What Is the Employees' State Insurance Scheme?
ESI registration is one of the best schemes for the security of employees and their families. It was mainly introduced to provide security to workers working in private sector companies in India. It works to provide immediate treatment to any worker in case of any unforeseen circumstance related to the health of the employee or family. The worker can get benefits from the ESI registration as many times as needed during the working years.
In case of any injury to the employee, he can ensure his complete salary at the end of every month by providing the required documents. This scheme helps thousands of employees annually to manage their expenses of the hefty amount required for treatment. Every organization that has more than ten employees working in the organization is bound to provide filing ESI returns to every employee. It is compulsory for both the company and the employee.
Employee State Insurance (ESI) is a social security scheme provided by the Indian government to benefit the working class. It is administered by the Employees’ State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment.
ESI is applicable to organizations that have a strength of 10 or more employees working full-time with them. It is compulsory for every working professional who earns less than INR 21,000 a month to get registered under this scheme. The ones getting monthly wages of more than this amount have an option to make a choice of getting the fund deducted or not.
ESI contributions (from the employee and employer) are calculated on the employee’s gross monthly salary. For ESI calculation, the salary comprises of all the monthly payable amounts such as:
- Basic pay,
- Dearness allowance,
- City compensatory allowance,
- House Rent Allowance (HRA),
- Incentives (including sales commissions),
- Attendance and overtime payments,
- Meal allowance,
- Uniform allowance and
- Any other special allowances.
The gross monthly salary, however, does not include Annual bonus (such as Diwali bonus), Retrenchment compensation, and Encashment of leave and gratuity.
The ESI scheme is designated to provide various benefits to employees and their families. The application and the ESIC claim procedure are less time-consuming and extremely user-friendly.
- Medical Benefits-The insured employees and their families will receive full medical care. There is no stated limit on the extent of funds that the insured person can receive for treatment from the scheme. On paying an extra premium of ₹ 120, the benefit is provided to retired and permanently disabled people and their spouses.
- Sickness Benefits-When a sickness certified by a medical authority is present for a maximum of 91 days per year, the insured employees can receive a sickness benefit of up to 70% of their salaries as compensation. However, the insured employee must contribute for 78 days during six months to be eligible for this benefit.
- Maternity Benefit-A maternity benefit during the pregnancy is payable to the insured employee for a total period of 26 weeks and an extension of one month on a medical expert’s advice for the full salary. However, the benefit is subject to a payment made for 70 days in the two preceding contribution periods.
- Long term plans-PF funds can be used by the employee for long term plans.
- Disablement Benefit-The disablement benefit is categorised into two different types.
- a.Temporary Disablement Benefit (TDB) – A TDB of 90% of the salary payable is provided to the insured as long as the disability continues. It is irrespective of the contribution made and applicable from the first day of employment if the injury is caused due to work-related accidents.
- b. Permanent Disablement Benefit (PDB) – A PDP of 90% of the salary payable is provided to the insured as a monthly payment based on the extent of loss and the earning capacity as certified by a medical professional.
- Dependent Benefit — The dependent benefit at the rate of 90% of the wages is paid to the dependents of the deceased insured person monthly when the death is caused due to an occupational hazard or an injury while carrying out work-related activities.
- Other ESIC benefits – A sum of ₹10,000 will be paid from the ESI scheme to the dependents to perform the final rites of the insured person. An insured woman will receive the financial benefit associated with the confinement expenses where medical services are not accessible based on the ESI scheme.
The scheme of ESI is contributory in nature. Both employee’s and employer’s contribution is required at a specific rate. Though, rates are amended from time to time. Following is the monthly contribution rate that is contributed mandatorily by both employer and employee:-
- Employee Employee has to contribute 0.75% of his basic wages to the ESI Fund.
- Employer Employer has to contribute 3.25% of the basic wage paid to employees.
- Every employer makes the ESI payment on a monthly basis. The due date for ESI is the 15th of the following month.
- Due date for filing of Employee State Insurance (ESI) Returns
|Period of Return||Due date of filing of return|
|April to September||11th November|
|October to March||11th May|
|PF Annual Return||25th April of every year|
1) Is it compulsory for the units to obtain the ESIC Registration Certificate?
Yes, every entity eligible under the ESIC Act shall get the certificate by registering its entity under ESIC. The applicant can apply online through the official website of ESIC.
2) Are there any provisions relating to compliance after registration?
Yes, entities once registered under ESIC are required to comply with the provisions of ESIC such as half-yearly return, a deposit of monthly contribution online, maintenance of other books and accounts as required, updating the changes if any relating to business activity, ownership, management, etc.
3) What is the ESIC code?
Once the unit is registered under the ESIC act is allotted 17 digits unique identification number, also known as ESIC Code.
4) What are the basic wages for the calculation of ESI?
Wages covered under ESIC is the total of Basic Pay plus Dearness Allowances that doesn’t include any overtime done by such employee.
5) What are the penal provisions in case of delayed payments?
If the employer fails to pay the online contribution within 15 days of the end of the month, shall be liable to pay damages at the rate of 12% per annum for each day of such default in contribution
6) What regulates the ESI Scheme?
The ESI Scheme is administered by a corporate body called the ‘Employees’ State Insurance Corporation’ (ESIC), which has members representing Employers, Employees, the Central Government, State Government, Medical Profession and the Parliament. The Director General is the Chief Executive Officer of the Corporation and is also an ex-officio member of the Corporation.
7) How the scheme is funded?
The ESI scheme is a self-financing scheme. The ESI funds are primarily built out of contribution from employers and employees payable monthly at a fixed percentage of wages paid.
8) On what salary ESIC is applicable?
Employees whose monthly wages are Rs 21,000 or below are covered under the ESI Act. The wage limit for coverage under the Act had been increased from Rs 15,000 per month to Rs 21,000 in December 2016.
9) Is ESI Compulsory?
ESI is a compulsory for entities employing 10 or more persons, earlier it was 20 revised to 10. ESI contribution is required for all the employees earning wages less than Rs. 21,000/- per month.