Employees’ State Insurance (ESI) is a self-financing social security and health insurance scheme for Indian workers. This fund is managed by the Employees’ State Insurance Corporation (ESIC) according to rules and regulations stipulated there in the ESI Act 1948, which oversees the provision of medical and cash benefits to the employees and their family. ESI Registration is a type of social security scheme for employees in the organized sector.
For all employees earning 15,000 ( 21,000 w.e.f January’17) or less per month as wages, the employer contributes 4.75% and employee contributes 1.75%, total share 6.5%. State government’s share is 1/8th and that by central government is 7/8th.
FAQ on ESI:
For which companies ESI is applicable?
- Non-seasonal factories using Power in and Employing 10 or more persons
- Non-Seasonal and Non-Power using factories and establishments employing 20 or more persons (However, w.e.f. 10/02/2011, shops and establishments covering 10 or more are also covered)
- Employees of the Factories and Establishments in receipt of wages not exceeding 15,000/- per month.(Amendment w.e.f January’17 i.e. 21,000)
- Since coverage under ESI Act is by area based notifications, the area in which an institution is located needs to be notified for the purpose of coverage under this Act.
Definition of Employee?
- Employee means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and
- Who is directly employed by the principal employer, on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or
- Who is employed by or through an immediate employer, on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or
- Whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes any person employed for wages on any work connect¬ed with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as apprentice, not being an apprentice engaged under the Apprentices Act, 1961 and includes such person engaged as apprentice whose training period is extended to any length of time but does not include:—
- any member of naval, military or air forces; or
- any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government a month: Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period;
What is meant by wages to make the contribution?
- Wages means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lock out, strike which is not illegal or layoff and other additional remuneration, if any, paid at intervals not exceeding 2 months, but does not include:-
- Any contribution paid by the employer to any pension fund or provident fund, or under this Act;
- Any traveling allowance or the value of any traveling concession;
- Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; and
- Any gratuity payable on discharge.
Which employees are exempted from contribution?
- Employees in respect of an average daily wage of 100 or less, are exempted from payment of their share of contribution but are entitled to all social security benefits under the scheme.
What do you mean by Contribution Period and Benefit Period?
- Employees covered under ESI Act are required to pay contribution towards the scheme in the contribution period. And the benefit period starts 3 months after the closure of contribution period.
Contribution Period Benefit Period
1st April to 30th September 1st January to 30th June
1st October to 31st March 1st July to 31st December
What is the interest rate for delay in contributions?
- Interest u/s 45C is 12% p.a.
What are the penal damages in case of delayed contribution?
Penal Rate Delayed Period
5% Delay up to 2 months
10% Delay 2 months-4 months
15% Delay 4 months-6 months
20% Delay above 6 months
When is contribution on ESI paid?
- It is paid by 21st of every month.
What is the procedure for Registration of an employer ESIC?
- The Factory or Establishment to which the Act is applicable is to be registered within 15 days by submitting an Employer’s Registration Form (Form-01) to the concerned Regional Office and obtain an identification number called the Code number which is to be used in all the Correspondence relating to the Scheme.
What are the documents to be submitted along with the Employer’s Registration Form ESIC?
- Documents relating to the constitution of the Factory/Firm/Establishment
- Evidence in support of the date of commencement of production/business/first sale
- List of partners/Directors with their addresses
- Address proof like pan card/pass port/voter identity card
- Month wise employment position etc. are the essential documents.
What is a ESIC Code Number?
- It is a 17 digit identification number allotted by the Regional Office on receipt of Form-01 or Survey report from the Social Security Officer, which is to be used by the employer in all the correspondence with the ESI.
What is a ESIC Sub-code Number?
- This is also an identification number allotted by the Regional Office to a sub-unit, branch office, sales office or Registered Office of a covered factory or establishment located in the same State or different State, on receipt of the details from the employer.
What are the compliance requirements?
- Every employer covered under this act has to comply with various compliances such as deposit of monthly contribution, in order to file half yearly return and report to ESIC authorities if there is any change in business activity, address, ownership and the management, maintenance of registers and records etc.