ESI Act Confusion: Do Employers Need to Deduct Contributions for Non-Implemented Areas?

My question is, if my company's address is in an implemented area of the ESIC, but all our work and employees are located in a non-implemented area, under which section of the ESI Act is the employer not liable to deduct ESI contributions?

Thank you.

ESIC Registration in Non-Implemented Zones

Under non-implemented zones, if the establishment (and/or branch) applies for ESIC registration (or subcode), then ESIC keeps it in abeyance and informs the establishment that the zone is non-implemented. However, if the registration or subcode is granted, then the establishment has to file contributions and payments.

ESIC Registration for Non-Implemented Areas

ESIC registration for a code in a non-implemented area is not possible. Instead, the employer can avail of an employee compensation policy.

Now, ESI is taking steps to expand coverage in all areas and districts, thereby reducing the number of non-implemented areas. Directives from ESI Headquarters in New Delhi have already been sent to the states.

Dear Friends,

Understanding Non-Liability of ESI Contribution in Non-Implemented Areas

The question is asked where it is written in the Act on the non-liability of ESI Contribution by the employer in a non-implemented area.

My take on it is as follows:

Please read section 1(3) carefully. According to this section, the provisions of the ESI Act are made applicable, in the first instance, to the employees of the factories covered under this Act by virtue of their location in areas where the Central Government has implemented the provisions of the Act through a Gazette Notification.

Thus, once the Act is implemented in a given area through a Gazette Notification, the provisions of the Act are applicable to all factories located in this area. Therefore, the employer is liable to cover the eligible employees as IP under the Act and make deductions of contributions from their salary and remit it along with his share.

It is implied that when there is no such Notification for any area, the employer in that area is not liable to cover any employee as IP, make deductions of contributions from their salary, or pay any remittances.

Applicability to Entities Other Than Factories

For the applicability of the Act to entities other than factories, please refer to section 1(5).

I hope I have clarified the point.

Please let me know if you need any further assistance.