I think the thread was initially posted to get advice on how an employer could get out of EPF and ESI coverage. Am I right?
Simply increasing the wages/salary of employees beyond 10,000 or 6,500, as suggested by some of the members, will not serve the purpose. This is because, first of all, the basic factor determining the coverage of ESI/EPF is the number of employees. An organization employing not fewer than 20 will be covered under the EPF, and a factory employing 10 (other establishments employing 20) is covered by ESI. Then, who is covered and whose contributions are to be deducted and contributed will be decided by the salary paid. Certainly, an employee drawing more than Rs 6,500 AT THE TIME OF JOINING/or at the time of enforcement of EPF will not be covered under the EPF, and one drawing more than Rs 10,000 will not be covered by ESI. But the establishment will be covered for those who are drawing less than the specified limit irrespective of the number of employees. Let there be one person whose salary is Rs 6,500; contribution and returns in respect of him shall be submitted. Similarly, let there be one employee whose salary is less than 10,000, ESI in respect of him shall only be submitted.
Now, in order to avoid ESI/EPF, if you raise the salary, you will be at risk. At any time, the government may announce an upward shift in salary. There have been revisions from time to time, for example, from 2,500 to 3,500, from 3,500 to 6,500 and 7,500, and now the salary limit has been fixed at 10,000, and we cannot say that the limit will remain at 10,000/6,500.
Hence, it is advisable to be covered. Moreover, once ESI is covered, many compensations that would otherwise be payable by the employer would be shifted to the ESI Corporation.
Regards,
Madhu.T.K