10 May, 2009


  • Once the ESI Act is made applicable to an establishment, it will continue to apply even when the number of employee is reduced to one.
  • For applicability of ESI Act upon a factory or an establishment, there must be prescribed number ( 10 or 20) of eligible employees (drawing less than Rs. 10,000 per month).
  • A coverable employee is to be enrolled as a member of ESI on the first day of joining.
  • A Co-operative Society, other than a House Owners’ Society, is liable to be covered under the Act.
  • A shop, though not defined under the ESI Act, but has been given wider interpretation by covering even the establishment where services are rendered and is not confined to sales and purchases only.
  • A hotel, even though not factory under the Factories Act, is liable to be covered under the ESI Act.
  • Use of LPG, for preparation of sweet, will be treated as power for the applicability of ESI Act upon a shop or an establishment.
  • A partner is not an employee but a Managing Director , drawing less than the prescribed limit of salary, will be an employee and covered under the ESI Act.
  • A contractor may not be covered under ESI Act but his employees are liable to be covered.
  • Apprentices not engaged under the Apprentices Act or the Industrial Employment (Standing Orders) Act are employees to be covered under the ESI Act.
  • The wages for ESI contribution are not restricted to basic or DA but includes many other allowances like overtime, HRA.
  • The contribution period and the benefit period under the ESI Act are different from each other.
  • An employee being member of ESI can avail benefit even when he is away from his work-place.
  • A person working on commission basis will not be entitled for coverage under the ESI Act.
  • The employees working in construction activities are not liable to be covered but in case such employees work for construction/repair or maintenance of additional building or same building of a covered establishment, they will be covered.
  • When work for construction/repair/extension of a covered establishment is given on contract with material, 25% of the total cost will be taken as labour charges unless specific bifurcation is given.
  • There will be no justification in not depositing ESI contributions merely because the Code Number was not allotted.
  • In the case of any dispute or difference between the ESI authorities and the employer, the appropriate remedy is provided before the Employees’ Insurance Court and neither the Civil Court not the High Court will entertain.
  • An employer can not terminate/dismiss an employee during the period when he is availing sickness benefits but this condition will not be applicable for termination of a probationer or a fixed term employee.
  • Consumer Protection Act is also applicable to the member of ESI.
  • Depositing ESI contributions is the first liability of principal employer for the employees of the contractor.
  • ESI will be liable to pay compensation for a road accident if it takes place within one kilometre of the place of work.
  • An employer has to send accident report within twenty-four hours of the accident to the nearest ESI office.
  • Notice pay will not attract ESI contribution.

Source:- LLR May 2009 Issue.

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Anonymous said...

this is very helpful for people dealing in Hr profile .


Jhon smith said...

really good information is posted. good study.

Bhima shankar said...

good blog. good information is provided.