General Applicability Criteria

• ESIC applies to employees earning up to ₹21,000 per month.
  
• The individual must be employed for wages under a contract of service.
  
• The applicability depends on whether the director has an employee relationship.
  
• Directors treated purely as owners or policy-makers are usually not covered.
  
• The classification must be evaluated based on actual duties and payment nature.
  

Executive Directors with Salary

• Executive directors working full-time and drawing a regular salary may be covered.
  
• If they are on the payroll and perform managerial duties, ESIC may apply.
  
• They are treated like other employees for compliance purposes.
  
• Their designation must not exclude them from being supervised or directed.
  
• The salary must fall within the prescribed ESIC wage limit.
  

Non-Executive or Nominee Directors

• Non-executive directors are not involved in day-to-day company operations.
  
• They generally receive sitting fees and are not employed under a contract of service.
  
• Such directors are not covered under the ESIC Act.
  
• Nominee directors appointed by investors or institutions are usually excluded.
  
• Their compensation is not considered wages for ESIC purposes.
  

Directors under Companies Act vs. ESIC Act

• Designation under the Companies Act does not automatically determine ESIC applicability.
  
• ESIC considers the nature of work, supervision, and wage structure.
  
• A director functioning in a dual role as employee and board member may be covered.
  
• Separate treatment must be given for executive responsibility and ownership.
  
• ESIC coverage is based on practical employment status, not just legal title.
  

Documentation and Compliance Advice

• Maintain appointment letters specifying whether the director is a salaried employee.
  
• Ensure wage payments are recorded in salary registers if ESIC applies.
  
• Classify directors correctly during ESIC filings to avoid penalties.
  
• Seek clarification from ESIC regional office in case of ambiguity.
  

Keep board resolutions and employment agreements clearly documented.