Employee State Insurance or ESI is a scheme commenced by the Government of India to offer medical, monetary, and other advantages to workers. ESI is managed by an autonomous authority ? Employee State Insurance Corporation ? which lies under the jurisdiction of the Ministry of Labour and Employment.
By law, any company that has more than 10 employees mandatorily needs to have ESI. In some states, the number of employees is 20. For employees earning more than ?21,000 per month, including basic salaries and dearness allowance, the insurance is deducted from their pay.
Also, taxpayers with a turnover of less than ?1.5 crore can opt for the composition scheme to get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
Definition of Establishment under the ESI Act
The Employees' State Insurance Act, 1948 (ESI Act) defines an establishment as any premises (or its precincts) wherein ten or more employees are employed for wages.
This includes factories but also other types of establishments, such as:
Hotels, restaurants, and boarding houses
Cinemas, theatres, and other places of public amusement
Shops, commercial establishments, and places of business
Educational institutions
Medical institutions
Transport undertakings
Warehousing establishments
Here are some of the important things to keep in mind about the definition of establishment under the ESI Act:
The premises must be used to carry on some economic activity.
There must be ten or more employees working on the premises for wages.
The employees must work on the premises for at least 240 days in the preceding 12 months.
Premises meeting all these criteria will be considered an establishment under the ESI Act. The ESI Act also provides for the extension of the coverage of the Act to establishments with less than ten employees. This extension is done by the Central Government or the State Government, as the case may be, by notification in the Official Gazette.