Navigating ESIC Registration: Do We Need It for a New Employee Earning Below 21,000?

Dear All,

We are in the service industry and we have a total staff of 11 employees, out of which 10 have gross salaries higher than 21,000, and 1 employee has a gross salary below 21,000 and joined this month only.

Kindly advise, do we need to have ESIC registration if this employee's salary crosses 21,000, or is it mandatory to register regardless?

Thank you.

Yes, it's applicable. Please read the applicability clause reproduced herein:

The ESI Act, 1948 Applicability

The ESI Act, 1948 is applicable to all factories and notified establishments in an implemented area employing 10 or more employees for wages.

For Factory

The threshold for coverage of a "factory," as per section 2(12) of the ESIC Act, is 10 employees located in implemented areas. At present, the Act is extended to 529 districts (as per the list available on the ESIC website at https://www.esic.nic.in/coverage).

For Establishments

i) The Central Government has extended the coverage to the following establishments, for which it is the appropriate Government, by way of a notification under section 1(5): Shops, Hotels, Restaurants, Road Transport Establishments, Cinema including preview theaters, Newspaper Establishments, Establishments engaged in Insurance Business, Non-Banking Financial Companies, Port Trust, Airport Authorities, and Warehousing establishments.

ii) State Governments have also extended the coverage to the following establishments: Shops, Hotels, Restaurants, Cinema including preview theaters, Road Motor Transport Undertakings, Newspaper Establishments, Educational Institutions (27 States/UTs), Medical Institutions (27 States/UTs), and Municipal Corporations/Municipal bodies employing 10 or more employees.

For the purpose of registration requirements, wages drawn by the employees, whether more or less than the threshold limit of Rs. 21,000, are not relevant. Amendments issued, if any, from time to time will apply.

Hi Vinay,

If that employee's gross is nearing or exceeding 21k, increase it slightly so that it goes over 21k. This is to avoid the need for employer and employee contribution payments.

if after appraisal gross salary Exceeds 21K slab for deduction, can the deduction be stopped with immediate effect even if the ESIC deduction cycle(1st Oct'19 to 31st Mar'20) already started .i.e. if we deposit ESIC for the month of Oct'19. How a person can be compensated.
Will he get the deducted amount back if he not remain in the deduction slab from April 1st 2019 onwards.

As you are aware, the contribution period and benefit period are as follows:

Contribution period

1st April to 30th September - 1st January to 30th June of the following year
1st October to 31st March - 1st July to 31st December of the year following

Since deduction/contribution has already commenced, it's not advisable to stop the deduction. On the other hand, if your contribution continues, you will receive the benefits during the benefit period, i.e., 1st July to 31st December forthcoming, notwithstanding the fact that your salary exceeded the coverable limit. There is no possibility of any refund on the plea that your 'salary' has crossed the threshold limit of Rs. 21,000, but you are entitled to ESI benefits.