ESI Amendment Act 2010-Sailent Features Of The Amendment-implications

Dear Friends,

As you are aware, the ESI Amendment Act 2010 has been notified and has come into effect from 01-06-2010. The ESI Amendment Act 2010 has introduced new changes that are essential to be understood by all HRM and other Labour Law practitioners.

Following are the important amendments and their implications:

1. Sec. 2 clause (6A)(a)(i) & (ii) - The age of the dependents has been increased from 18 years to 25 years, although in the proposed bill, the suggested age was 21 years.

2. Sec. 2 Clause(6A)(11) - "Family" - A qualification has been attached to the "dependent parents" of the Insured Person to avail the medical benefits under the Act, which was not in the Act earlier. Sub Clause (v) of Clause 11 of Section 2 has been substituted with the words "dependent parents, whose income from all sources does not exceed such income as may be prescribed by the Central Government".

3. Sec. 2 Clause(6A)(11) - "Family" - New members have been introduced to the "Family" - Sub Clause (vi) of Clause 11 of Section 2 has been inserted, which says "in case the insured person is unmarried and his or her parents are not alive, a minor brother or sister wholly dependant upon the earnings of the insured person" shall also form part of the family of the Insured Person.

4. Trainees appointed under the Standing Orders - ESI Contribution liable to be paid - The definition of the "employee" has been amended. Now the trainees are brought under the ambit of the Act and are liable to pay ESI contribution. Clause 9 of Section 2 has been amended.

5. FACTORY - DEFINITION - Clause 12 of Section 2 has been amended. The old definition and the new definition of Factory need to be compared, thus I am reproducing both for ready reference:

Old Definition (Prior to ESI Amendment Act 2010)

New Definition:

On comparing both, the following implications of the amendment come out:

• Now the units where manufacturing activities are performed by 10 or more persons have been brought under the ambit of the Act, irrespective of the use of power and irrespective of the fact that 10 or more coverable employees are engaged or not.

• The definition of the "Factory" has been amended to bring the small units within the ambit of the Act. Earlier, the ESI Act was applicable to units employing 10 or more persons manufacturing with the aid of power - Now the word power has been omitted. Thus, every unit manufacturing and employing 10 or more persons has been brought under the ambit of the ESI Act.

• Secondly, one hidden amendment has been made in the Act - The uncovered employees would also be counted for the purpose of the applicability of the ESI Act. Earlier, the unit employing 10 or more workers and doing a manufacturing process would still be out of the purview of the Act if there are persons drawing a salary above the prescribed limit.

6. TEST INSPECTIONS & RE-INSPECTIONS - The system of Test inspection or Re-inspection has been introduced in the Act. This system was though prevalent in practice but did not have any statutory force behind it. Now by inserting Sub-section(4) in Section 45, the ESI Corp. has legitimized its acts of test inspection.

7. LIMITATION PERIOD - The unbridled powers of the visiting inspectors demanding the contribution for the very old periods have been put on hold by the Parliament (on the recommendations of the Apex Court). The New Proviso has been inserted in Section 45A.

8. APPELLATE AUTHORITY - New Section 45AA has been introduced in the Act, providing for an appeal to the appellate authority against the orders passed u/s 45-A.

9. ACCIDENTS OCCURRING WHILE COMMUTING TO PLACE OF WORK AND VICE-VERSA - COVERED UNDER THE ACT - New Section 51E has been inserted.

Apart from the above said amendments, some more amendments have been made in the ESI Amendment Act 2010. For text, the notification may be referred.

Hope you all will find the above information useful.

Regards

Dear friends,

I am attaching the ESI Amendment Act 2010 notification.

Regards

Thank you for contributing to the changes in the ESIC Act. Are there any changes in the definition of an establishment covered under section 1(5) of the act?

Dear,

There are no changes in the definition of establishment under section 1(5) of the ESI Act. An establishment employing 20 or more coverable employees will be covered under the ESI Act, unlike the coverage of a factory. The ESI Act applies to a factory under section 1(4) employing 10 or more employees (whether coverable or not) where manufacturing activities are being carried out.

However, the ESI Corporation is considering issuing a fresh notification under Section 1(5) to change the definition of establishments to align them with the amended definition of a factory by incorporating "10 or more persons employed or were employed on any day of the preceding 12 months."

Applicability of ESI Act on Hotels/Restaurants - Section 1(5) or 1(4):

The ESI Corporation has specified the types of establishments covered under the ESI Act under section 1(5) of the Act in February 1988 and 22-11-2002. In this list, hotels, restaurants, and shops are included. This indicates that the ESI Act applies to hotels/restaurants when their staff exceeds 20 on any day of the preceding 12 months. However, the Hon'ble Supreme Court in a case reported as 2009 III CLR 316 ruled that restaurants employing 10 or more employees and cooking food with the help of an LPG cylinder are also covered under section 1(4) of the Act, as they use power.

With the 2010 amendment Act, the word "Power" has been omitted from the definition of "Factory." This omission does not affect the coverage of hotels/restaurants cooking food with 10 or more employees, as they are engaged in the "manufacturing process" as defined in the Factories Act.

Thus, hotels/restaurants that were previously covered under section 1(5) by employing 20 or more coverable employees are now covered under Section 1(4) by employing 10 or more employees.

NOTE: Emphasis on capital letters.

With Regards

Dear Mr. Puneeth Gupta,

Thank you for providing details on ESI amendments. Could you please clarify if there is any provision in the ESI Act for voluntary registration when the number of employees is less than the minimum statutory requirement of 20 persons? This clarification is needed for both manufacturing and non-manufacturing units, including commercial establishments.

Please reply immediately.

With regards,

SHRIVATHSA

Hi everybody,

Greetings of the day!!

Please send me the payroll structure Excel sheet. I have an urgent requirement for it. Please post it as soon as possible.

Thanks and Regards,
Manisha
HR Manager Personnel

Dear Mr. Puneet Gupta,

Your posting on ESI Amendments and its implications, and further clarifications, is truly excellent and helps the members in understanding the implications. You have done a wonderful job. All the appreciation for this outstanding posting. Thanks a lot.

K.V. Ramana Murty, Dy. Director (Retd.) ESIC, Hyderabad.

As per the recent amendment in the ESI Act, the ceiling is Rs. 15,000/-. If the employer provides any medical policies/medical allowances for the employees (who are receiving <15000 net), will they be covered under ESI? Is there any section in the ESI Act that addresses this? Kindly assist me with this query.

Thanks and regards,
Ram

Dear Mr. Shrivathsa,

There are no provisions for "VOLUNTARY COVERAGE" in the ESI Act for units employing a number of employees less than the minimum statutory requirement of 10/20 persons.

Hi Mr. Puneeth,

As a principal employer, what documents do we need to file and keep track of since we have outsourced two facilities where the number of employees is more than 10 and we have been allotted an ESI Code? Can you kindly advise me on this?

Thanks,
Somnath

Dear all members,

Could someone please inform me about the following:

We have 19 employees here in a software company established in March. Eleven of our employees have a gross salary of more than 15,000k, while the remaining nine earn below this threshold.

I have four questions:

1. Is it mandatory for a software development company to register with ESIC?
2. If yes, what are the procedures for an established company to register in ESI?
3. Are there any penalties for not registering yet, and if so, how much?
4. How long does the registration process take, and can it be done online? (Please provide details on the formalities)

Please respond promptly so that I can take the necessary steps for the welfare of our employees.