Respected Seniors,
My company doesn't have any contribution towards ESIC or PF, although it has been operating for the past 56 years and employs more than 30 individuals. I am new in HR, and the HR Department is also new here. Now, as employees are requesting to initiate ESIC and PF in the organization, my Managing Director is asking me to understand the pros and cons of it. Please, seniors, help me understand the pros and cons of ESIC and PF from the company's point of view.
From India, Bhopal
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10My company doesn't have any contribution towards ESIC or PF, although it has been operating for the past 56 years and employs more than 30 individuals. I am new in HR, and the HR Department is also new here. Now, as employees are requesting to initiate ESIC and PF in the organization, my Managing Director is asking me to understand the pros and cons of it. Please, seniors, help me understand the pros and cons of ESIC and PF from the company's point of view.
From India, Bhopal
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Dear,
Sorry to say that, but I feel that your concern authority is trying to keep busy with unwanted work to avoid such responsibility.
Here, I would like to mention that the applicability of any law doesn't depend on your choice; it is compulsory.
If your organization has 20 or more employees and their salary (Basic + DA) is more than 6500/-, then there is an option for employees to avail of PF benefits or not.
If your organization has 10 or more employees, and their gross salary is less than 15000/- per month, then they have to be registered under ESIC; there is no choice for pros and cons. You can only take an exemption for ESIC if you can prove that you are providing the same or better benefits than ESIC.
As I believe these are social security benefits, it is beneficial to your employees themselves. I don't see any negatives in this; in fact, most are positive. If you don't avail the same, the liability will increase for the company in terms of employee health and security.
Regards,
Tushar Swar
From India, Mumbai
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Sorry to say that, but I feel that your concern authority is trying to keep busy with unwanted work to avoid such responsibility.
Here, I would like to mention that the applicability of any law doesn't depend on your choice; it is compulsory.
If your organization has 20 or more employees and their salary (Basic + DA) is more than 6500/-, then there is an option for employees to avail of PF benefits or not.
If your organization has 10 or more employees, and their gross salary is less than 15000/- per month, then they have to be registered under ESIC; there is no choice for pros and cons. You can only take an exemption for ESIC if you can prove that you are providing the same or better benefits than ESIC.
As I believe these are social security benefits, it is beneficial to your employees themselves. I don't see any negatives in this; in fact, most are positive. If you don't avail the same, the liability will increase for the company in terms of employee health and security.
Regards,
Tushar Swar
From India, Mumbai
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Dear Sir(s),
Regarding the application of the ESI Act, 1948, as well as the EPF & Misc. Prov. Act, the coverage is automatic once your establishment employs the minimum number of persons. Under the ESI Act, in addition to the condition of a minimum number of employees, there is also a condition that the factory or establishment must be situated in the implemented area.
The management of the factory/establishment may avoid coverage of their unit today. However, when the authority becomes aware of the situation and verifies the records, the unit is required to be covered from the very date it qualifies for coverage. In such a situation, the employer must pay the contribution as well as interest from a retrospective period but cannot deduct the same from the employees' salary as the employees' share of the contribution. Therefore, it is advisable for the management to cover their unit under the respective enactments at the earliest possible time if the unit satisfies the conditions of coverage.
The coverage of employees under social security enactments as mentioned above will be beneficial to the employees of the unit in the long run.
From India, Noida
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Regarding the application of the ESI Act, 1948, as well as the EPF & Misc. Prov. Act, the coverage is automatic once your establishment employs the minimum number of persons. Under the ESI Act, in addition to the condition of a minimum number of employees, there is also a condition that the factory or establishment must be situated in the implemented area.
The management of the factory/establishment may avoid coverage of their unit today. However, when the authority becomes aware of the situation and verifies the records, the unit is required to be covered from the very date it qualifies for coverage. In such a situation, the employer must pay the contribution as well as interest from a retrospective period but cannot deduct the same from the employees' salary as the employees' share of the contribution. Therefore, it is advisable for the management to cover their unit under the respective enactments at the earliest possible time if the unit satisfies the conditions of coverage.
The coverage of employees under social security enactments as mentioned above will be beneficial to the employees of the unit in the long run.
From India, Noida
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Dear Harsh,
In short, I mean to say that the applicability of any act is not by choice, but by force of law. We can't decide whether anyone wants to follow it or not based on pros and cons.
I believe this organization has been running for 56 years, which is not a short period of time. As a business person (Director, management, or owner), one should know which laws are applicable to their organization.
From India, Mumbai
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In short, I mean to say that the applicability of any act is not by choice, but by force of law. We can't decide whether anyone wants to follow it or not based on pros and cons.
I believe this organization has been running for 56 years, which is not a short period of time. As a business person (Director, management, or owner), one should know which laws are applicable to their organization.
From India, Mumbai
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I feel your organization has smartly managed to remain out of bounds of EPF and ESI provisions, which are unavoidable for the type and size of your organization as I can see. If the attention of the enforcement officers under both these statutes is drawn (of course in writing) by any employee of the organization, the employer will have to implement these requirements and that too with retrospective effect.
I suggest you may draw the attention of your employer to this vulnerable situation immediately.
Lalit Thakkar
From India, Surat
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I suggest you may draw the attention of your employer to this vulnerable situation immediately.
Lalit Thakkar
From India, Surat
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Dear Tusharji,
Thank you for your comments. You are well aware of the importance of statutory laws and the rules/regulations framed within them. However, the ground realities in India regarding the implementation of labor laws paint a different picture. The level of compliance with labor laws in India is significantly poor and does not meet the same standards as tax laws.
