Hi This is Hemangee,
I would like to know more about the ESI Rule when it says that the ESI is not applicable for the employee who is drawing above Rs. 10000/- Per month but I want to know this Rs. 10000/- should be Fixed gross or total gross including incentives.
eg . The Total gross of employee is 11000/- per month out of which Rs. 9750/- is fixed gross & Rs. 1250/- incentives. then the employee will be eligible for ESI or not?
Pls help me in this.

From India , Mumbai
Dear Kaleem
You are right , we cant see in act the concept of coverable employees. In the year 1997 Delhi High Court has given judgement in this regard and subsequently The Supreme Court of India commending the views of Delhi High Court in MM Suri & Associates VS ESIC 1999 and it was reported in LLJ. I dont have the judgement copy but I read it fully long back. If you can get the copy of the judgement pl send me the soft copy to my email id:
With Power was used in the act is meant for only facatories, so I am not sure this software industries will fall on this phrase or not. My personal opinion after studying the various factors software companies will come into the category of Establishments so for those organisations ESI will attract only if they have more that 20 coverable employees.
99636 11511

Dear Hemangee
If you are paying incentives on monthly basis for ESI the employee gross earnings are 11000/- So you need not cover thos employees. If you are paying incentives on quarterly basis then you need to be covered such employees.
99636 11511

From India , Hyderabad
hi arathi,
ESI will pay 100% of her salary and no need to pay any compensation / salary from company.
and when a person getting esi benefit under any claim, there is no need to pay any compensation / salary from employer.
anuway this is rajesh.
c u

From India , Mumbai
Dear Alex,
ESI Wage ceiling is upto 10,000. The employees who are drawing upto 10,000 er hasto register in ESIC pay the contributions accordingly.

For Provient Fund if any employee baisc exceeds 6,500/- then no need to continue the pf contributions. Ofcourse, that is the management decision whether they r willing to continue or not. But if basic is less than 6,500 employer to continue the pf deductions.


We have got 2 firms (separate) and the employee details are as follows

1. IT Training firm

Total no: of employees is 8. Of this 7 are drawing less than 6500. Will ESI and PF be applicable?

2. S/w dev firm

Total no: of employees is 21. Of this 1 is less than 6500 and 4 are drawing between 6500 and 10000 and the rest all above 10000. Should we register for ESI and PF?

Some points regarding this.

a) The rule says 20 for not using power. IT firms use power. So is the no: 10 applicable for both the firms (for ESI & PF)?
b) If 20 is the count then can I put 2-3 from the s/w to the IT training firm rolls and escape both ESI and PF registration for the time being?
c) I heard that some firms take a written declaration from the employees saying that they do not need both ESI and PF. Is that valid?

Thanks in advance.

Warm regards,

From India , Visakhapatnam
i am working as hr exe in a s/w co.
75 ppl are working here.now we r going to start pf and Esi in our co.
could anyone pls tell me that what are the basics for that.
as i am new in this field
you can reply me on

From India , New Delhi
As far as ESI is concern you need total 20 employees drawing less than 10000 Gross Salary which is not there in your case hence ESI is not applicable you.
But in case of PF gets applicable if you have total 20 employees working in your organisation irrespective of their salaries. hence if you have 21 employees you get statutory covered under the PF act and you will need to apply for the PF Code Number.
Else transfer some employees to other comany and bring down your employee strenght to less than 20.

From India , Mumbai


ESI Rule for Registration:

1. Firm should have 10 employees drawing up to Rs. 10,000 if power is used in the Process.

2. Firm should have 20 employees drawing up to Rs. 10,000 if power is not used in the Process.

Since both your firms are not cinfirming to the above conditions ESI is not applicable. There is no provisition for voluntary coverage in ESI.

PF Rule for Registration:

1. Firm should have 20 employees for Registartion. Salary is not relevent. Only head count of employees is considered.

PF is not applicable to your IT training Firm ( Only 8 employees).

PF is applicable to your S/W dev. form (21 employees)

PF Act provides for voluntary Coverage also. If you wish to Register your IT Training Firm it is possible under voluntary coverage provisions.

You may also bear in mind that there are provisions in the PF act to club both the firms and treat as one unit and implement PF in both firms if in any way they are inter connected. i.e. Common Management. Inter changebility of employees, etc.

Other Points.:

Power: Power means power used in the process of development of products. ie. Manufacturing Process.-Factory. this is revelent only in case of ESI

As IT training division does not develop any products and only training persons, may not fall under the category of factory.

S/w. dev. firm is a factory. With ten Employees drawing upto Rs. 10,000/- will attrct ESI Coverage. as only 5 employees are drawing up to Rs. 10,000/- ESI is not applicable.

You may transfer employees from S/w dev. to IT trg. and escape coverage from both ie.e ESI and PF. But you should take care of the provisions regarding clubbing of the units.

Written declarations/conssent letters are use less and irrelevant. it does not help in any way.


From India , Mumbai
Hi Jennil & Ramarao,
Thanks a lot for your replies.
I am a bit confused with all different type of replies coming in. I will need to finalise one approach without much delay now :no:
Warm regards,

From India , Bangalore
I have a firm who has 25 employees on its roll, working with different organisations for providing cleaning and pantry services on contract bases and drawing less than 6500 salary. Out of 25 employees 12 are deployed with an educational institute where ESI is said to be not applicable. So far I have got only EPF code for the said firm. Now rest of the 13 employees are to be covered under ESI Scheme. So, I require your valuable suggestion on this. Can I apply for ESIC code with same employees as minimum requirement is of 20 ? Eagerly awaiting for your reply.
Thanks & regards !
LS Kasana

From India , Lucknow
Dear Alex,
As per PF rules the first company is under second or vice versa like branch office , then the PF is applicable for both. Regarding ESIC those who are below 10000 necessary.
Kabil Kumar.A

From India , Bangalore

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