Is Your Firm with Consultants and TDS Deductions Covered Under EPF & ESI Act? Let's Discuss!

If a firm has twenty-five employees, all employees have a Basic Salary of Rs. 16,000. Is the firm covered under the EPF & ESI Act?

EPF & ESI Act Coverage Query

If a firm is covered under the ESI Act and has 22 employees, of which 14 employees are consultants and not on the payroll, and also deducts TDS, is this firm liable to be covered under the EPF Act?

Kindly help me.

If nobody comes within the ceiling limit, there is no question of a statutory obligation to pay to PF, provided none of the above are registered with EPFO.

Regards,
Abbas. P. S

Question on ESIC and PF Applicability

How could it be that a firm is covered under ESIC but not under PF? The applicability of both these acts is the same. The date when ESIC becomes applicable to that particular organization, PF would also be applicable. I just want to understand the scenario.

Regards,
Jitender

If the company has 20 or more employees, it is automatically covered under the EPF Act. If the Basic Salary + Dearness Allowance (DA) is more than Rs. 15,000, then it is not mandatory to cover the employees. However, if the employee is already a member through their previous employment, the company will have to extend the membership to them. Other employees can be exempted. The company will have to take the number, but there is no compulsion for contribution.

ESI Applicability

ESI is applicable when there are 20 or more employees with a gross salary of Rs. 15,000 or less. If this condition is not fulfilled, the company is not eligible for coverage. For example, call centres have hundreds of employees, but due to higher salaries (more than Rs. 15,000), they are not covered under the ESI Act.

Employee vs. Consultant

Regarding employees, if an appointed person is working fully and solely for a company, they are not a consultant but an employee. Just by designation and deduction of TDS, he will not be considered a Consultant. A Consultant has their own office and multiple clients. They raise professional charges bills. Many companies have faced issues due to this misconception.

I hope this clarifies your queries. Let me know if you need further assistance.

Regards

Yes, I also agree with Gurindr. Both acts apply to the above case.

For ESI applicability, the coverage limit is 10 employees. Kindly revert back if I am wrong.

Regards,
M. Dinesh Kumar.