ESI Act 1948: Should a Factory with 10 Workers, Including Contractors, Register?

Hi Experts,

A factory that employs 6 persons has engaged a few individuals through a contractor. The number of persons employed through the contractor is 4, including the contractor himself. Since the total count is 10, should the employer register his factory under the ESI Act of 1948?

Yes, ESI would apply if those people work under his supervision; see this

Employees State Insurance or ESI Act, Rules, Forms, Returns: Simplified: Employees Covered under ESI Act, 1948

WHO IS AN EMPLOYEE UNDER THE ACT:

Any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment whether such work is done by the employee in the factory or establishment or elsewhere; or

Who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

Whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service;

Includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department, or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961, or under the standing orders of the establishment;

But “Employee” will not include:

Any member of the Indian naval, military, or air forces; or

Any person so employed whose wages excluding remuneration for overtime work exceed such wages as may be prescribed by the Central Government:

PROVIDED that an employee whose wages excluding remuneration for overtime work exceed such wages as may be prescribed by the Central Government at any time after and not before the beginning of the contribution period, shall continue to be an employee until the end of that period;

Thanks.

Is a contractor lending the services of his employees to the principal employer to be counted for the minimum number of employees for coverage under the ESI Act?

Dear Mr. Royal,

You have to take into consideration total direct employees and total indirect employees for determining the total strength of the establishment for the purpose of the applicability of the ESI Act. If the contractor is providing only manpower, he need not be counted as an employee. However, if the contractor himself is working as an employee, in addition to being a contractor, then he also needs to be counted as an employee.

Dear Royal,

The minimum count of employees to be registered under ESIC is 20. Thus, you need not to get registered under ESIC. However, if your contractor employs more than 20 employees, even though they are not working in your organization, he needs to get registered under ESIC.

I hope this clarifies the registration requirements for ESIC. Let me know if you have any further questions.

Thank you.

The number of employees here means the total number of employees on the rolls of the establishment, including workmen. It does not specify 20 workmen.

The minimum number of employees required for obtaining registration varies from 10/20. It is better to verify the actual number of employees required for registration, i.e., 10/20 depending upon the location of the factory/establishment and respective state ESI rules.

Please peruse the advertisement from ESIC regarding the applicability of the ESI Act to factories/establishments.

Thank you.