Coverable strength of employees under ESIC - house rent.. CiteLegal

sansum05 Started The Discussion:

I am in one engineering company. we have around 80 employees.

Out of these 80 there are 4 employees get a salary of less than 10,000 per month. We did not register under ESIC earlier.

Now in audit it has been raised why we have not registered under ESIC whereas the fact is that we did not register because one Inspector told me that till you have 20 employees on board who are = or less than 10,000/- no need to get register and deposting their money,

Would any one tell me that it is right or wrong to not deposit till be reach on 20 employees =<10000.

Also if you can tld me that if coverable strength of atleast 20 or more people who are get 10000 or less in a month.


malikjs -  Member Since: Oct 2008
i could not get from your thread whether you are manufacturing company and covered under factories act or covered under shop and est act.
dear if it is factory and registered under factories act, than you should have ESI code no if and buts.
factories are registered if your stregth is 10 with power or 20 without power,so if u are registred under factories act you have to take ESI code.
in case of shop and establisment act strength is 20 that is total number of employee in any day.
it is not that you are having only 3 employees less than 10 strength has to be taken into consideration in case of applicablity of act .your auditor is right.
j s malik

irudayamarockiam -  Member Since: Feb 2009
Dear all,
1. The coverage under ESI Act, is independent of coverage Factories Act or Shop and Establishment Act.
2. As regards coverage under ESI Act, in case of Factory employing 10 or more employees with power being used for manufacturing process or 20 without aid of power; and 20 or more employees in respect of Shop / Establishment, such Entity will be deemed to be covered under the ESI Act from the day, the no. of employees are 10 or more / 20 or more as the case may be. The burden of coverage and compliance are on the Employer and not on ESIC. Even non-allocation of Code no. by ESIC is not an excuse for non-compliance.
3. In the instant case, notwithstanding no. of the coverable employees viz. 4 ( whose wages are less than Rs.10,000/-), the Manufacturing Unit / Establishment as the case is therefore deemed to covered under ESI from date from which the Co. had employed 10 or more employees (in case of mfg. with aid of Power) / 20 or more otherwise. Though the Unit / Entity will be covered under ESI from the aforesaid date, compliance of ESI contribution both Employers component as well as Employees component will be warranted only in r/o of employees had received / receiving less then Rs.10,000 /- ( wef 1-10-2006). In case of non-compliance so far, it is the sole responsibility to pay the entire contribution ( Employers + Employees) plus damages and penalties as may be determined by ESIC.
4. The Employer is advised to immediately register with ESIC for getting the Code No. without loss of time.
A.Irudayam, M.A., M.B.A., LL.B.
Advocate and HR Consultant

s.kumarasubramanian -  Member Since: Oct 2008
Dear all,

1. In the instant case if from the day one the factory statrted functioning after obtaining the necessary licence from the authorities is covered under the ESI act as per the slab then availble 3500,6500,7500 and now 10000 etc. But in any given point of time if the staff/workers whose wages were below 3500 or 6500 or 7500 or 10000 and their numbers are less than 10 in case of power aided units and 20 incase of non power aided unit then that establishment is not at all covered under the ESI act. But even for one day there are records to prove that there were 10 or 20 workers/staff were working whose wages as per the slab mentioned above, then that establishment is covered for ever, even today everyone in that establishment drawing wages of 10k and above. It is a lengthy procedure to approach the ESI authorities in order to state that all the 80 staff are getting more than Rs.10000 as wages and kindly remove our company from the coverage and so on. Instead of that we can continuously send nil return once in six months.

