Dear Dialogue Members,
Greetings from SRRF!!!
A query has been rec’d from an NGO running an orphanage in southern India. It is a society registered under Tamilnadu Societies Registration Act of 1975. An inspection was undertaken at the orphanage by ESI officials, who have claimed that orphanage is employing 12 full time staff and 7 part-time staff and have demanded that organisation pays its Contribution as per Regulation 31 of ESI General (Regulation) of 1950. The orphanage has very meagre resources and pays its staff like Aya, cook, etc. amounts ranging between Rs 2500 to Rs 7000.
I request learned members of the SRRF Dialogue Group to advise
- Is ESI applicable on non-profit organisations ? If no, please provide the basis of your opinion.
- If yes, how can it minimise liability, does it have to pay full ESI contribution even on part-time staff?
Your expeditious advise would help the NGO take a proper recourse.
With warm regards
Ramanuj Maurya
Coordinator
__________________________________
Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in; website: http://www.srr-foundation.org
Dear SRRF Dialogue Members, I find the discussion above very useful. Applicability of ESI scheme has always been confusing since it is applicable state-wise, thus one has to look at the State legislation for coming to conclusion for the answers.
I have myself not gone through the state legislation, however I think Pushkar has really covered it well. My suggestion to the organisation would be to hire a local lawyer / consultant specializing in this field to ensure that it gets the best legal remedy.
Regarding comments from other SRRF members, particularly Uday Chaturvedi & SP Loonker, on usefulness of ESI scheme, I fully agree that we should all encourage NGOs to provide some basic benefit to lowly paid employees (earning less than Rs 15000/-) who can avail of this vital health benefit at a nominal cost. Most common argument against ESI scheme among employers as well as employees is based on lack of information and misunderstanding.
I thank everyone who has contributed to this discussion.
subhash
Dear Friends,
What ever applies to entities registered under shops and establishments act is applicable to registered societies and trusts. Is it not? If, yes, ESI is applicable to NGOs as long as better choices/alternatives are not made/provided.
Udayashankar
Dear Udayashankar,
If I read your comment correctly – you are stating three separate but very important matters here.
1. NGOs or rather any organisation registered as a trust or soceity should be registered under the Shops and Extablishments Act.
2. That ESIC is applicable to all such organisations. – However if you look at the FAQs that are published on the ESIC website (page 4 Serial 17 at http://www.esicmaharashtra.gov.in/htmldocs/ESIC-FAQ.PDF) they only specify Teaching Institutions and Hospitals that are run by Trusts / Societies. They do not mention other organisations.
3. By implication all the statutes that are applicable to Shops and Est e.g. Minimum wages, labour laws etc would also be applicable to NGOs.
I suspect this will affect the viability of numerous organisations.
What do the other members of the group have to say about this?
Regards,
Anil
Community Aid and Sponsorship Programme
CASP Bhavan
Pashan Baner Link Road, Pashan
Pune 411021
Yes, very correct. Also, there is no mediclaim better than ESI and cheaper than ESI. Which medical insurance will u get for ur entire family for only Rs. 15 per month and which also includes free OPD and free medicines ?
Surya Prakash Loonker
ESI is the cheapest form of medical insurance that is available. Also, it is the best mediclaim in country between private and public insurances. It is like Rs. 10 or 15 per month per employee. Very very low cost. But it covers OPD, medicines, surgeries, maternity benefits, unemployment benefits. So I would suggest that NGOs should go ahead and offer ESI to their employees. It is best benefit you can offer to your employees for almost no cost to you.
I would even suggest making all your beneficiaries, members, people you work with, part of NGO and offer them ESI. The beneficiaries can pay the cost of ESI to the NGO. Only way to get ESI is through a company or organisation or manufacturing plant or business that you are employee of. So please extend ESI to as many as possible and if ESI dept is asking you to get ESI registration and offer it all your employees, you should be happy and immediately go for it.
Unlike PF, ESI is very low cost to NGO but very big benefit to the employees of NGO.
Dear Sir
The below is the response of ESI applicability.
Applicability OF ESI
The ESI Act, in the first instance, applies to all non-seasonal factories using power and employing ten or more persons, and, to non-power using manufacturing units and establishments employing 20 or more persons for wages and falling within the scope of an implemented geographical area. As of now, employees of factories/ establishments, that fall within the ambit of coverage, and earning wages not exceeding Rs. 15,000/- per month are covered under the ESI Scheme (wef 1st May 2010).
The provisions of the ESI Act, have also been extended to the following classes of establishments under Section 1(5) of the Act.
• Shops
• Hotels & Restaurants, Clubs
• Cinemas, including preview theatres
• Newspaper establishments
• Road Motor Transport establishments
The provisions of the Act are applicable only factories and establishments where either the manufacturing process goes on or where business of selling and purchase takes place as a commercial activity. In this case of NGO that it is neither a factory nor an establishment nor a shop.
The meaning of the words “Shop” and “Establishment” as per the New Lexicon, Webster‟s Dictionary of the English language (Deluxe Encyclopedic Edition), and the Oxford Dictionary as given below. In the former, the words “Shop” and “retail” are described as under: “SHOP” A Store (Building where retail trade is carried on). A workshop or establishment where machines or goods are made or repaired. RETAIL Selling of goods, which are for sale, in small quantities to the General Public, outlet (i.e. shops) for the retail of leather goods, retail business traders, manufacturers, etc.
The meaning of word “Shop” as per Oxford Dictionary is as under:
“Building or room where goods or services are sold to the public.”
The meaning of the word “Commercial Establishments” as per THE TAMIL NADU SHOPS AND ESTABLISHMENTS ACT,1947 was also adverted to as given below:
‘commercial establishment´ means an establishment which is not a shop but which carries on the business of advertising, commission, forwarding or commercial agency, or which is a clerical department of a factory or industrial undertaking or which is an insurance company, joint stock company, bank, broker’s office or exchange and includes such other establishments as the state government by notification may by notification declare to be a commercial establishment for the purposes of this Act.
The Meaning of Establishment as per The Tamil Nadu Shops And Establishments Act,1947 ‘establishment´ means a shop. Commercial establishment, restaurant, eating house, theatre or any place of public amusement or entertainment and includes such establishment as the State Government for the purposes of this Act;
In the light of above, in my opinion ESI act is not applicable on NGO since it is not engage in commercial activity.
Regards
CA Pushkar Gupta
(A.C.A, B.Com.)
E-mail: pushkar.gupta@sma.net.in, website: http://www.sma.net.in
Dear Friends,
Voluntary sector should cover its staff members under family health insurance scheme and accident insurance scheme. Funds for the same should be built into programme cost. Donors accept such measures. Such insurance coverage is more than paying handsome salaries which anyway we can’t even dream of. Once I told the visiting Labour Commissioner that insurance schemes provide better protection/health care than ESI.
This is to add a different dimension to the subject issue.
Udayashankar