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Hello Suman
There is some error in the reply of malikjs and amit lycos, I am sorry to say so. It appears that they are not aware of the famous Supreme Court judgment in Suri Case, some years back.
Let me make it clear that as per final judgement of Supreme Court only those drawingt Rs 10000 or beloe per month can be counted for the purpose of payment of ESI contribution as well for the purpose of determining whether the factory or Establishment is coverable under the ESI Law. This is final. I have in this very site few month back gave exhaustive reply and illustration on this point and I think you can search this site and get the illustration.
If the ITES or IT unit is only providing softwre support, call centre and such services, without providing any hardware support, repair, maintenance etc, it will come under the category of Establishment/Shop and not factory. But if there is any manufacturing process including mass printing of information etc. it will come under the category of Factory. For factory the required number of employee is 10 to come under ambit of ESI scheme and for Establishment (Shop) it is 20. That means the number of employees drawing Rs 10000 per month or below should be 10 or 20 (for factory and establishment). For Eg, in an establishment there are total 100 employees and 81 of them draws monthly "Wage" above Rs 10000 and only 19 draws Rs 10000 or below, then that establishment will not be covered under ESI Act. In what is called as Suris case, Supremen Court has clarified and I am not aware of any amendment by Parlisment to get over this judgment thought ESI department was trying this.
Now the word "Wage" is defined in Sec 2 (22) of the ESI act, as all cash compensation paid in consideration of work including additional money paid in periodicy less than two month. Employers contribution to ESI, EPF, Gratuity and superannuation Scheme, Annual Bonus, facilities given in kind like house, free food and reimbursement given for educational expences of child, housing, medical care etc will not be counted. Only cash payment is taken. In this "Fixed conveyance allowance" (different from reimbursement of conveyance allowance for duty or actual reimbursement as per ticket) will be treated as Wage. Whatever is defined as wage will be treated as wage for the purpose of deciding coverage and payment of contribution. For Eg. if a employees has Rs 9800 as basic, Da and other cash allowance and 300 as "fixed conveyance allownce' then his month wage is abov e Rs 10000 and he is not covered. If wearing of Unifvorm is compulsory, then washing allowance will not be treted as wage.
If you still have some doubt you need to give the wage structure for your employees and then get a reply since different companies have different nomenclature.
O. Abdul Hameed
Formerlhy Additiona Commissioner
ESI Corporation New Delhi
Now General Manager, Private Company
From India, Coimbatore
There is some error in the reply of malikjs and amit lycos, I am sorry to say so. It appears that they are not aware of the famous Supreme Court judgment in Suri Case, some years back.
Let me make it clear that as per final judgement of Supreme Court only those drawingt Rs 10000 or beloe per month can be counted for the purpose of payment of ESI contribution as well for the purpose of determining whether the factory or Establishment is coverable under the ESI Law. This is final. I have in this very site few month back gave exhaustive reply and illustration on this point and I think you can search this site and get the illustration.
If the ITES or IT unit is only providing softwre support, call centre and such services, without providing any hardware support, repair, maintenance etc, it will come under the category of Establishment/Shop and not factory. But if there is any manufacturing process including mass printing of information etc. it will come under the category of Factory. For factory the required number of employee is 10 to come under ambit of ESI scheme and for Establishment (Shop) it is 20. That means the number of employees drawing Rs 10000 per month or below should be 10 or 20 (for factory and establishment). For Eg, in an establishment there are total 100 employees and 81 of them draws monthly "Wage" above Rs 10000 and only 19 draws Rs 10000 or below, then that establishment will not be covered under ESI Act. In what is called as Suris case, Supremen Court has clarified and I am not aware of any amendment by Parlisment to get over this judgment thought ESI department was trying this.
Now the word "Wage" is defined in Sec 2 (22) of the ESI act, as all cash compensation paid in consideration of work including additional money paid in periodicy less than two month. Employers contribution to ESI, EPF, Gratuity and superannuation Scheme, Annual Bonus, facilities given in kind like house, free food and reimbursement given for educational expences of child, housing, medical care etc will not be counted. Only cash payment is taken. In this "Fixed conveyance allowance" (different from reimbursement of conveyance allowance for duty or actual reimbursement as per ticket) will be treated as Wage. Whatever is defined as wage will be treated as wage for the purpose of deciding coverage and payment of contribution. For Eg. if a employees has Rs 9800 as basic, Da and other cash allowance and 300 as "fixed conveyance allownce' then his month wage is abov e Rs 10000 and he is not covered. If wearing of Unifvorm is compulsory, then washing allowance will not be treted as wage.
If you still have some doubt you need to give the wage structure for your employees and then get a reply since different companies have different nomenclature.
O. Abdul Hameed
Formerlhy Additiona Commissioner
ESI Corporation New Delhi
Now General Manager, Private Company
From India, Coimbatore
Mr. Hameed, Thx for the wonderful information that u shared with us. This is the brief detail i wanted to know. Thanks again for ur help. Thanks Suman:-P
From India, Gurgaon
From India, Gurgaon
Hello Suman,
visit this site for more info.
Laws - Employees State Insurance Act, 1948
From India, Madras
visit this site for more info.
Laws - Employees State Insurance Act, 1948
From India, Madras
Hi Friend's,
Applicability of ESI Act & Rule's
(1) Factory employing 10 or more employees, whose wages do not exceed Rs. 10000/- per month.
