Employees’ State Insurance (ESI) is governed by the Employees State Insurance Act, 1948. It is a self-financed social security scheme designed to protect employees covered under the ESI act. Employees of an eligible organisation are protected against financial distress arising out of sickness, disablement and death due to employment injury. 

Who is covered under the ESI scheme?

According to the ESI Act 1948, the scheme applies to all factories and other establishments where the employee strength is 10 or more. The scheme covers both organised and unorganised sectors. 

The same rules apply to a non-seasonal factory where the employee count is 10 or more. Furthermore, the applicability of this scheme has been extended to shops, hotels, restaurants, educational institutions, newspaper establishments, cinemas and private medical institutions since 2001. 

However, the employee strength required for ESI registration for factories is 10 for PAN India. For establishments, this threshold is 10 or 20 depending on the state. 

Minimum number of employees required for registration of establishment
Sl. no State Minimum employees to be registered
1 Himachal Pradesh 20
2 Jammu & Kashmir 20
3 Jharkhand 10
4 Kerala 10
5 Madhya Pradesh 20
6 Maharashtra 20
7 Manipur 20
8 Meghalaya 20
9 Mizoram 20
10 Nagaland 20
11 Orissa 10
12 Pondicherry 10
13 Punjab 10
14 Rajasthan 10
15 Sikkim 20
16 Tamil Nadu 20
17 Tripura 10
18 Uttar Pradesh 20
19 Delhi 10
20 Karnataka 10
21 West Bengal 10
22 Andhra Pradesh 10
23 Arunachal Pradesh 20
24 Assam 20
25 Bihar 10
26 Chhattisgarh 10
27 Goa 20
28 Gujarat 10
29 Haryana 10
30 Uttarakhand 10
31 Chandigarh 20
32 Daman and Diu 20
33 Dadra and Nagar Haveli 20
34 Andaman and Nicobar 20
35 Lakshadweep 20
36 Outside India 20

Which employees are eligible for ESI?

Employees with monthly wages of Rs 21,000 or less are covered under the ESI Act. This wage limit of Rs 21,000 was increased from Rs 15,000 in December 2016. 

ESI Registration What are the benefits covered under the ESI scheme?

The scheme provides medical, cash, maternity, disability and dependent benefits to the insured employees. The contributions made by employers and employees fund these benefits. 

A registered employee is entitled to full medical care during the period of their incapacity and their restoration to health and working capacity. The scheme provides financial aid to compensate for the loss of wages during the period of employee’s absenteeism from work due to sickness, injury due to employment, pregnancy and during hospitalisation in any ESI hospital.  

The income limit for availing medical benefit under the ESI scheme by the dependent parents of an insured person has been enhanced to Rs 9,000 per month from Rs 5,000 in February 2019.  

What is the registration process for employers?

Any employer falling into the eligible category can get its factory or establishment registered under ESI through ESIC website. Earlier ESI registration was a manual process, and a lot of documentation was required. However, with the government’s initiative for ease of conducting business, a new online process has been introduced. 

Refer this step-by-step guide to registering your factory or establishment under ESI. 

What are the ESI contribution rates?

The ESI contribution payable to the ESI corporation comprises employer’s and employee’s contribution at specified rates. These rates are subject to revision from time to time.  

Currently, the employer’s contribution is 3.25% of the wages, and that of employees is 0.75% of the wages payable or paid in every wage period. Usually, the wage period is a month. Such rates came into effect from the 1st of July 2019. 

Employees earning up to Rs 176 on a daily average basis are exempted from payment of their contribution. But, the employer has to contribute their share for such employees. 

What are the due dates for the ESI payment and return filing?

An employer should pay their contribution and the employees’ contribution on a monthly basis to the ESIC. The due date for paying ESI contributions is 15th of the following month. 

Further, an employer needs to file ESI return on a half-yearly basis. Here are the due dates for filing half-yearly ESI returns: 

Period of return Due date of filing returns
April to September 11th November
October to March 11th May 

 

However, these due dates can be extended or changed through an official notification by the ESIC department.

For instance, due dates of ESI contributions for the month of February 2020 & March 2020 were extended to the 15th of May 2020. Also, the due date to file ESI return for Oct’19 to Mar’20 was extended to 11th of June 2020 from 11th of May 2020. 

It can be difficult for you, as an employer, to keep up with all these dues dates and pay the dues on time. We realise it! 

And, to streamline the entire payroll process, we built RazorpayX Payroll

Wondering what is so different about RazorpayX Payroll? Well, it processes payroll using a direct deposit model as long as a user maintains the balance. You can think of it as a wallet from which payroll expenses are automatically paid. 

All the statutory payments like ESI, PF, TDS, and PT are automatically deducted and paid within their due dates. The product also deals with their periodical return filings. 

What is the penalty for non-payment or late payment of contributions?

Simple interest of 12% per annum for each day of delay in payment will apply to every employer who fails to pay the ESI contributions on time. 

Also, non-payments, delayed or false payments under the ESI Act may attract imprisonment for a period extending up to 2 years and fine up to Rs 5,000.

Further, the income tax act also disallows ESI contributions deposited after the due date. The employers shall not get the deduction benefit of such contributions and will end up paying income on it. 

The conclusion

If you want to spend your valuable time in managing core business operations and not worrying about the statutory dues, try RazorpayX Payroll now

It provides you with one-click, seamless and end-to-end automated payroll processing experience. Also, you can keep track of leaves and attendance, make vendor payments while being compliant with the latest regulations. 

Frequently Asked Questions (FAQs)

  • What is the full form of ESI?

ESI stands for Employee State Insurance. This scheme is governed by the Employees State Insurance Act 1948. 

  • Is ESI mandatory? 

ESI contribution is mandatory for employees earning Rs 21,000 or less monthly. Prior to December 2016, the wage limit was Rs 15,000 or less. 

  • How does the ESI scheme work?

Employers and employees contribute predetermined rates to this insurance scheme. The employer’s contribution is 3.25% of the wages, and that of employees is 0.75% of the wages payable or paid in every wage period. 

  • What are the benefits of ESI? 

This scheme provides full medical care to registered employees during the period of incapacity, restoration of his health and working capacity.

  • What is the insurance number?

Insurance number under the ESIC Act is the 17 digit unique identification number that is allotted to every registered establishment. The number is generated through the ESIC portal on the submission of required information by the employer.

  • Is it required by law for an employer to register with ESIC Act?

Yes, it is the mandatory for the employers to register their establishment under the ESI Act within 15 days from the date when the act becomes applicable to them.

  • After ESI registration is completed, how many returns need to be filed per year?

An employer will have to file 2 half yearly returns after their ESI registration is complete.

  • What is the ESIC benefit period?

The financial year (April to March) has been divided in to two six monthly contribution
periods i.e. 1st April to 30th September and 1st October to 31st March of next year. The
relevant benefit period corresponding to each contribution period commences 3
months after the end of the that contribution period i.e. Jan to June and July to December
The calendar year (January to December) has been divided in to two six monthly
benefits periods.

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