Facing an ESIC Inspection Without Registration: How Can I Navigate This Challenge?

Hi HR Team, I have recently joined a company that focuses on outsourcing accounts. The employee base consists of 76 employees, with 4 falling under ESIC coverage. The company has been registered under EPFO since 2005; however, we are not registered under ESIC yet. Two days ago, we had a visit from an ESIC inspector requesting various documents. Not being registered under ESIC is not a fair practice. Could you please suggest a way for me to address this situation?

Thanks & Regards,
Abhinav Sidana

If your establishment is situated in an implemented area, it is definitely covered under the ESI Act, 1948.

Thank you, Harsh, it's under the ESIC implemented area; however, the main concern is that my company did not register itself under ESIC, and our existence is from the past 10 years. These 4 employees have been working from the day of the commencement of our company.

Please let me know about the consequences and the way to overcome this situation.

Thanks & Regards,
Abhinav Sidana
[Phone Number Removed For Privacy Reasons]

No need to worry. Check with the local ESI inspector regarding the registration process; he will surely guide you. At his first visit, he shall suggest you maintain certain registers and records. Once you do that, he will come and issue the registration certificate (Form C-11). After the completion of one month, he will come and verify the records, and then he will calculate the damages for those who are not covered under ESI from the inception, which you need to pay through a challan.

Hope you got some idea.

Thanks,
Hari Prasad K

To be very clear, there appears to be no escape from statutory laws and rules/regulations framed thereunder. However, you may also agree that you may be counting coverage of persons on the basis of the present wage ceiling, but you know that before 01/05/2010, there was a different wage ceiling. So, if coverage is determined since the start, there may be more or fewer coverable employees. In addition, under the said Act, all casual or temporary employees are also coverable, which I think you may have not counted. However, if you desire and like, you can share with me the following information through my email so that I may be able to make you clear about rules/regulations:

1. Whether your establishment is a factory coverable under section 1(3) of the ESI Act, 1948.

2. If not, whether your establishment is a shop or another establishment for which the State Government (appropriate Government) has issued a notification under section 1(5) of the said Act. If so, detail the exact activities in your establishment. As mentioned by you, your establishment is doing the work of Accounts Outsourcing. Hence, in my opinion, it qualifies as a "shop" and is coverable under the said Act.

3. Whether you have a copy of the notification under section 1(5) issued by the State Government if your establishment is among those establishments as notified under section 1(5) of the said Act.

Regards.

Thank you, Hari Prasad Ji and Harsh. I really appreciate your efforts and contribution. However, my concern lies in the consequences of not following statutory compliance and a way to escape from the same.

Definitely, we will register under ESIC from 01st April 2014. However, what about the previous misdeeds? How can they be rectified? Aside from that, Harsh, you are correct; there must be changes in salaries as well. Due to increments, some employees might have evaded ESIC obligations. Please check with my accounts department, as until now, they have been managing payroll.

Moving forward, I will handle payroll, and I expect the accounts department to rectify any past mistakes to ensure our company is fully compliant.

Thank you and regards,
Abhinav