimum of 20 employees. Please clarify under which Act our company falls and whether we need to register for ESI.

Also, clarify whether this employee limit is based on a salary of less than 15K or on the total strength of the company. In case no employees are paid a salary of less than 15K, does the company still need to register?

Please clear my queries regarding the same.

Thanks & Regards

ESI Coverage for Software Companies

To my knowledge, a software company falls under the Shops & Establishment Act. The eligibility criteria for ESI coverage is that there must be twenty or more employees employed in the organization, and only those employees whose salary is less than Rs. 15,000 are covered.

Regards,
Suresh

Eligibility Criteria for ESIC

The eligibility criteria for ESIC require a minimum of 10 employees for your company. If all the employees have a salary of more than Rs. 15,000, then you are not covered by ESIC. However, if out of the 10 employees, even one employee's salary is less than Rs. 15,000, then ESIC has to be taken.

Software Firms and ESI Act Applicability

The Bombay High Court has held that software firms are considered factories under the ESI Act. However, this decision is not applicable to Delhi, where the Delhi Shops and Establishments Act applies. If you have 20 persons (not necessarily employees) working, you are covered by the ESI Act.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Are you sure the IT company comes under the Factory Act? What is the definition of a factory that will be covered with 10 employees?

Clarification on Factory Act Applicability

Dear Satya, Suresh is right.

With reference to your question, your company doesn't manufacture any product. You operate as a service provider. Secondly, you have fewer than 20 employees, which means that in the future, the number of employees may increase. It is my advice to kindly enroll in PF and ESI benefits. Third, if the monthly salary is more than 15,000/-, then no ESI is applicable.

Regards,
Meenu Singh

Irrespective of the salary, we need to register under ESIC if the employee strength is 10.

Regards,
Suresh

Applicability of ESIC Act for Your Company

There was a notification (No. LD 323 LSI 2010, dated 16-03-2011) stating that all establishments are covered under the ESIC Act where 10 or more employees are employed in any industries.

If you don't have any employees eligible for coverage (with a salary below 15K), you still need to obtain a code allotment letter from the department and submit Nil returns periodically (half-yearly returns).

Regards,
Mallikarjuna R
[Phone Number Removed For Privacy Reasons]

Any establishment having 10 or more employees with salaries up to Rs. 15,000/- is required to be registered under ESI if the establishment falls within the notified area. Even establishments with more than 10 employees drawing salaries above Rs. 15,000/- still have to be registered with ESI, and a NIL return must be submitted.

Regards,
RL Dhingra
Labour Law Consultant, Delhi
[Phone Number Removed For Privacy Reasons]
Email: [Email Removed For Privacy Reasons]