PF/ESIC Inspection Details

Dear Seniors
Greetings!
ESIC registration was done in OCT 2012 and now inspection will be conducted in 1st week of December13.
My issue is that:
We gave salary around 5 lacks to employees till March13 but for tax saving company had not shown this amount in Balance sheet. In balance sheet company just shown 1.2 lacks as salary. We deducted ESIC on 4.5 lacks till March13 (ESIC wage). Our balance sheet is already finalized in March13 with 1.2 lacks salary details so now what will be solution?
and what would be impact at time of inspection?
Regards
Mahima

Dear Member,
I understand that the Inspecting Authority (Social Security Officer) of ESIC will try to tally the amounts as disbursed in Payment of Wages Register with the Accounts Heads of Ledgers of your factory/establishment. In case amounts of wages shown in Payment of Wages Register ( on which as mentioned by you in above remarks that contribution is reported paid) tallys with the entries in Wages Heads of Accounts Books, then perhaps the Inspecting Officer will not require Balance Sheet of your establishment/factory.
Otherwise also, in my opinion, you factory/establishment can explain the position to Inspecting Officer accordingly as mentioned by you.
With regards;

why esi inspecting authority is verifying the balance sheet?find out any difference between balance sheet & salary register.As far as salary/wages concern,salary/wages register's datas are important.other than wages / salary many heads of accounts are reflecting in balance sheet.If balance sheet wages is higher than register difference amount will be deemed as omitted wages.If wages amount is higher than balance sheet which will be ignored.
Other than wages, labor charges paid in side factory/out side factory, loading &unloading charges, staff welfare,over time wages will be attracted esi 6.5% will be calculated & spot letter will be issued
Regards
V.Subbarao

Dear Mr. Mahima,
Any company for the purpose of I.T advantage would only escalate the salary & wages. It is strange that you have downsized the same for the I.T purpose.
2.Anyhow the esic can only draw adverse inference that your Bal.Sheet is not dependable.Are you under compulsory audit zone.Pl.consult your Auditors and do the needful.
Regards,
S.SANKARALINGAM
RETD.SR.DY.DIRECTOR,ESIC
ADVOCATE & LABOUR LAW ADVISOR
mobile 09790754727
e.mail srihari 1953 @ gmail.com

Thanks Sir..
Sir do he will take copy of documents as a proofs like salary details/attendance/challans/balance sheets etc or he will just inspect the things....
Regards
Mahima

Sir thanks.
Company is new and thing are in process to get aligned, auditing is done by CA firm, i asked them about the issue but their reply was not satisfactory...
Please suggest what could be done next in the case..
Regards
Mahima

Dear Member,

With reference to your remarks as above, I will suggest you to read Section 45 of the Employees' State Insurance Act, 1948 which lays down about powers of Social Security Officer, and his functions and duties. As a matter of practice, the Inspecting officer will only inspect the records. However, in respect of some of documents, to which he desire he can obtain copies from your establishment. Above Section of Act empowers Social Security Officer to obtain copies from the documents.

However, I will suggest you that in future, try to see that the amounts of all type of wages viz. paid to regular, casual, temporary as well as on contract basis are properly reflected and tally in the accounts Books of the factory/establishment and from the challans paid by the factory, the Time Office Incharge or HR staff (as you may call), are in a position to establish/prove that the compliance on all wages is made and returns viz.Returns of contributions, Accident Reports, Declaration forms are also submitted. You will also have to prove that the required Register as laid down under said Act are also maintained properly and regularly. Please also ensure that all your staff are also having ESI Identity Cards and also their family cards.

The maintenance of all registers as laid down under ESI Act as well as production of complete records and your proving that the contribution has been paid properly on all wages as reflected in Payment of Wages Register and Accounts Books will pave the way for verification of records satisfactorily and I think in case in future regular care is taken, the Time Office/HR staff need not to worry for such inspections.