ESI Act Confusion: Does It Apply to IT Firms with High-Earning Employees?

As per the ESI Act 1948, under section 2(12) and 1(5), it is applicable to all factories and establishments in India that have 10 or more employees. However, the wage limit for its applicability is Rs. 15,000 per month. So, if there are no employees or if there are less than 10 employees with monthly wages of Rs. 15,000 or less, but there are employees with wages exceeding Rs. 15,000 per month and they are more than 10 in number, then is the ESI Act applicable or not? Can an experienced HR manager in the IT industry guide me on this matter?

Regards

Hello Mr. Sachin, that is correct that only employees with a monthly salary below Rs. 15,000 are eligible for ESI. However, my question pertains to the fact that in our company, the number of such eligible employees is less than 10, whereas the number of employees earning above Rs. 15,000 per month exceeds 10. In this scenario, do we still need to obtain a license for ESI? I believe that in such a situation, an ESI license may not be required, but this information has not been confirmed anywhere. Could you please shed some light on this matter?

Regards,
Mahavir Mittal

ESI Applicability and Registration

ESI is applicable to all establishments employing 10 or more persons. For the purpose of coverage of the establishment and subsequent registration, only the total number of employees is taken into account, and the salaries of employees are not considered at all. By registration, it does not mean that there should be at least one person who will be covered, but you can have nil returns filed each year. You can provide coverage to those whose salary is within the prescribed limit (say, Rs 15,000, as of now but subject to change as proposed). Further, you can include those who come within this bracket.

Regards,
Madhu.T.K

Hello Mr. Madhu, Thank you very much for your guidance. So, it means I need to apply for ESI now whether there is any employee below Rs. 15,000 per month in salary or not. I can send nil returns.

Regards, Mahavir Mittal

As per the act, you have to apply for ESI registration, and if there is no contribution by the employee as well as the employer, you have to send the NIL returns.

Thanks and regards,
Lakshminarayana
[Phone Number Removed For Privacy Reasons]

I came across a client who was an IT company that had carried out building construction and furniture work in their company. In the ESI inspection records, which reflected wages for such work, ESI was held payable. So, watch out for such loopholes.

Regards,