Is ESI Mandatory for Organizations and What Happens If It's Not Deducted?

Can someone tell me whether ESI is a must in an organization? What if an organization does not deduct ESI?

It should not be compulsory for each and every employee.

I don't know why this arises here. This is a statutory requirement, and you have to deduct ESI for all eligible employees.

Applicability of the ESI Act

Under Section 2(12), the Act is applicable to non-seasonal factories employing 10 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings, and newspaper establishments employing 20* or more persons.

Further, under Section 1(5) of the Act, the Scheme has been extended to private medical and educational institutions employing 20* or more persons in certain States/UTs.

So, if any of the above points are applicable to your organization, then you must take coverage under the ESI Act and comply as per the Act.

Consequences of Non-Compliance

If the Act is applicable and your organization does not comply with it, then under Section 39:

- [5(a)]: If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve percent per annum, or at such a higher rate as may be specified in the regulations till the date of its actual payment:

Provided that a higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled bank.

- [5(b)]: Any interest recoverable under clause (a) may be recovered as an arrear of land revenue or under Section 45-C to Section 45-I.

Hope this will help you.

Regards

Hi, adding to my comment, there is an option: if you have a fully furnished hospital as prescribed, yes, you can be exempted from paying the contribution.

ESIC Benefits and Employer Contributions

Every employee is entitled to ESIC benefits if their gross salary is within or up to ₹15,000 per month. The employer deducts 1.75% every month from the employee's gross amount. Additionally, the employer contributes 4.75% of the gross amount every month. The total amount is deposited into the ESIC account monthly by the employer.

According to the ESIC Act, any establishment or factory must register its company name with ESIC if it has a minimum employee strength of 10 persons.

Regards

Employer Contribution for Handicapped Employees

If you are employing a handicapped person, the employer need not contribute 4.75% (Employer's contribution).