Clarification On ESIC

Hi All,

I would like to have detailed information on ESIC. I have read a lot of articles on ESIC on the Internet; however, the terms used everywhere are so outdated that I am unable to relate them to my current organization. I work for an IT software development firm and would like to know:

1) To pay ESIC, what is the headcount required? Is it 10 employees or 20 employees?

2) Also, if the salary limit for ESIC is 15K gross, is there any rule that a specific number of employees should earn less than 15k, and only then do you have to pay ESIC?

Hi,

1) ESIC covers employees of non-seasonal power-using factories employing 10 or more persons, and it has been extended to cover employees in non-power using factories employing 20 or more persons. So, we can't say whether it's exactly 10 or 20; it depends on the type of the organization.

2) Every employee who is drawing a monthly gross salary less than or equal to 15,000 should be covered under the ESIC, regardless of the number of employees working in your organization.

Dear Prasad,

E.S.I.C. stands for Employee State Insurance Corporation. It covers every industry that has a minimum of 10 employees working with power or 20 employees without power. Employees receiving a gross salary of 15000 per month or less are covered under ESIC.

The contribution is 1.75% from the employee's gross salary and 4.75% from the employer's side. Monthly and half-yearly returns need to be filled, and now it is also available online.

Dear Prasad,

Here, I believe all your doubts are clear, but I see one query still pending. If an organization has 20 or more employees but not all are earning under 15000/-, you may also want to understand that registration under the ESIC Act is mandatory for where 20 or more employees are working.

Please let me know if you need further clarification.

Thank you.

Hi,

It's 10 and above that are required for ESIC, and below 15000 salary, all employees should be covered under that.

Dear Prasad,

1) The ESI Act was amended in 2010, and subsequent to the amendment, it covers the following establishments:

a) Factories employing 10 or more persons irrespective of whether they are using power or not.

b) Establishments other than factories, like commercial establishments located in union territories and states, can be covered by virtue of notifications to be issued by either the Central Government or by State Governments respectively. Thus, to cover such establishments located in their territories, the Central Governments and State Governments had issued notifications before the amendment of the ESI Act. According to the earlier notifications, such establishments shall consist of 20 or more employees to be covered by the ESI Act. However, it appears some state governments have issued fresh notifications after the amendment, bringing down the number of employees of commercial establishments from 20 to 10 for the purpose of coverage. You need to check with the notification of your state.

2) Though only employees drawing wages of Rs. 15,000/- or less are covered, it is not necessary in the case of factories that all the ten employees shall draw wages of Rs. 15,000/- or less to cover the factory. It is enough if the factory employs ten or more persons. Regarding establishments other than factories in this regard, you need to check your state notification.

B. Saikumar
Mumbai

Dear Prasad Rajput,

First of all, please mention where your IT company is operated because in some states, ESIC is applicable on 10 employees, while in others, it is on 20. Therefore, it is important to specify the location of operation as there are areas where ESIC is not applicable. Kindly provide the details of the place of business.

Regards,
Nilesh Soni

If the company is taking a car on lease from a third party at Rs. 8000 per month rent (annual - Rs. 96,000) and providing it to the employee (XYZ), Rs. 7500 is allocated for the driver's salary, and Rs. 10,500 is designated for fuel and car maintenance expenses.

If a reimbursement of Rs. 7500 is given as the driver's salary to the employee (XYZ), who will be responsible for depositing the ESI contribution of the driver? Is it our company, the employee (XYZ), or is there no need for anyone to pay the ESI contribution?

If you need further clarification on this matter, please let us know.

Thanks and Regards,

Diwakar Jha
9582400117

Dear Mr. Diwakar,

Based on my understanding, the employee's share is covered by the driver (XYZ) and the employer's share by a third party. However, as the principal employer, the responsibility for paying ESIC contributions for both shares lies with the company that is hiring the car.

Regards,
Vijay Dere

Dear Prasad ji,

You are in IT Software Development Firm.

Your query is on ESI, whether to your IT Software Development Firm the applicability of ESI is on 10 employees or on 20 employees and this 10 or 20 employees should be coverable or total head counts.

My answer to you query is as under:

IT Software Development Firm is a factory under the ESI Act.

Amendment 2010, Factory is defined in sec 2 (12) as "factory" means any premises including the precincts thereof whereon ten or more persons are employed or were employed on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 or a railway running shed;’.

According to Amendment 2010, the units where manufacturing activities are performed by 10 or more PERSONS has been brought under the ambit of the Act, irrespective of use of POWER and irrespective of the fact that 10 or more coverable employees are engaged or not.

Therefore, a criterion to you is 10 employees and not 20 employees and that too, head counts.

Hope you will find my reply up to your satisfaction.

You said in the beginning of your query that you have gone thru various articles on this topic and you got confused. Even I also was confused some time back. This was due to hidden amendment. Sec.1(4) read with Sec.2(12) unfolds that the ESI Act is applicable to factories where in ten or more persons are merely employed but does not say that they shall be employed 'for wages'.

My confusion / doubt was cleared by interaction in this forum. Thanks to this forum and the members who actively participates on such kind of issues.