Understanding ESIC Coverage and Salary Criteria for Employee Benefits

If there is a firm in which 25 employees are working, out of which 16 have a gross salary of less than ₹15,000, and the remaining have more than ₹20,000, is ESIC applicable to that firm? Please suggest.

Thanks
Regards

Yes, ESIC is applicable in your case since the count of employees has crossed 20. Even though out of 25 employees, 9 employees are out of the range of the ESIC salary bracket. Hope this clarifies your query.

In addition to Saji, I also note that ESIC is applicable in your case because 16 employees had a salary less than Rs. 15,000, and only 10 employees were required for coverage.

Thanks & Regards,

Sumit Kumar Saxena

ESI Act Implementation Criteria

For the implementation of the ESI Act, having 20 employees working is sufficient. The salary criteria do not arise. ESI coverage applies to those in the salary range of ₹15,000 and below. Since the total number of employees is above 25, ESI is applicable to you. You must extend the ESI facility to individuals earning ₹15,000 and below, even if the number of such individuals is below 20.

Regards,
D. Gurumurthy

Regarding your query, please note the following:

1. You have not mentioned the category under which the firm falls.
2. This regulation applies to factories/industries where 10 or more people are working with power, or 20 or more people are working without power. This includes Shops & Establishments, Private Educational Institutions, and Dispensaries that have been operational on any day in the preceding 12 months, and whose salaries/wages are below ₹15,000 per month.

Thanks & Regards,
V R RAO PULIPAKA

Yes, ESIC is applicable in this case because 16 employees were having a salary less than Rs. 15,000/-, and for coverage, only 20 employees were required.

Regards

Thank you for the answers. However, there are some HR personnel whose opinion is that for the applicability of ESIC, all twenty members should have a gross salary of less than ₹15,000. Is this 100% true or not? The act also does not clarify that applicability is related to gross salary criteria. If any of you have any supporting documents regarding this, I kindly request you to please share them.

Thanks
Regards

With due regards to all members who contributed to this thread above, I humbly submit that the position of coverage under the ESI Act, 1948, as mentioned, appears to be unclear. I would like to summarize the position as follows:

1. Under the said Act, coverage applies to two types of establishments: factories and establishments (as specified in the notifications). Coverage for factories is determined by Section 1(3) of the Act, while coverage for establishments falls under Section 1(5).

2. Following amendments in 2010, a factory's coverage under the Act now requires employing 10 or more persons. The use of power for manufacturing processes and a minimum coverage of 10 or more persons (earning wages within the wage ceiling) are no longer necessary. Even if only one person out of 10 in a factory earns wages within the coverage limit (currently up to and including ₹15,000), the factory is still covered by the Act, and the principal employer must ensure compliance.

3. Establishments' coverage is determined by notifications issued by the appropriate government, with State Governments typically handling establishments not governed by the Central Government. Most State Governments (excluding Maharashtra, etc.) have issued fresh notifications aligning specified establishments' coverage with that of factories under Section 1(3).

4. However, in areas like Pune or other regions of Maharashtra and some states, the situation may differ as some State Governments have not issued fresh notifications under Section 1(5) in alignment with Section 1(3). Information on which State Governments have issued new notifications post-amendments in the ESI Act, 1948, can be obtained from the respective Regional Offices of the ESIC. For instance, the Government of Gujarat issued a notification dated 03/01/2012, and the Government of Andhra Pradesh issued a revised notification dated 21/04/2011.

5. In my view, except for certain states like Maharashtra, shops, hotels, restaurants, etc. (qualifying as specified establishments) that employ 10 or more persons are covered under the Act, regardless of how many earn wages below the coverage limit mentioned above. In states where fresh notifications under Section 1(5) have not been issued, the coverage of specified establishments will follow earlier notifications from the respective Governments.

I recommend that all members interested in coverage under the ESI Act, 1948, especially HR professionals, review the amended provisions of the Act, particularly the definition of a factory in Section 2(22), and confirm the status of State Government notifications issued under Section 1(5) within their jurisdiction before forming any opinions. For areas like Pune in Maharashtra, it is advisable to confirm the local situation before determining coverage of such units.

Thank you.

The definition of "factory" is under section 2(12) of the ESI Act. I have inadvertently mentioned the same as u/s 2(22) in my above remarks. Kindly read the same accordingly.

ESI Registration Requirement for Establishments

Please note that by virtue of the ESI notification, an establishment that employs 10 or more employees, even if all of them are drawing a salary/wages exceeding ₹15,000 per month, is required under the ESI Act to obtain ESI Registration. As far as your establishment is concerned, you have to apply for registration under the said Act. The above clarification should address your query.

Regards,
Sibabrata Majumdar
Management Consultant Legal & HR
Kolkata, Mb: [Phone Number Removed For Privacy Reasons]

As per the relevant provisions under the ESI Act, if an establishment employs 20 or more people, then it has to be registered under the ESI Act. It does not matter if some staff members are receiving salaries above the ESI limit.

Therefore, the company needs to submit particulars of all employees to ESIC, obtain a registration number under the ESI Act, and make contributions to ESI as stipulated by the Act.

Thanks & regards,
R K Nair

Under Section 2(12) of the Act, it is applicable to non-seasonal factories employing 10 or more persons. In your case, the employees directly employed in your factory total 25 workers, so it is applicable in your situation.

Thanks & Regards,
S. Mohammad Irfan

PF and ESIC Applicability

For IT or any company: PF applies if 20 or more employees are on the roll, whether they are permanent employees, trainees on a stipend, or trainees working on projects not paid by the company.

For IT companies, ESIC applies if 10 or more employees are on the roll, whether they are permanent employees, trainees on a stipend, or trainees working on projects not paid by the company.

For manufacturing companies: ESIC applies if 20 or more employees are on the roll, whether they are permanent employees, trainees on a stipend, or trainees working on projects not paid by the company.

Gratuity applies if 10 or more employees are on the roll, whether they are permanent employees, trainees on a stipend, or trainees working on projects not paid by the company.

PF Form Details

- Form 19 for PF withdrawal
- 10C for PS withdrawal
- Form 13R for transfer of PF account from the past employer to the current employer
- Form 5 for missing details
- Form 5 Statement -1 for International Worker (should be submitted every month before the 15th day of the month to RPFO)
- Form 9 for updating details, changes, or corrections in Annex 2 (Annex 3 is yet to be released)

APPLICABILITY

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.

Furthermore, 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.

*Note: 14 State Governments/UTs have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons. Remaining State Governments/UTs are in the process of reducing the same.

The existing wage limit for coverage under the Act is ₹15,000/- per month (w.e.f. 01/05/2010).

Clarification on Gross Salary Limit for Shops and Establishments

This question is for shops and other establishments. You all are clear about the number of employees required for coverage, but please clarify the criteria for the gross salary limit in relation to the number of employees and their current gross salary.

I also request Mr. Manoj to provide the names of the 14 states that have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons.

Regards

ESI Coverage Salary Limit Update

The ESI coverage salary limit is currently Rs. 15,000. However, there have been some newspaper reports stating that the salary limit for ESI coverage has been increased to Rs. 25,000. To the best of my knowledge, no such amendment has been made.

Thanks,

R K Nair

ESI Applicability

ESI is applicable to a place and its working people if the number of employees is more than 10. It becomes applicable from that date, and it is to be paid as per ESI rules.