Central trade unions have raised concerns multiple times, demanding strict enforcement of all labor laws.
Regarding the coverage under the ESI Act, the individual who raised this matter has not clarified the following aspects:
1. The nature of the establishment, whether it is a factory or an establishment for which the State Government has issued a notification under section 1(5).
2. Whether the said factory or establishment is situated in an implemented area as notified under section 1(3).
Thank you.
From India, Noida
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Thank you for your comments. You are well aware of the importance of statutory laws and the rules/regulations framed within them. However, the ground realities in India regarding the implementation of labor laws paint a different picture. The level of compliance with labor laws in India is significantly poor and does not meet the same standards as tax laws.
Central trade unions have raised concerns multiple times, demanding strict enforcement of all labor laws.
Regarding the coverage under the ESI Act, the individual who raised this matter has not clarified the following aspects:
1. The nature of the establishment, whether it is a factory or an establishment for which the State Government has issued a notification under section 1(5).
2. Whether the said factory or establishment is situated in an implemented area as notified under section 1(3).
Thank you.
From India, Noida
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Dear Querist,
I am sorry to be blunt and feel the pity on the intelligence of the MD of your company, who has been violating the statutory provisions of the ESIC and the PF Act for the last 56 years, even though employing more than 30 employees in his organization. He has asked you to find out the pros and cons of ESIC and PF from the company's point of view. If you are an HR Department personnel, you should know that all organizations or companies are duty-bound to follow government regulations without any choice. You should have advised your MD accordingly instead of approaching the senior members for advice. Please tell your MD that he has no choice other than to follow the regulations under the ESIC and the PF Act. I feel bad for the employees who have suffered so much loss during this time. The only part of ESIC you need to check is if your establishment does not fall in the non-implemented area of the ESI scheme.
BS Kalsi
Member since Aug 2011
From India, Mumbai
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I am sorry to be blunt and feel the pity on the intelligence of the MD of your company, who has been violating the statutory provisions of the ESIC and the PF Act for the last 56 years, even though employing more than 30 employees in his organization. He has asked you to find out the pros and cons of ESIC and PF from the company's point of view. If you are an HR Department personnel, you should know that all organizations or companies are duty-bound to follow government regulations without any choice. You should have advised your MD accordingly instead of approaching the senior members for advice. Please tell your MD that he has no choice other than to follow the regulations under the ESIC and the PF Act. I feel bad for the employees who have suffered so much loss during this time. The only part of ESIC you need to check is if your establishment does not fall in the non-implemented area of the ESI scheme.
BS Kalsi
Member since Aug 2011
From India, Mumbai
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Quite strange to know that an establishment working for the past 56 years is not covered under these Acts from the due date of coverage (if in a notified area regarding the ESI Act). If the establishment is law-abiding, it should contact the respective authorities immediately to avoid complications at a later stage.
A K Chandok
RPFC (Retd.)
www.akchandok.com
From India, Chandigarh
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A K Chandok
RPFC (Retd.)
www.akchandok.com
From India, Chandigarh
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Dear Seniors,
Thank you very much for your valuable feedback and suggestions. I am aware that it is a legal requirement, and my company is obligated to follow such rules without considering the pros and cons. However, the Managing Director of my organization has recently discovered a way to circumvent these laws. They have divided the firm into four separate companies and distributed the employees equally among them. This strategy allows them to avoid compliance with the factory's act.
Currently, the Director, under pressure from employees, is considering initiating Provident Fund (PF) and Employee State Insurance Corporation (ESIC) contributions. He may merge all four companies into one if he identifies significant benefits in doing so. This is why he has tasked me with evaluating the pros and cons.
Regards,
Tanay Singh Kulshreshtha
HR Executive
From India, Bhopal
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Thank you very much for your valuable feedback and suggestions. I am aware that it is a legal requirement, and my company is obligated to follow such rules without considering the pros and cons. However, the Managing Director of my organization has recently discovered a way to circumvent these laws. They have divided the firm into four separate companies and distributed the employees equally among them. This strategy allows them to avoid compliance with the factory's act.
Currently, the Director, under pressure from employees, is considering initiating Provident Fund (PF) and Employee State Insurance Corporation (ESIC) contributions. He may merge all four companies into one if he identifies significant benefits in doing so. This is why he has tasked me with evaluating the pros and cons.
Regards,
Tanay Singh Kulshreshtha
HR Executive
From India, Bhopal
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Dear Kalsi sir,
I am new in the HR field and don't know many things about the HR Department. This is my first experience, and the only person in the HR Dept. is me. I am trying to learn new things, and that's why I used to put up my general queries in this forum. I feel seniors are like my teachers and will teach me right and wrong. For me, the only way to learn anything about HR is this forum. Still, if you feel I made a wrong query, I am sorry for that. I'll keep in mind to put a correct query next time.
Regards,
Tanay Singh
HR Executive
From India, Bhopal
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I am new in the HR field and don't know many things about the HR Department. This is my first experience, and the only person in the HR Dept. is me. I am trying to learn new things, and that's why I used to put up my general queries in this forum. I feel seniors are like my teachers and will teach me right and wrong. For me, the only way to learn anything about HR is this forum. Still, if you feel I made a wrong query, I am sorry for that. I'll keep in mind to put a correct query next time.
Regards,
Tanay Singh
HR Executive
From India, Bhopal
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