ESI Eligibility Confusion: Does Having 5 High Earners Affect Coverage for 20 Employees?

Dear Seniors, I understand that for ESI eligibility, there must be at least 20 employees in an establishment, and the salary ceiling is Rs. 15,000. However, I would like to inquire whether an establishment with exactly 20 employees, where 5 employees earn more than Rs. 15,000, would still be covered under the ESIC Act?

With regards,
Paras

The ESI eligibility is at least 10 employees, not 20 employees.

Regards,
Rajeev Dixit

Any company where 20 or more employees (who are drawing Rs. 15,000 or less) are employed without power or with 10 or more employees working with power is covered under the provisions of the ESI Act 1948. Your company is also covered under the provisions of the ESI Act 1948.

Thank you for your suggestion. Kindly let me know what a special allowance is. As I understand, ESI contribution is payable on Basic + special allowance. So, what kinds of allowances are included under special allowance?

Regards,
Paras Thakur

ESIC is deducted on the gross salary up to ₹14,999, not on Basic + Special Allowance.

Warm Regards,
Bhaevsh Kalal

The definition of the 'Factory' under Section 2(12) of the ESI Act, 1948, has been amended by Act 18 of 2010, where the words 'with or without the aid of power' have been removed from the definition. The definition has been simplified to include any premises where ten or more persons are employed.

As regards the determination of coverage, all employees, irrespective of the quantum of salary, shall be included, but persons drawing over Rs. 15,000/- shall not be covered for the purpose of benefits under the Act.

Based on the judgments of various courts, the ESI Corporation has clarified that ESI contribution shall be payable on all the remunerations received by the Insured Person, viz. Basic Pay, D.A., H.R.A., C.C.A., O.T., Night Shift allowance, etc.

Regards,
BS Kalsi
Contributing Member

Mr. Kalsi has provided good feedback to everyone; it is also the correct information. I would like to add something.

ESI Contribution Details

ESI contribution shall be payable on the gross salary except for the washing allowance, and the payment made quarterly is also exempt from ESI contribution. We will pay ESI on overtime payment, but it is not included as wage/salary.

Regards,
V. K. Rao

An establishment has 15 employees drawing salaries of ₹15,000 and above, and 8 employees drawing salaries of ₹6,000 and below. Could you please tell me if this establishment is covered under the PF Act?

Regards,
V.R. MURTHY

Those establishments are eligible for PF which must employ 20 or more employees. If some employees are earning below 6500, the contribution will be based on their basic pay + DA. For those earning more than 6500, the calculation will be capped at 6500. In other words, the ceiling is 6500.

Regards,
Paras Thakur