The ESI scheme is managed by the Employees’ State Insurance Corporation (ESIC). The scheme provides medical and financial assistance to the employees and their families.
- What is ESI?
- ESI Applicability
- ESI Wage Limit
- ESI Registration
- Documents Required for ESI registration
- Returns to be filed every year post registration
- Return Filing Process
- Consequences of non or Late Payment of Employees Contribution
- Penalty for Non-Payment or Delayed Payment of Contribution
- Wages Definition
- ESI Calculation
- Contribution Period and Benefit Period
What is ESI?
The ESI scheme is managed by the Employee State Insurance Corporation a government body, and it is governed by the ESI Act 1948. It protects the employee in the case of sickness, disability, physical injury, and more. Moreover, it provides the working individual and his family with medical facilities. Both the employer and employee contribute to ESI and enable Indian employees to take part in a self-financed, healthcare, insurance fund.
An individual should meet certain criteria set by the committee to avail the benefits. ESI Scheme shall be applicable to:
- Any individual working in a non-seasonal factory with more than 10 employees as per Section 2(12) of the ESI Act
- Employees working in sectors such as shops, hotels and restaurants, newspaper establishments, road-motor transport undertakings, cinemas, preview theatres, private educational and medical institutions with a strength of more than 20 employees
ESI Wage Limit
The existing wage limit of the employee is ₹21,000 per month and if the employee has any disability, the wage limit for coverage is ₹25,000 per month.
There are exemptions to the rule in the case of daily average wages of INR 137. They do not have to contribute to the scheme from their wages. Only the employer’s contribution is paid for such people.
The registration for employers under the ESI scheme is completely online. Here’s a step by step guide to the ESI registration online:
- The employer should keep all documents ready for reference
- An employer must file form 1, available in PDF format on the official website
- Fill in the form and submit it for registration on the official website
- Once verified, a registration number, a 17-digit unique identity will be provided. This unique number is required for all filings
- Employees registered under the scheme get an ESI card after submitting a form with photographs and details of family members
Documents Required for ESI registration
- PAN card of the business
- Address proof of business
- The license obtained under Shop and Establishment Act or Factories Act
- Basic documents required as per the nature of entity – Articles of Association, Memorandum in case of a company, partnership deed in case of a partnership, and Limited Liability Partnership
- Details of all directors, partners, and shareholders
- Details of all employees along with their salary information
- Bank details
Returns to be filed every year post registration
After the registration, ESI Returns have to be filed twice a year. Documents required for ESI Returns are listed below:
- Register for Form 6
- Attendance register of the Employees
- Inspection book
- Register of wages
- Register of any accidents on the premises
- Monthly returns and challans submitted for ESI
Return Filing Process
On successful registration of the establishment, the employer can file returns online. The login credentials will be available once registered. The same will be required for the online filing of returns. The half-yearly return of ESI for the period April to September is due by 12th November, and October to March is due by 12th May.
In order to file ESI returns online, the employer must follow the below-mentioned procedure:
- The employer must log in to the official website using login credentials
Once he is able to log in to ESIC Portal, there is a list of actions that are available.
- To file the return, the employer must first verify if all the employee details are up to date and then file the return
The employer must then fill the bank details and submit them to file the returns.
- The employer can go to the ‘List of Actions’ and ‘Generate Challan’
You can download the challan and document it for future reference and inspections.
Consequences of non or Late Payment of Employees Contribution
Non-payments, delayed payments, or falsifying payments under ESI Act may attract imprisonment for a period extending up to 2 years and a fine up to ₹5,000. An employer who fails to pay the contribution within the time limit specified in the regulation shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of delay or default in payment of contribution.
Penalty for Non-Payment or Delayed Payment of Contribution
The ESI Corporation may levy and recover damages as per the Regulations, at the following rates, not exceeding the amount of contribution payable for default or delay in payment of the contribution.
|Period of delay||Rate of damages in % p.a|
|Less than 2 months||5%|
|2 to 4 months||10%|
|4 to 6 months||15%|
|6 months and above||25%|
The employer will be liable for prosecution under Section 85(a) for the first time, and if the employer repeats the offense, he will be liable for enhanced punishment for every repetition.
The definition of wages under Section 2(22) under the ESI Act, 1952 states that it means all remuneration paid or payable in cash to an employee if the terms of the contract of employment were fulfilled. Some of the inclusions and exclusions from the wage component are as follows:
|Basic Pay||Entertainment Allowance|
|Dearness Allowance||Encashment of leave and gratuity|
|House Rent Allowance||Retrenchment Compensation|
|City Compensatory Allowance||Deduction of health insurance|
|Medical Allowance||Tax Deductions|
|Any other special allowances||–|
|Incentives (including sales commission)||–|
|Attendance and Overtime Payments||–|
An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages. He shall pay these contributions at the below-specified rates to the Corporation within 15 days of the last day of the Calendar month in which the contributions fall due. The same can be deposited online or to authorized designated branches.
|Employee||0.75% of wages paid/payable|
|Employer||3.25% of wages paid/payable|
Let us say Mr. Ansh having wages of Rs. 24,000 works in a processing unit. The contribution will be as follows:
Employee Contribution – 0.75% * 24,000 = 180
Employer Contribution – 3.25% * 24,000 = 780
So a total contribution of INR 960 will be made. The onus of deducting the contribution and depositing the same is on the employer.
Contribution Period and Benefit Period
There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under:
|Contribution Period||Cash Benefit Period|
|1st April to 30th Sept||From 1st Jan of the following year to 30th June|
|1st Oct to 31st March of the year following||From 1st July to 31st December|
As mandated by the ESI Act, treatment has to be taken only from the ESIC hospitals or dispensaries. However, in case of emergency, if the treatment is taken from a private hospital, you can raise a claim with the ESIC subject to ESIC approval.
For medical treatment, ESIC card is valid from the first date of insurable employment to last date of the corresponding benefit period. However, for cash benefits you need minimum contribution period, if you have minimum contribution period then you can avail ESIC cash benefits in the benefit period.
You need to give your old ESIC number to your new employer to reactivate your ESI Pehchan card. Your ESIC card will be reactivated when your new employer pays your ESIC contribution.
ESI is a premium paid for medical benefits. If no benefit is obtained from it, there is no option available to withdraw amount from ESI Account.
The ESI Scheme is administered by a statutory corporate body called the Employees’ State Insurance Corporation (ESIC).
The scheme provides full medical care to the employee registered under the ESI Act, 1948 during the period of his incapacity, restoration of his health and working capacity. It provides financial assistance to compensate the loss of his/ her wages during the period of his abstention from work due to sickness, maternity and employment injury. The scheme provides medical care to his/her family members also.