Is ESIC Mandatory for Non-Manufacturing Companies? Understanding Compliance Requirements

Whether ESIC is mandatory if the company does not have any manufacturing unit.

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ESIC refers to the Employees' State Insurance Corporation, which is a social security and health insurance scheme for Indian workers. The applicability of ESIC is not solely based on whether a company has a manufacturing unit. ESIC coverage is determined by the number of employees and wages paid by the company, regardless of the type of industry or business operations. It is essential for companies to comply with ESIC regulations to provide insurance benefits to their employees and ensure legal compliance.

ESIC is related to employment strength. If employed in an establishment where "power," i.e., electricity is used, then it is mandatory for exceeding ten employees. In all other cases, it is mandatory when the employment strength exceeds twenty. It is nowhere related to manufacturing or non-manufacturing bifurcation.

Thank you for your kind response. Please let me know whose salary is Rs. 21,000 or less. If the member is not interested in continuing ESIC deductions, is it acceptable or mandatory?

ESIC Registration is mandatory if your company falls under the ESIC criteria. As mentioned by U.S. Sharma, it is not in the employees' interest to be taken for.

Mr. Saji,

Thank you for your advice. If I am not wrong, if the employees fall under Rs. 21,000/- or less and the strength of the organization is 10 or more, ESIC is mandatory; otherwise, it is not mandatory.

In order to deduct the Employee Share of ESI Contribution, the Employer should have registered the Establishment with an ESI Code Number. Is your Establishment registered under the ESI Act?

Once the establishment is covered under ESIC, there is no choice or option for employees. If their gross wages are below 21000, they have to contribute under the ESIC scheme.

Dear All,

Thank you all for your kind advice. Now it is clear to me. Our organization is registered under the ESI Act.

Regards

Dear Ms. Jyothi,

It would not be appropriate for the forum member to reply in a vague manner. Please provide full details in order to present a comprehensive view. If the number of employees in an organization exceeds the eligibility criteria, and if even one employee (e.g., peon, sweeper, security guard, clerk, or any individual earning below 21,000 salary) is on the payroll, ESIC registration becomes mandatory. The option for employees to choose not to deduct ESI contributions will not be applicable.

Hope this clarifies.

ESIC Coverage for Factories and Establishments

When a company or unit is manufacturing and employing persons as required under the ESI Act, 1948, it becomes a "factory" and is therefore coverable under section 1(4) of the said Act, effective from the date it employs 10 or more persons, provided the area is implemented/notified under section 1(3) of the Act. Even if, after coverage, the factory stops the manufacturing process, it continues to be covered as laid down under section 1(6) of the Act. The term "manufacturing process" has very wide connotations and almost includes every repair, maintenance, preservation, etc.

If the unit is not using the manufacturing process since its start and falls under another category of establishments, it can still be covered under the Act, provided that the nature of the unit and the minimum number of persons required fall within the ambit of a notification issued by the appropriate government under section 1(5) of the Act. In this case, the area must also be an implemented area within section 1(3) of the Act.

As mentioned by Sh. Saji above, I think this forum could have discussed in more detail had the person who started this thread mentioned complete facts and the nature of the working of the company.

My company is registered in ESIC, but no employees have a salary less than 21K. What compliance do we have to follow? How do we file the Challan of contribution when there is no contribution?

You can inform the concerned Branch Office Manager and the Regional Director of ESIC, to which your unit is attached, that there were no coverable employees during the month. Discuss the matter with the above authorities and, if necessary, file a NIL report during specific period(s) to avoid any ad hoc assessments that may classify your unit as a defaulter. Exact wages of Rs. 21,000 per month are also coverable. For exemption, the wages must exceed the present coverable limit.

Kind Regards,
[Your Name]

Can a company have the option of providing ESIC or group insurance if some employees' salaries are below 21k and others are above 21k?

Dear Nitin,

Coverage under the ESI Act is compulsory subject to the applicability clause to your establishment. For employees who are above the ESI coverage limit, i.e., Rs 21,001 and above, you may cover them under a Group Insurance Scheme as decided by your company.