program for Indians. The Employees’ State Insurance Corporation (ESIC) operates under the Ministry of Labour and Employment Act. Employees and employers contribute to a social insurance fund, which is used to provide them with benefits.
In 1948, the Employees State Insurance Act was passed that defined Employees’ State Insurance (ESI). It is a self-financed social security scheme designed to protect employees covered under the ESI act. As a result of employment injury, employees of an eligible organization will not suffer financial hardship when they get sick, disabled, or die.
Under the ESI scheme, who is covered?
- This scheme covers both organized and unorganized sectors and is applicable to factories and establishments with 10 or more employees.
- In a factory that is not seasonal and has more than 10 employees, the same rules apply. In addition, since 2001, this scheme has been extended to shops, hotels, restaurants, educational institutions, newspaper outlets, cinemas, and private medical facilities.
- Factory registration requires a minimum workforce of 10 employees for PAN India, while establishment registration requires a minimum workforce of 20 employees.
An overview of ESI’s benefits
- Medical, cash, maternity, disability, and dependent benefits are available to insured employees. Contributions are made by both employers and employees.
- When an employee becomes incapacitated and is restoring health and working capacity, they are entitled to full medical care. If an employee is absent from work due to sickness, injury on the job, pregnancy, or hospitalization in any ESI hospital, financial aid is provided to compensate for wages lost.
- Dependent parents of an insured person can now avail of medical benefits under the ESI scheme up to INR 9,000 per month, compared to INR 5,000 in February 2019.
The Registration Process for ESI
Through the esic registration, employers who fit into the eligible category can register their factory or establishment under ESI. A new online process has been introduced as part of the government’s initiative to make business easier. Before, ESI registration was a manual process that required lots of paperwork.
ESI contribution rates: What are They?
ESI corporation contributions are comprised of employer and employee contributions, subject to revisions from time to time.
In the current wage period, the employer contributes 3.25%, and the employee contributes 0.75% of the wage period, which typically lasts a month. These rates have been in place since the 1st of July 2019.
A daily average salary of up to Rs 176 on a daily basis exempts employees from contributing, but employers must contribute their share.
When Are the Esi Payment and Return Filing Due Dates?
It is the employer’s responsibility to pay ESI contributions as well as the employees’ contributions. The due date for ESI contributions is the 15th of the following month.
ESIC requires employers to file ESI returns twice a year. However, these dates can be extended or changed through the official notification from the department.
To illustrate, the due date for ESI contributions for the months of February 2020 and March 2020 was extended to the 15th of May 2020. Furthermore, the due date for ESI returns from October’19 to Mar’20 was extended to the 11th of June 2020.
ESI returns are due on the following dates:
In the event that contributions are not paid or are paid late, what is the penalty?
The employer who fails to pay the ESI contributions on time will be charged a simple interest of 12% per annum.
Under the ESI Act, non-payment, delayed, or false payments may also result in imprisonment for a period of up to 2 years and a fine of up to 5,000 rupees.
ESI contributions deposited after the due date are also disallowed by the income tax act. Employers will therefore end up paying income on such contributions.