Understanding ESI: Do I Need to Register for My Small Trading Business with Part-Time Help?

Hi, this is Shammi. Can you please tell me, in an organization (trading & distribution), if I have 8 employees, one account consultant (who prepares yearly accounts) comes once a month to collect bills, one loading auto attached (we pay them rent and per kilometer diesel amount). Sometimes we hire an electrician for electrical faults and a carpenter (2-3 times a year) and pay them based on their job.

Do I need to be registered under ESI?

Hi KHS,

Query regarding ESI: We have taken ESI registration in Hyderabad head office. We have one branch office/project office in Chennai. Do we need to take separate ESI registration in each state, or is one enough for all states in India?

Thank you.

Coverage Under the ESI Act, 1948

1. Sir, the issue of coverage under the ESI Act, 1948 depends on the facts of each case and the circumstances as narrated by you. The issue can be examined and decided by the appropriate Social Security Officer who has jurisdiction over the area in which the unit is located. Therefore, it would be better to contact the concerned SSO of ESIC regarding the issue.

2. Furthermore, in cases where the Branch Office of any covered unit is situated in another state, a Sub-Code Number is required to be obtained from the Regional/Sub-Regional Office of ESIC where the said Branch Office/Sales Office is located. Therefore, it would be advisable to address the matter and discuss it with the relevant Regional/Sub-Regional Office.

Here, I will provide you with the applicability of the ESI Act 1948. It seems there is no need to register under the ESI Act. Further, the accountant is not a regular employee as he is performing allotted work and not dedicating his hours wholly to you or the organization. The code of employee may kindly be consulted in the labor act. The electrician and the carpenter are daily wage workers or working on a piecemeal basis depending on the availability of work, so they are not employed in your organization for your work.

Applicability

Under Section 2(12) of the Act, it 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 theaters, road-motor transport undertakings, and newspaper establishments employing 20 or more persons.

Further, 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 Govts./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.

Best of luck... You are really appreciated for your concern for the employee.

The ESIC registration is mandatory if you have 10 employees on roll.

Regards,

Upasana

Counting of 10 employees is a very interesting thing.

Under proprietorship, there are 9 employees plus 1 proprietor (nine on the payroll and 1 proprietor).
Under a company, there are 8 employees plus 2 directors (8 on the payroll and two directors; if there are three directors, then it would be 7 on the payroll and 3 directors).
Applicability starts from a count of 10 employees, including directors/proprietors.

Sir, the proprietor or the director(s) of the firm/factory/establishment can be counted only if they are receiving wages or remuneration from the said concern/unit.

Thank you so much for your suggestion. I am the proprietor, but what I withdraw is not under salary or wages. I pay taxes on income from the business. One social security officer visited, and he is pressuring me, stating that he will submit a report that ESI is applicable here. In the past five years, the maximum number of employees was 8, plus a part-time accountant, and 1 loading auto attached to my firm. During this period, I had some furnishing done through freelance carpenters; they were not my employees, and I paid them based on a contract.

Regards.

Sahai India,

You don't fall under the ESIC scheme right now. The number of employees is 8, and the auto loader and part-time accountant are not to be treated as 2 more employees, bringing the total to 10. Even your part-time accountant can be made into an accounting book writing contract.