Is Our Startup with Part-Time Advisors Required to Have ESI Coverage? Seeking Guidance

Kindly advise on ESI coverage for a new company - what is the statute for coverage? We are a startup company with 15 associates, of which 7 are retired persons working as part-time advisors (subject matter experts). Only 3 employees are drawing a monthly salary of less than 15k, i.e., one driver and 2 telecallers. Should this establishment be covered under ESI?

Hi Buddy,

As per the ESI Act of 1948, the scheme is applicable to all factories, shops, and establishments where 10 or more persons are employed. Thus, this act is applicable to your organization.

With Regards,
Mr. Thumbs Up

Please go through the ESIC Act and check the definition of employee/worker. Then, you need to see whether the 15 persons working come under the decision. "Associate" is a vague term, and it's unclear what they do, their employment status, etc. So, you will need to check the definition and make a decision.

Though you can't escape from the law, from my point of view, the total scenario, as of now, depends upon your approach. You have not shared the location and legal status of your company.

ESI Coverage Considerations

If the work done by employees is in an accident-prone area or of a hazardous nature, you must go for ESI. But if not, you can avoid it. As stated by you, 7 are retired persons. If you exclude them, the strength will be only 8 (less than the prescribed limit).

You can hire them on a contract basis (being professional). For that, you have to engage them through a legal agreement. Their employment nature should be mentioned as expert. They will raise a monthly bill as fees for their service, and you will pay them after TDS deduction.

Please note, don't allow them any other benefits like leave, bonus, mobile reimbursement, etc. Else, they can claim all employee benefits.

Future Considerations

But this is a temporary solution. If your company grows, you have to go for ESI, EPF, etc. If your budget allows, go for that immediately.

For better controlling and regulating, seek some expert services.

Best regards.

ESI Coverage for Establishments

Dear member, the seven retired persons in question are "persons" and will be counted for coverage of your establishment under the ESI Act, 1948. Since your establishment employs 10 or more persons, it is, in my opinion, definitely covered under the said Act.

The argument that only three persons receive wages/salary less than Rs. 15,000 and therefore the unit is not covered under the said Act is invalid and inaccurate. After the unit is covered, only those persons whose wages are up to and including Rs. 15,000 per month will be covered, and contributions are required to be paid only for those employees.

Furthermore, the "seven retired persons working as part-time advisors (subject matter experts)" are also covered, and contributions are required under the said Act if their monthly salary, wages, honorarium, or fee, as indicated by you or your organization, is up to and including Rs. 15,000 per month. The Act does not exempt any so-called "experts." If exemptions were allowed, as suggested by one expert in the remarks above, many employers might choose to engage "experts" instead of employees to avoid coverage under the Act and its associated regulations.

Thank you.