Reached 20 Employees: Do We Need to Enroll in ESIC Along with Provident Fund?

Hello,

We recently reached the limit of 20 employees in our company and are in the process of enrolling for the Provident Fund. I want to know, is it necessary to also enroll under ESIC?

We are a software company, and all employees are developers, except for one employee who is a helper.

Thanks.

Coverage Under the ESI Act, 1948

Coverage under the ESI Act, 1948 is based on the engagement of 10 or more persons. Therefore, in my opinion, your unit is coverable under the said Act, provided the area where the unit is located is declared as an implemented area under Section 1(3) of the said Act.

For the coverage of a factory, it is not necessary that the said 10 or more persons must be getting wages up to the present coverable limit. Once a factory is covered, only the employees getting wages up to the coverable limit will be covered under the said Act, even though there may be only one employee.

Dear Abbas Ali,

I agree with the submissions made by the senior member, Shri Harsh Kumar Mehta. It is not clear from your email in which state your establishment/factory is located. Moreover, in case it falls within the Shops and Commercial Establishment Act, even then in few states, the coverage under ESIC is on 10 eligible persons or otherwise it is 20 eligible numbers.

P K Sharma

Dear Sh. P.K. Sharma ji,

After the amendment in the year 2010, there is no longer a requirement of "10 eligible" persons. The current requirement is for 10 or more persons. Please refer to the definition of "factory" in the ESI Act, 1948 (as amended).

Thank you.

Hello,

We are in Nagpur, Maharashtra. We are a service-oriented software company where all the employees are software developers. The only exception is a helper who is an unskilled office boy.

Out of 20 employees, 19 employees have a gross salary of more than Rs. 15,000. However, only a handful (less than 10) of employees have basic salary + DA less than Rs. 15,000.

Please let me know.

Thanks.

Hello,

We are in Nagpur, Maharashtra. We are a service-oriented software company where all the employees are software developers. The only exception is a helper who is an unskilled office boy. Out of 20 employees, 19 employees have a gross salary of more than Rs. 15,000. However, only a handful (less than 10) of employees have a basic salary + DA less than Rs. 15,000.

Please let me know.

Thanks.

I have gone through your concern, but once you start a business, particularly in India, you need to abide by all the prevailing laws of the land. As for enrolling in ESIC, first of all, you need to see if the ESIC Act is applicable to your area. As per the ESIC Act, all employees above 10 with the use of power, and employees 20 or more without the use of power, the said establishment is required to be enrolled. This includes the directors withdrawing remuneration. If the visiting inspector feels that the said establishment does not fall under the ESIC Act, he will exclude the establishment on assessment before the allotment of Employers' Code #. However, you need to do the paperwork for enrollment.

Regards

Dear Pankaj Sibal and Shri Abbas Ali ji,

The coverage under ESIC is for 10 individuals, with or without the use of power, and the procedure is now online. No verification or recommendation by the area inspector is required anymore. You can fill in the required information online, and your employer's code will be generated with just a click.

P K Sharma

Dear Abbass Ali, as per the confirmation, EPF calculation is applicable for companies with 20 or more employees. ESIC is also compulsory. Since the software company has a salary structure where employees earn more than ₹15,000, they are not eligible for ESIC. However, ESIC applies to companies with 10 or more employees.

Kind Regards,
Sathyanarayanan T
Senior Advisor – HR Compliance
NI Consulting Services Private Limited
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ESIC Applicability for Companies

ESIC is applicable for all companies, regardless of the industry, if their total employee strength is 10 or more. Once the company reaches an employee strength of 10, it should be registered under the ESIC Act. However, contributions are mandatory only when they reach 20 employees.

Companies are exempted from the ESIC Act only if:

1. The employee strength is less than 10
2. The company is located in an ESIC non-implemented area

In your case, ESIC registration is mandatory, and contributions must be made for employees whose gross salary is less than or equal to 15,000.

Regards,
Starlet