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Employees state insurance (ESI) is a self-financing social and healthcare insurance scheme for Indian workers. Employees’ State Insurance Corporation (ESIC) is a body under the “Ministry of Labour and Employment” act. Under the scheme, the employers and workers are required to contribute to a social insurance fund, which is to be utilized for granting benefits to them.
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 organization 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 organized and unorganized 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|
|2||Jammu & Kashmir||20|
|32||Daman and Diu||20|
|33||Dadra and Nagar Haveli||20|
|34||Andaman and Nicobar||20|
Eligibility for ESI Registration in India
Employees with monthly wages of INR 21,000 or less are covered under the ESI Act. This wage limit of INR 21,000 was increased from INR 15,000 in December 2016.
Benefits of ESI
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 absenteeism from work due to sickness, injury due to employment, pregnancy, and hospitalization in any ESI hospital.
The income limit for availing medical benefits under the ESI scheme by the dependent parents of an insured person has been enhanced to INR 9,000 per month from INR 5,000 in February 2019.
Procedure for ESI Registration
Any employer falling into the eligible category can get its factory or establishment registered under ESI through the 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 to 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 the 15th of the following month.
Further, an employer needs to file an 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.
[Also Read – A 7-step checklist to help you wrap up FY 2020-21 error-free]
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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 a fine up to INR 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.
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Frequently Asked Questions
What is the full-form of ESI?
ESI stands for Employee State Insurance
How is the total salary calculated?
ESI will be calculated on the gross salary (basic and loss of pay dependent allowances) up to ₹21,000. If Gross is above ₹21,000, then ESI remains constant.
Who is eligible for ESI?
The ESI scheme is applicable to all factories and other establishments with 10 or more people employed in such establishments and the beneficiaries' monthly wages do not exceed INR 21,000.
What are the PF & ESI rules?
From your basic salary, PF deduction would be 12% as employee contribution and 12% for company contribution. ESIC deduction would be 0.75% for employee contribution and 3.25% for company contribution respectively.
What are the benefits of ESI?
ESI provides a monthly cash allowance for a duration of 24 months in case of involuntary loss of employment, ESIC provides monthly payment apportioned among dependants in case of death due to employment injury, ESIC provides continuous monthly payment till injury lasts for the temporary disabled and for life for the permanent disabled , and ESIC provides 70% of average daily wages in cash during medical leave instances
Should employers register under the ESI scheme?
Yes, employees should register themselves on the ESIC Portal.
What is the interest charged for late payment of ESI contribution?
Employers who fail to pay the contribution within the limit specified in the rules are liable to pay simple interest at the rate of 12% per annum in respect of each day of delay in the payment of contribution.
What is an ESI code number?
Your ESID Number, or Electric Service Identifier, is a number that is unique to your property address. It is a 17 digit identification number allotted by the Regional Office.