It is not uncommon to find establishments and factories that remit statutory contributions only for a section of their workforce—and often on wages that do not reflect actual earnings.
More concerning are cases where contributions are paid, yet workers are unable to access benefits under the law due to the employer’s failure.
I encountered one such case in a factory.
Regular inspection of the factory was conducted on 2nd and 5th May, 1988 and the Inspector verified the records from 27-4-1985 to 26-3-1988. My special inspection was on 13th October of the same year.
The factory was brought under the ESI Act from 28-11-1986. From that month, the employer was deducting employees’ share of the contribution from their wages.
The factory was also filing, every six months, the statutory Form-7 returns listing employees, employee-wise wages paid and employees’ share of contribution deducted from their wages as also his share.
Yet, these returns consistently omitted insurance numbers of respective employees.
This critical omission went unaddressed as the Inspector who conducted the earlier inspection did not flag it and the branch at our regional office which processes these returns did not notice it.
As a result, for almost 2 years, the employees whose contributions were paid, remained disconnected from entitlement for benefits.
Workers appeared in records, but not within the system that would enable them to access medical benefits for self and family members and cash benefits in the event of sickness, employment injury and maternity.
The employer’s explanation was one of ignorance: that they were unaware that workers needed to be registered by way of submitting declaration forms in respect of each employee to the ESI branch office, to enable them to receive benefits.
This was difficult to accept.
The regular submission of statutory returns suggested familiarity with compliance requirements, and they cannot be oblivious of the purpose of such returns.
At the time of my inspection, 42 workers were employed in the factory. Records indicated that the same number had been working during the earlier routine inspection period as well.
However, as can be expected, the Inspector’s report reflected only 22 workers. The remaining workforce had effectively been left outside the purview of the Act.
I annexed the full list of 42 workers to my report and advised the management to submit declaration forms in respect of all of them. I also requested our regional office to consider prosecution in the event of non-compliance within the stipulated period.
The pattern extended beyond this.
Casual workers engaged in various activities were neither recorded in attendance registers nor covered for contributions. The management argued that the intermittent nature of such work made compliance impractical.
I clarified that eligibility under the law begins from the very first day of employment—whether for workplace injury or for medical care required by the workers or their families.
A closer examination of ledgers from 1985-86 to 1987-88 revealed further gaps, ignored during the regular inspection.
Wages amounting to Rs 1,89,252.10 paid to temporary workers had not been considered for contribution purposes.
Similarly, under “building repairs,” wages totalling Rs 29,402 had been disbursed, but contributions were remitted on only Rs 10,315.10. The remaining Rs 19,086.90 was overlooked—not only by the management but also during prior inspection.
Compliance, when partial, can be as exclusionary as non-compliance. When workers are not registered, they remain outside the protective framework of the law—regardless of contributions made in their name.
What emerges is not outright defiance, but a fragmented application of the law: selective coverage, incomplete records, and uneven enforcement.
In such circumstances, the system does not fail dramatically—it fails quietly, leaving workers formally included, but practically excluded.
Unfortunately, the present is no different from the past. It appears that time stands still as far as enforcement of labour laws is concerned.
Recently, like many in our town, we went to a shopping mall to purchase dress material. It is owned by a large retail company that operates several malls in our and some other towns and employs around 6,000 workers.
It is widely known for its charitable work—healthcare, scholarships, and community support. Yet, as far as compliance with ESI Act is concerned, the picture is the same.
Long working hours. Wages that are below statutory norms and a section of workers outside ESI coverage. It is ironic that while charity thrives, compliance falters.
(Views expressed in this opinion piece are those of the author)
Read earlier parts in the series:
Part 1:
Part 2:
Part 3:
Part 4:
Part 5:
Part 6: