Are Gratuity, PF, and ESI Acts Applicable to Small Group Companies with Few Employees?

Query on Applicability of Gratuity Act, PF, and ESI

I have a query related to the applicability of the Gratuity Act, PF, and ESI. What are the provisions for the applicability of the act for companies under the same management? A company in which approximately 50 employees are working is covered under ESI, PF, and Gratuity. I want to know if there is another group company in which only 5 employees are working, then are these Acts applicable to this company as well, even though the number of employees is below the minimum required for the applicability of the act.

Thanks,

PF Applicability

- PF is applicable to establishments with 20 or more employees.

ESI Applicability

According to the notification issued by the State Governments concerned under Section 1(5) of the Act, the following establishments employing 20 or more persons for wages attract ESI coverage:

1. Shops
2. Hotels or restaurants not having any manufacturing activity, but only engaged in 'sales'
3. Cinemas, including preview theatres
4. Road Motor Transport Establishments
5. Newspaper establishments (that are not covered as factories under Sec. 2(12))
6. Private Educational Institutions (those run by individuals, trustees, societies, or other organizations) and Medical Institutions (including Corporate, Joint Sector, trust, charitable, and private ownership hospitals, nursing homes, diagnostic centers, pathological labs)

However, Medical and Educational Institutions established and run by Ramakrishna Math and Ramakrishna Mission are excluded from this coverage.

Gratuity Applicability

- Gratuity is applicable to establishments with 10 or more employees.

Gratuity Calculation Based on Service Duration

I have queries regarding how gratuity is calculated on 15 days. I know the formula, but can we calculate gratuity based on 20 days or 30 days? I have heard that it is possible, but only if the person has completed 10 or 20 years of service. Please help me with this as it is urgent.

Regards,
Monali

Applicability of Labor Laws for Companies Under the Same Management

With reference to the issue raised by Sh. Kapil Bansal regarding the applicability of certain labor laws in all companies/firms under the same management, it is submitted that there can be any number of companies/firms, etc., under the same management, and there is no bar. Their coverage under different labor laws will be examined and decided as per the provisions of the said Acts respectively. However, the condition is that the said companies/firms must be separate in actual working. Such bifurcation should not have been created artificially only to deny some workers/employees the benefits of certain labor laws or to escape some taxes.

However, in cases where different firms/companies are artificially created, and in fact, there is a unit of purpose, continuity in the manufacturing process, continuity in sales, unity in financial transactions, etc., the same electric power or unity in the preparation of final accounts, then such units can be clubbed together to treat as a single unit, and the coverage is decided accordingly. There are a number of cases where authorities have clubbed such units as one, and the honorable courts have upheld such actions of clubbing.

However, such cases are decided as per the facts of each case, and no hard and fast conclusions can be drawn.

Regards

Query on ESI Act Applicability to NGOs

I have a query regarding whether the ESI Act of 1948 is applicable to NGOs. I request all members to provide their opinions:

1. Is ESI applicable to NGOs? If not, please provide the basis for your opinion.
2. If yes, please also provide the basis for your opinion.

Regards,

Dear Sir, Yes, the above-mentioned acts are applicable to those 5 employees. You will have to take a sub-code under the respective act.

Regards, Chandrakant Vishwakarma Labour Law Consultant