Understanding ESIC and Provident Fund Rules in Gujarat: Are They Applicable to My Company?

ESIC and Provident Fund Queries for Gujarat State

I am living in Gujarat State. Please clarify my queries:

(1) ESIC Query: If the total number of employees in a company (registered under the Shop Establishment Act) is more than 10, but there are only 7 employees whose salary is less than Rs. 15,000, is ESIC still applicable in the company? Please provide any circular in this regard.

(2) Provident Fund Query: If the total number of employees in a company (registered under the Shop Establishment Act) is 25, and the salary of 21 employees is more than Rs. 6,500, is PF still applicable in the company? Please provide any circular in this regard.

Thanks,
Geetesh Shah

Yes, both ESI and PF are applicable. However, only those who are within the salary criteria and satisfying other eligibility conditions are to be covered.

Regards,
Varghese Mathew

The ESI Act applies to non-seasonal factories or manufacturing units, shops, and establishments, as well as private medical and educational institutions employing 10 or more persons. The PF Act applies to every factory engaged in any industry specified in Schedule I to the Act and employing 20 or more persons, and to every other establishment employing 20 or more persons specified by the Central Government in this behalf.

Please note that the provisions in these Acts are for the applicability to the establishment/company/organization. Coverage/applicability to individual employees is governed by the salary ceiling prescribed in the respective Acts. Once the Act becomes applicable to the establishment, it continues to be binding even if the number of employees reduces below the prescribed minimum number.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

Clarification on Applicability of ESI and PF Acts

Your query has been very well answered by Sh. Shailesh Parikh. Let me explain the same in another way, which is for the general applicability of any law or Act.

You are to make a division between the applicability and coverage of the employees or beneficiaries under a particular Act. In any Act, including ESI & PF, the applicability is judged by the number of workers or employees as a whole engaged by an establishment, irrespective of their status or position. Only those persons who meet the criteria of the provisions shall be covered under the Act. In your case, both the Acts are applicable to your establishment. Therefore, you have to approach the concerned authorities for the allotment of registration numbers for your establishment. However, the ESI & PF contributions shall only be deducted for employees whose salary/wages are below the limit prescribed under the Acts.

Hence, you are required to deduct and deposit ESI contribution for 7 employees whose salary is less than Rs. 15,000 and PF contribution for 4 employees whose salary is less than Rs. 6,500.

Please refer to the provisions given under the respective Acts. Circulars are issued by the Authorities only where any doubt arises about the interpretation of the provisions and not otherwise.

Regards,
BS Kalsi
Member since Aug 2011

Provident Fund Coverage for Higher Salaries

With regards to PF, a person having a basic salary for the purpose of EPF more than Rs. 6,500 can also be covered. As per the act, the liability of the employer will be to the extent of 12% of Rs. 6,500 only, even if the person is employed at higher wages.

ESIC Act: Those who are getting gross wages below ₹15,000 are eligible for the deduction specified under the act. Industries running with ten employees or more fall under the purview of ESIC if the industry operates through power; otherwise, the threshold is set at twenty or more employees. Casuals and daily wage workers are also eligible for ESI.

EPF Act: Any industry with twenty or more employees at any given time during a year is eligible to be registered under the EPF Act. Employees receiving a salary (Basic & DA) below ₹6,500 are covered by the EPF Act. Individuals above this limit can also voluntarily contribute to their EPF, but employers are not obligated to enforce this.

Wishing you all the best.

Yes, please. Both Acts are applicable in the above-stated circumstances. Employees, though drawing more than 6,500, are to be counted for the purpose of coverage under the EPF Act. However, compliance is to be reported as follows:

Compliance for Employees Drawing Up to 6,500/-

In regard to those drawing up to 6,500/-, statutorily yes.

Compliance for Employees Drawing More Than 6,500/-

In regard to those drawing more than 6,500/-, yes, if they were a member of EPF in their earlier employment before joining this establishment and have not withdrawn their PF contribution.

If appointed for more than 6,500/- and not a member of EPF, it is for the employer to make them a member only if the employee desires; otherwise, the employer is not obligated to deduct and deposit the PF contribution.

Employers can restrict contributions up to 6,500/- in the case of new employees drawing more than 6,500/-.

Regards,
Chandok AK
RPFC (Retd.)
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