(2) Manufacturing process being carried out without the aid of Power employing 20 or more employees
(3) Establishments employing 20 or more employees, whose wages do not exceed Rs. 10000/- per month.
(4) Other establishments to which the Act has been made applicable by notifications.
Please revert if you need additional information/ clarification.
Regards
Shanmugham.K
From India, Madras
Applicability of ESI Act & Rule's
(1) Factory employing 10 or more employees, whose wages do not exceed Rs. 10000/- per month.
(2) Manufacturing process being carried out without the aid of Power employing 20 or more employees
(3) Establishments employing 20 or more employees, whose wages do not exceed Rs. 10000/- per month.
(4) Other establishments to which the Act has been made applicable by notifications.
Please revert if you need additional information/ clarification.
Regards
Shanmugham.K
From India, Madras
Dear Mr. Hameed,
Thank you so much for detailed clarification, however i have one doubt regarding this.
Lets suppose at one point of a time we have 19 employee drawing wages less than 10k and after six months it increses to 22 and then after six months again goes back to 18.
In that case what would be the treatment, can applicability under ESI be changed from time to time. And if the establishment is exempted from its complaince once the number of employees drawing wages less than 10K decreases to less than 20
Looking forward to hear from you.
Thanks
--
Ravi Dua
Thank you so much for detailed clarification, however i have one doubt regarding this.
Lets suppose at one point of a time we have 19 employee drawing wages less than 10k and after six months it increses to 22 and then after six months again goes back to 18.
In that case what would be the treatment, can applicability under ESI be changed from time to time. And if the establishment is exempted from its complaince once the number of employees drawing wages less than 10K decreases to less than 20
Looking forward to hear from you.
Thanks
--
Ravi Dua
Dear Mr Dua
A factory or establishment, once covered under ESI Act, will always covered irrespective of number of employees coming down. Sec 1 (6) of the ESI act say so. So, after crossing the limit of 10 (for factory) of 20 (for other establishments) and come under the scheme, it will remain under the scheme even if there is only one employee drawing Rs 10000 or below. In some cases, all the regulr employees may cross the limit of 10000 but there may be casual, temporary or contract workers drawing Rs 10000 or below and even then the unit is covered but you have to pay contgribution only for those who are covered.
However an empoyee who is once covered under the scheme will remain covered only till the end of the Contribution Period (April to September and October to March). This means if an employee was drawing 10000 or below in the month of April, he will be covered, but if his wage increased above 1000 in the next month, he will still be covered till September of that year and then go out of coverage.
Hope you are clear on this.
O Abdul Hameed
From India, Coimbatore
A factory or establishment, once covered under ESI Act, will always covered irrespective of number of employees coming down. Sec 1 (6) of the ESI act say so. So, after crossing the limit of 10 (for factory) of 20 (for other establishments) and come under the scheme, it will remain under the scheme even if there is only one employee drawing Rs 10000 or below. In some cases, all the regulr employees may cross the limit of 10000 but there may be casual, temporary or contract workers drawing Rs 10000 or below and even then the unit is covered but you have to pay contgribution only for those who are covered.
However an empoyee who is once covered under the scheme will remain covered only till the end of the Contribution Period (April to September and October to March). This means if an employee was drawing 10000 or below in the month of April, he will be covered, but if his wage increased above 1000 in the next month, he will still be covered till September of that year and then go out of coverage.
Hope you are clear on this.
O Abdul Hameed
From India, Coimbatore
If the size of comapny is 55 enployee and out of which there are 10 employees who’s gloss salary is less than or equal to 10,000, is the ESI is applicable?
From India, Delhi
From India, Delhi
Hameed i need a clarification regarding the same....as you have stated that only those person who is withdrawing 10,000 or ore than 10,000 are exempted from ESIC but as p[er my knowledge it is not take home amount but the gross is calculated in ESIC....means if gross is more than 10,000 or equal to 10,000 then only he is exempted from ESIC.can u please clarify it whether it is gross or Net take home....
From India, Calcutta
From India, Calcutta
Friends
Let us not talk about "Company" which means an organization registered under Company Act (and let us also not talk of "Firms" which means a partnership firms) ESI Act does not cover Companies or firms but only "Factories" (Ten or more coverable employees) and "Establishments"( 20 or more coverable employees). Hence if a factory has 10 employees drawing Rs 10000 per month (gross amount payable had he worked on all days and Not net amount) and another 100 employees drawing more than 10000 Rs, the factory is covered. In case of "Establishsments" (Shopes, Cinema theatre, Hotel not using electric power for manufacturing food, Transport Unit and other manufacturing units not using electric Power for manufacturing) the number is 20 instead of 10.
Did I make myself clear please?
O. Abdul Hameed
From India, Coimbatore
Let us not talk about "Company" which means an organization registered under Company Act (and let us also not talk of "Firms" which means a partnership firms) ESI Act does not cover Companies or firms but only "Factories" (Ten or more coverable employees) and "Establishments"( 20 or more coverable employees). Hence if a factory has 10 employees drawing Rs 10000 per month (gross amount payable had he worked on all days and Not net amount) and another 100 employees drawing more than 10000 Rs, the factory is covered. In case of "Establishsments" (Shopes, Cinema theatre, Hotel not using electric power for manufacturing food, Transport Unit and other manufacturing units not using electric Power for manufacturing) the number is 20 instead of 10.
Did I make myself clear please?
O. Abdul Hameed
From India, Coimbatore
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ESI applicable to software development companies - Bom HC 2012.pdf
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