I work in a mid-sized software firm, and our management is concerned with a recent article that covered a few software companies being labeled as "factories" for ESIC. Does this mean all software firms will have to work under the Factories Act from here onward? Are bigger companies like Infosys/Persistent, etc., falling under the Factories Act or the Shop & Establishment Act? Please advise on how to interpret the recent article! Thanks in advance.
From India, Mumbai
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From India, Mumbai
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Presently, IT firms are under the state's Shops and Commercial Establishments Act. However, IT firms engaged in any kind of manufacturing activities, the end product of which is tangible and visible, can come under the Factories Act. Since software development, etc., are purely service functions, these companies come under the Shops Act only.
Coverage of ESI
With regard to the coverage of ESI, the Act is applicable to both factories and other establishments, and as such, the said Act, like other social legislation (Employees Provident Fund and Misc. Provisions Act), is applicable to IT firms as well.
Regards,
Madhu.T.K
From India, Kannur
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4526Coverage of ESI
With regard to the coverage of ESI, the Act is applicable to both factories and other establishments, and as such, the said Act, like other social legislation (Employees Provident Fund and Misc. Provisions Act), is applicable to IT firms as well.
Regards,
Madhu.T.K
From India, Kannur
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I second Mr. Madhu in this context. The IT industries are covered under the Shops & Establishments Act and not under the Factories Act. For the IT industries, PF & ESI are applicable and can be implemented as a part of welfare activities for the employees.
From India, Kumbakonam
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From India, Kumbakonam
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Thank you very much for sharing your thoughts. The coverage under ESI doesn't concern us too much, since we already comply with the requirements as relevant to Shop & Establishments.
Concerns About Software Firms Being Labeled as Factories
Our management is concerned that if software firms are regarded as "factories" by ESI, then wouldn't that mean that software firms will then have to comply with the Factories Act? We don't produce any "product" that is packaged... just code delivered to customers. However, the thought of being labeled a factory with the need for a crèche, no late evening work for women, OT, etc., is of great concern to us! Are we overreacting?
From India, Mumbai
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Concerns About Software Firms Being Labeled as Factories
Our management is concerned that if software firms are regarded as "factories" by ESI, then wouldn't that mean that software firms will then have to comply with the Factories Act? We don't produce any "product" that is packaged... just code delivered to customers. However, the thought of being labeled a factory with the need for a crèche, no late evening work for women, OT, etc., is of great concern to us! Are we overreacting?
From India, Mumbai
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Please refer to the recent high court ruling (link below), which has declared IT companies as factories when it comes to the ESI Act.
[Software Companies are 'Factories' as per New Court Ruling](http://www.employmentlawalliance.com/firms/trilegal/articles/software-companies-are-factories-as-per-new-court-ruling)
Clarification on the Factories Act
As far as the Factories Act is concerned, IT companies are yet to be included within the ambit of factories as per Section 2(m) of the act, so provisions of the Factories Act won't apply.
Sangeeta, since you said you don't have to worry about the ESI, then I think you would be relieved by this post.
Regards
From India, Asansol
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[Software Companies are 'Factories' as per New Court Ruling](http://www.employmentlawalliance.com/firms/trilegal/articles/software-companies-are-factories-as-per-new-court-ruling)
Clarification on the Factories Act
As far as the Factories Act is concerned, IT companies are yet to be included within the ambit of factories as per Section 2(m) of the act, so provisions of the Factories Act won't apply.
Sangeeta, since you said you don't have to worry about the ESI, then I think you would be relieved by this post.
Regards
From India, Asansol
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The given verdict also clarifies that ESI is applicable to 'other establishments' and not exclusively to factories. The verdict references some other judgments which clarify that IT firms are not engaged in any manufacturing operations and hence are not factories within the meaning of the Factories Act.
Both the Factories Act and the Shops and Commercial Establishments Acts are social security enactments meant for employees engaged there, making hardly any difference if it comes under the Factories Act or the Shops Act. When viewed from the employees' perspective, the Shops Act seems to be good since it provides for better service conditions.
Regards,
Madhu.T.K
From India, Kannur
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Both the Factories Act and the Shops and Commercial Establishments Acts are social security enactments meant for employees engaged there, making hardly any difference if it comes under the Factories Act or the Shops Act. When viewed from the employees' perspective, the Shops Act seems to be good since it provides for better service conditions.
Regards,
Madhu.T.K
From India, Kannur
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Thank you for your replies. Yes, I agree that ESI is meant for employee benefits. Our only concern is whether we need to start working towards abiding by the requirements of the Factories Act, as I mentioned earlier—things like the provision of a crèche, OT, etc. Currently, our office space doesn't have any possibility to provide a crèche, etc., and hence our concern.
As an "establishment," we are compliant with ESI. We read the newspaper article and interpreted it to mean the possibility of all IT firms being labeled as "factories" and were wondering if this is going to be the next step for IT in India.
From India, Mumbai
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As an "establishment," we are compliant with ESI. We read the newspaper article and interpreted it to mean the possibility of all IT firms being labeled as "factories" and were wondering if this is going to be the next step for IT in India.
From India, Mumbai
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ESI COVERAGE ON 1O EMPLOYEE0104201 1.pdf
Factories Act.doc