S.Kumarasubramanian, M.A., M.Com., LL.B., P.G.D.I.R.P.M.
Advocate and HR Consultant

irudayamarockiam -  Member Since: Feb 2009
Dear all,

1. Coverage under ESI Act for Factories under Sec.1(4) 10 employees with power or 20 employees without the aid of power or under Sec.1(5)- 20 employees will not be determined as per the wage slabs viz. 3500, 6500, 7500 or 10000. For the purpose of coverage under the aforesaid Sections, total no. of employees in the Factory / Establishment both below the exemption level as well as the above it will be taken into account to arrive at the figure of 10 or 20 as the case may be. In other words, for the purpose of Coverage under ESI, what is relevant is the total no. of all employees in the Entity and for contribution, only the no. of employees falling within the threshold say Rs.10000/- wef.1-10-2006.
2. After issue of the Code no. by ESIC ( in fact the Employer is expected to comply with the provision without even waiting for the allocation of code No. In other words , the employer has to take initiative to obtain the code No. by submitting Form No. 1 ) and pay contribution only in respect of employees below the threshold of coverage viz. 3500, 6500, 7500 or 10000 as the case may depending upon the period.
3. Once a Factory / Establishment is covered, it stands covered forever until such time the Entity is would up by due legal process.
4. Even if there are only one person out of the total no. of 80 employees is covered under ESI in a wage period, contribution must be paid and Returns must be submitted once in 6 months.
5. In case all employees have crossed the coverage threshold of Rs.10,000/-, a mere letter addressed to the concerned Regional director / Branch Office declaring Nil contribution with due certification will be sufficient. The process is not cumbersome.
Advocate and HR Consultant

irudayamarockiam -  Member Since: Feb 2009
Dear all,
Regarding aspect of Coverage of the Factory / Establishment under ESI Act, Mr. Kumarasubramanian, Advocate spoke to me on 7th evening and explained that what was written by him on 24th February in response to my points dated 19th Feb. reflects the correct and latest interpretation of the provisions of ESI Act.
My points were based on the staus during 1990,when I left ESIC. Perhaps, I took for granted that there cannot be any change in the fundemental facts and interpretations of provisions like Coverage. However, after the intereaction with Mr. Kumarasubramanian, Advocate, i checked with senior officers in ESIC and had confimed that What was written by Mr. Kumarasubramanian, Advocate on 24th Feb. reflects the correct legal status of Coverage now in the light of the S.C. Rulings.
I therefore intend to clarify that what was written by Mr. Kumarasubramanian, Advocate on 24th Feb. should be taken as correct.
I thank him for his gentlemanlinees in discussing the issue with me and record my deep sense of appreciation.

sansum05 -  Member Since: Feb 2009
Hello Mr. Subramanium and other advocates,

I am the candidate who initiated this message, in fact i researched and went through later on some case study and read all of your comments and gave my input to auditor and they agreed with the coverable strength of ESIc, thanks for all your comments.

I have another interesting scenario going on and I think all of you would like to give your comments as this time my argument is going on with PF office guys.

You all will be knowing that PF for international workers has recently started effective 1.11.08.

To calculate contribution for PF the guideline is Basic+ DA+ Retaining allowance, if any+food concession.

For DA the definition is by whatever name the payment is given to raise the cost of living.
In some cases some international workers have COLA Cost of living allowance as one of the separate allowance than Basice. Should it be treated as DA.

In India we do not consider any payment like petrol, executive allowance+books and periodicals and entertainment expenses as DA.

Is PF for international workers to be calculated on total salary or basic+COLA.



s.kumarsubramanian -  Member Since: Sep 2009
Dear All,

Clarification about EPF for international workers to be calculated on total salary or Basic and Cost of Living Allowance.

The monthly pay shall be the pay as specified under Para 29 of the EPF Scheme, 1952, which covers:
1) Basic wages (all emoluments paid or payable in cash while on duty or on leave / holiday except Dearness allowance, House rent allowance, overtime allowance, bonus, commission or any other similar allowance payable in respect of employment and any presents made by the employer)
2) Dearness allowance (all cash payments by whatever name called paid to an employee on account of a rise in the cost of living)
3) Retaining allowance
4) Cash value of any food concession

Further it is clarified that contribution is payable on the total salary payable on account of the employment of the employee employed for wages by establishment covered in India even for responsibility outside India also.




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