ESI Applicability [Thread 514067]

Hi,
Can anybody help me regarding applicability of ESI Act for our Company. We are a software development company incorporated during the year 2009. Presently we have about 95 employees on board, but there are only 4 employees drawing less than 15000 per month. Do we have to register with ESI, and if so what is the procedure? Is there any penalty for not applying earlier

Dear Tmpaulose,
You will get answer to your query in below given links:
https://www.citehr.com/513735-esi-eligibility.html
https://www.citehr.com/513289-esi-pf-registration.html

Sir,

1. For coverage under ESI Act, 1948 and rules/regulations framed thereunder, the coverage eligibility starts immediately when the factory employ 10 or more "persons" and such coverage is required only if it is situated at a place/area where the Central Government has extended the provisions under section 1(3) of said Act.

2. For coverage of factory under said Act, there is no requirement that there must be some minimum number of employees getting wages upto Rs. 15000/- per month.

3. If the unit in which you are working is located in implemented area where provisions of above Act have been extended under section 1(3), then the same will be covered from that very date when it employed 10 or more persons. Contribution including interest will be required to be paid in respect of coverable employees only, if any, from the date of coverage. The amount of damages will also be required to be paid for delayed deposit of contributions.

4. Therefore, your management, in the interest of unit may contact the nearest Social Security Officer /Branch Office Manager or appropriate officer of Regional/sub/Divisional Office of ESIC for coverage under said Act.

Yes you have to Register your Esstt under ESI Act as you have crossed 10 employees. Doesn't matter how many are covetable employees.

The Software Development Company is not a factory within the meaning of ESI Act read with provisions of Factories Act. It will fall under establishment employing 20 or more employees. However, whether the establishment is located in scheme implemented area is another question. But, there are only 4 employees drawing less than salary limit. Others drawing more than Rs.15,000 cannot be counted for applicability of ESI. Then, how one is required to register the establishment under ESI? is the question I am also finding answer..

1. Respected Sh. Kulkarni ji, I have found your above views namely-(a) the Software Development Company is not a factory within the meaning of ESI Act" and
(b) "Others drawing more than Rs.15,000 cannot be counted for applicability of ESI" not according to the spirit of ESI Act, 1948 as it stands today.
2. May I request your goodself to kindly elaborate your views so that I may be able to up-date myself accordingly.
3. So far as I understand development of software is a manufacturing process and in order to cover the factory under above Act, there must be 10 or more persons working in a factory.

Dear Kirshorkulkarni,

In the ruling in The Assistant Director, ESIC v. M/s Western Outdoor Interactive Pvt. Ltd. & Oth, while determining the applicability of the ESI Act to a software company, the Bombay High Court took a view that software development is a manufacturing process and the premises where computers are involved in such a manufacturing process is a factory for the purposes of the ESI Act.

However, this judgment is unlikely to effect on coverage of software establishments significantly since most of the States have already issued notifications covering various 'shops' and/or 'commercial establishments' within the scope of the ESI Act, and most IT/ITeS establishments are therefore already covered.

It seems you are either from Maharashtra, HP or Assam and you are following the law in force or in practic in your State for shops and commercial establishment. Please note that ESI law in other States in regards to its applicability to shops and commercial establishment is different. This issue is discussed in this forum on number of occasions.

Dear Shri. Korgaonkar,

The Software Development Companies (SDC’s) and IT Companies are establishments and if they employ 20 or more persons, they are under ESI Act in general, leave the cases where certain states have granted exemptions for a year or so. As you have rightly stated, most of the SDC’s and IT’s stand covered under ESI Act.

It is nice that you mentioned the solitary judgement of Justice Mrudula Bhatkar of Bombay High Court in Western Outdoor matter passed in 2012. In this judgement, as you said, software development has been held as “manufacturing” and such SDC’s having computers installed and used for Software Development are held as “factories”. If we read the judgement, we will know that the Court has liberally interpreted the term “manufacturing process” to bring the SDC’s in the fold of ESI. The Court observed that, there is a difference in the definition of “factory” in the two acts and benefit of “Explanation II” found in Factories Act cannot be given to definition of “factory” found in ESI Act.

However, division benches of High Courts of AP and Madras had taken a different view.

In spite of the said judgement, I am bit reluctant to accept that software development would mean manufacturing and SDC’s are factories. No doubt, advancement of technology is day-by-day giving newer meanings and we are required to redefine old concepts and ideas. Who knows tomorrow, so far the intellectual work such as novel and poem writings, music composition and orchestration, architectural designing would mean “manufacturing” and making of such things would mean “factory”.

Thanks and regards and wishing all a happy new year.

Adv. K. H. Kulkarni.

Dear sir
Please edit my name in my ESIC NO. 6914275192. Thank you
Name - Ram kr Marya.
My correct name is -
Ram Kumar Maurya
Regard
Ram Kumar Maurya
9999815125