The Employees’ State Insurance (ESI) scheme is a vital social security program designed to provide financial and medical benefits to employees in India. Governed by the Employees’ State Insurance Act 1948 this scheme is applicable to certain businesses based on the number of employees they have.
Understanding the minimum employee requirement for ESI applicability is essential for employers to ensure compliance and avoid penalties. This guide explains the eligibility criteria the calculation of employee strength and key factors that determine ESI coverage.
Minimum Number of Employees for ESI Applicability
1. General Applicability
As per the ESI Act any establishment with 10 or more employees (in most states) must register under the scheme. However in some states the threshold is 20 or more employees.
The ESI scheme applies to:
- Factories
- Shops
- Hotels
- Restaurants
- Cinemas
- Road transport businesses
- Educational institutions
- Private medical institutions
2. Variations by State
While the general rule is 10 or more employees certain states have set a higher limit of 20 employees. It is important for employers to check state-specific ESI rules to ensure compliance.
3. Who Counts as an Employee?
To determine ESI applicability employers must count all individuals working in the organization including:
- Permanent employees
- Contractual and casual workers
- Daily wage earners
- Temporary staff
- Apprentices (except under the Apprentices Act 1961)
If the total number of employees including these categories meets the threshold ESI registration is mandatory.
Wage Limit for ESI Coverage
Even if an establishment meets the employee threshold not all employees may be covered under ESI. The scheme applies to employees earning up to ₹21000 per month (₹25000 for persons with disabilities).
Employers must contribute 3.25% of an eligible employee’s wages while the employee contributes 0.75%.
Registration Process for ESI
1. Online Registration
Employers must register their establishment through the ESIC (Employees’ State Insurance Corporation) online portal. The key steps include:
- Creating an account on the ESIC portal
- Filling in employer and establishment details
- Providing employee information
- Uploading necessary documents
2. Documents Required
Employers need the following documents for registration:
- PAN card of the business
- Address proof of the establishment
- Bank details of the company
- Employee details (Aadhaar salary records etc.)
After registration the employer receives an ESI code number which is used for compliance and reporting.
Penalties for Non-Compliance
Failing to register for ESI when required can result in legal consequences including:
- Fines and penalties
- Interest on delayed contributions
- Legal action against the employer
Employers must ensure timely compliance to avoid these consequences.
The ESI scheme is mandatory for establishments with 10 or more employees (20 in some states). It provides essential benefits such as medical coverage disability benefits and maternity benefits for employees earning up to ₹21000 per month. Employers must register their business under ESI if they meet the required threshold to ensure compliance and employee welfare.
