Is ESI Still Required When Employees Have Private Health and Accident Insurance?

Hello all, we have already taken healthcare insurance and personal accident cover from a private insurance company for all our employees. I wanted to know if ESI is mandatory even after providing insurance coverage from a private company.

Mandatory Provisions of the Employees' State Insurance Act, 1948

The provisions contained in the Employees' State Insurance Act, 1948 are compulsory if the establishment or factory is located within the implemented area under section 1(3) or is of such a category as notified under section 1(5) by the appropriate government. It also requires employing the minimum number of persons as laid down in the said Act.

Obtaining insurance cover from insurance companies is optional and does not serve as a basis for seeking exemption from the operation of the said Act.

Regards

Thanks, Mr. Mehta, for your reply. I would be happy if you could guide me on two other points regarding ESI.

Eligibility Criteria for ESIC Registration

First, what is the eligibility criteria for ESIC registration? Our firm is a partnership firm, and we have a staff strength of 31, with hardly 3-4 of them earning below Rs. 15,000; the remaining all earn above Rs. 15,000. Is it mandatory for us to register with ESIC even if only 3-4 are earning below Rs. 15,000?

Calculation of ESI

Second is "How is ESI calculated?" Is it based on monthly gross or monthly CTC?

Thanking you in anticipation.

Understanding ESI Coverage and Requirements

With reference to your raising of further issues in the above remarks, I may indicate my opinion as follows:

• The nature of incorporation of a factory/establishment, i.e., whether proprietorship, partnership, or a company, does not matter as far as coverage under the ESI Act, 1948 is concerned. What is important is whether the establishment is a "factory" as defined under the said Act. Furthermore, in the case of other establishments, it is also important to consider whether the unit falls under a category for which the appropriate Government has extended the provisions of the Act, such as shops, hotels, restaurants, cinemas, etc.

• Once the factory/establishment is covered under the said Act, only employees earning wages up to and including Rs. 15,000 per month will be covered under the Act. Even if there is only one employee earning up to Rs. 15,000 in salary, you are required to obtain an ESI Code Number.

• ESI contribution is payable on "wages" as defined under the said Act, and for this purpose, payments made in the form of yearly bonuses, actual reimbursement of transport charges, etc., are not considered part of "wages."

For further details, I suggest that you please contact the nearest Branch Manager/Social Security Officer of ESIC in your area and discuss the matter, including the coverage of your unit under the said Act. You can also download literature or guidelines from the website of ESIC Headquarters or the appropriate Regional Office of ESIC.

Regards