Esi not deducted

This query is : Resolved

CA Aditya (Querist)
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23 July 2012 Dear Experts,

Kindly answer the following:

I'm working for educational institutions ( Nursery to Class X)...Its was assumed by Managemnt that ESI is note applicable to Educational Insttitutions..

due to that company is not deducted ESI for some locations( We have 5 location in banglore)
Now what is the options to open to comapny ..
1) As non dection will lead to non complince of act... if not corrected it would become more complicated againuring this period... what needs tobe done for them?
3) can i recover the same from existing eemploees... arrears also..

Regards

2) Some of the employess left d

CA UMESHKUMAR R. ACHARYA

CA UMESHKUMAR R. ACHARYA (Expert)
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08 August 2012
It is in the best interest of institution to contact your local labour law consultant and pay the tax as soon as possible.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 If ESI (Employee State Insurance) deductions were not made as required by law, and the company is now concerned about compliance and potential repercussions, here are the steps and considerations:

### 1. Compliance and Corrective Actions

- **Legal Requirement**: ESI applies to establishments with 10 or more employees (in some states, it's 20 or more employees). Educational institutions are generally covered under ESI if they meet the employee threshold.

- **Corrective Action**: The company should immediately assess its compliance status and take steps to rectify any non-compliance. This typically involves:
- Registering the affected locations under ESI, if applicable.
- Calculating and paying the arrears of ESI contributions that should have been deducted.
- Filing necessary returns and ensuring ongoing compliance.

- **Communication with Employees**: Inform current employees about the situation transparently. Explain that ESI deductions were not made as per regulations and that corrective measures are being taken. Employees should understand the impact on their records and benefits.

### 2. Recovery of Arrears

- **Recovery from Employees**: The company cannot recover the arrears of ESI contributions directly from current or former employees. ESI contributions are employer obligations and cannot be deducted from employee salaries retrospectively.

- **Financial Impact**: The company will need to bear the cost of the arrears of ESI contributions that were not deducted. This includes both the employer's and the employee's share for the period in question.

### 3. Steps Forward

- **Consultation with Experts**: It's advisable for the company to consult with legal experts or chartered accountants specializing in labor laws and compliance. They can provide guidance on the specific steps required to rectify the non-compliance and ensure future compliance.

- **Registration and Compliance**: Ensure that all affected locations are registered under ESI, if they meet the criteria. This includes filing necessary paperwork and adhering to reporting requirements.

- **Future Compliance**: Implement robust processes to ensure timely and accurate deductions of ESI contributions moving forward. This may involve training HR personnel, updating payroll systems, and conducting regular audits to ensure compliance.

In summary, while the situation requires immediate corrective action to comply with ESI regulations, the company cannot recover the arrears from employees. Instead, it must bear the financial responsibility for the missed contributions and focus on ensuring full compliance going forward. Seeking professional advice will help navigate the legal and procedural aspects effectively.

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