Employee State Insurance Act (ESI) is established in 1948 and it is health insurance for Indian workers. It is an autonomous corporation by a statutory creation under the Ministry of Labour & Employment, Government of India. The Corporation can set up hospitals either independently or in collaboration with the state government or other private entities but most of the hospitals & dispensaries are run by the state government.

It is applicable to all factories & other establishments where 10 or more persons & has been extended to other undertakings & newspaper establishments employing 20 or more persons. ESI shall be deducted only for those employees whose wages are less than 21000/- per month, engaged directly or through a contractor.

Employee State Insurance or ESI is a scheme commenced by the Government of India to offer medical, monetary, and other advantages to workers. ESI is managed by an autonomous authority – Employee State Insurance Corporation – which lies under the jurisdiction of the Ministry of Labour and Employment.

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. The State Government concerned also contributes its share to meet the cost of Medical Benefit.

Employees Covered under ESI Scheme

Employees drawing the salary up to INR 21000/- per month is covered under this scheme. Now, items which are included to compute salary under this scheme is given underneath:

1. Basic Pay, Wages, Salary;
2. A./HRA/CCA/Overtime/officiating allowance /Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance;
3. Wages/salary/pay for weekly off and public holidays;
4. Commission paid to sales staff;
5. Subsistence allowance paid to an employee during the period of suspension;
6. Attendance Bonus or incentive or ex gratia in lieu of Attendance Bonus or production incentive;
7. Regular Honorarium or salary or remuneration paid to a Director;
8. Collection Batta paid to run staff.
9. Actual payments made towards leave Salary lay off compensation or wages for the strike period.

ESI wage limit has been increased to Rs. 21000 from Rs 15000 per month with effect from 1st January 2017. It was INR 15,000 per month from 1st May 2010 to 1st January 2017 and 1st May 2010 INR 7500/- per month. The Salary Limit keep is changed by the Central Government from time to time keeping in mind the inflation rate, economic growth, and other indirect factors.

Features of the scheme

Complete medical care and attention are provided by the scheme to the employee registered under the ESI Act, 1948 at the time of his incapacity, restoration of his health and working capacity. During absenteeism from work due to illness, maternity, or factory accidents which result in loss of wages complete financial assistance is provided to the employees to compensate for the wage loss. The scheme provides medical care to family members also. As of 31 March 2017, 2.93 crore employees are covered under this scheme with the total number of beneficiaries summing up to 12.40 crores. Broadly, the benefits under this scheme are categorized under two categories, 1) cash benefits (which includes sickness, maternity, disablement (temporary and permanent), funeral expenses, rehabilitation allowance, vocational rehabilitation, and medical bonus) and, 2) non-cash benefits through medical care.

The scheme is self-financing and being contributory in nature. The funds under the ESI scheme are primarily built out of the contribution from the employees and employers payable monthly at a fixed percentage of wages paid. Currently, the employee contribution rate is 1.00% of the wages and that of employers is 4.00% of the wages paid. For newly implemented areas, the contribution rate is 1% and 3% respectively for employee and employer for the first 24 months. The employer makes the contribution form its own share in favor of those employees whose daily average wage is Rs 137 as these employees are exempted from own contribution The employer is required to pay his contribution and deduct employees’ contribution from wages and deposit the same with ESIC within 15 days from the last day of the calendar month in which the contribution fall due. The payment can either be done online or through designated and authorized public sector banks.

Applicability of EPF Registration for Employers

EPF registration is mandatory for all establishments:

1. Which is a factory engaged in any industry having 20 or more persons, and
2. To any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification specify in this behalf.

Central Government may apply any establishment employing less than 20 employees after giving not less than two months’ notice for compulsory registration

Where the employer and majority of employees have agreed that the provisions of this act should be made applicable to the establishment, they may themselves apply to the Central PF Commissioner. The Central PF Commissioner may apply the provisions of this Act to that establishment after passing the notification in the Official Gazette from the date of such agreement or from any subsequent date specified in the agreement.

Some establishments having less than 20 employees would also be required to obtain PF registration but that is voluntary registration. All the employees will be eligible for a PF from the commencement of their employment and the responsibility of deduction & payment of PF lies with the employer.

The monthly payment amount under EPF Administrative charges is rounded to the nearest rupee and a minimum of Rs 500/- is payable.

Note:- If the establishment has no contributory member in the month, the minimum administrative charge will be Rs 75/-

1. The contributions are payable on the maximum wage ceiling of Rs. 15000/-
2. The employee can pay at a higher rate and in such cases the employer is not under any obligation to pay at much a higher rate.
3. To pay a contribution to higher wages, a joint request from Employee and employer is required [Para 26(6) of EPF Scheme]. In such a case, the employer has to pay administrative charges on higher wages (wages above 15000/-).
4. For an International Worker, a wage ceiling of 15000/- is not applicable.

Documents Required for ESI and PF Registration

1. Name of the company. (Incorporation Certificate)
2. Company’s PAN (Proprietor’s, in case of proprietorship concern) and Incorporation Certificate.
3. Copy of the licenses available in the name of the company/Firm. (like GST/MSME).
4. Address of the company with address proof.
5. ID, Pan, and Address proof of Proprietor / Director / Partner of the company.
6. Email address, Mobile Number of Proprietor / Director / Partner of the company.
7. Specimen Signature as per attached format
8. Digital Signature
9. Details of 10 & 20 Employees (10 for ESIC & 20 for EPF) (as per Sheet attached)
10. Consent Letter as per attached format (In case of EPF Voluntary Registration)

Compliance

Every employer covered under this act has to comply with various compliances such as deposit of monthly contribution, in order to file half yearly return and report to ESIC authorities if there is any change in business activity, address, ownership, and the management, maintenance of registers and records, etc.

Records to be maintained for the purpose of the ESI Scheme

In addition to the Muster roll, wage record and books of Account maintained under other laws, the employer is required to maintain the following records for ESI:

1. Accident Register in Form-11
2. An inspection book.
3. The immediate employer is also required to maintain the Employee’s Register for the employees deployed to the principal employer.

Reports to be submitted by the Employer

Reports: Accident report in Form 12 in case any accident takes place, to the notice of the Accident. Absence verification reports such as Employee Records including attendance, wages, and books of accounts.

Periods of contribution and benefit

The financial year from April to March has been divided into two six-monthly contribution periods i.e. 1st April to 30th September and 1st October to 31st March of the next year.

The relevant period of benefit corresponding to each period of contribution commences three months after the end of that contribution period i.e. Jan to June and July to December (The calendar year has been divided into two six-monthly benefits periods).

Key Features & Benefits of ESI

There are a number of attractive features and benefits that are offered by the Employee State Insurance Corporation. Not only does it provide medical benefits but it also comes with a level of financial security in times of financial hardship like unemployment, etc. Some of these are listed below:

1. Medical Benefits: The Employee State Insurance Corporation takes care of an individual’s medical expenses by providing reasonable medical care. This cover comes into effect from day one of the individual’s employment.
2. Disability Benefit: In case an employee is disabled, ESIC ensures that the employee is paid their monthly wages for the period of the injury in case of a temporary disablement or for the remainder of the employee’s life in case of permanent disablement.
3. Maternity Benefit: ESIC helps an employee welcome their baby to a household that has been showered with benefits. ESIC provides a total of 100% of the average daily wages for a period of to 26 weeks from the time of going into labor and 6 weeks in case of a miscarriage. 12 weeks of pay is provided in the case of an adoption.
4. Sickness Benefit: ESIC ensures that there is a flow of cash coming into the employee’s household during medical leave. 70% of the average daily wages of an employee are paid during medical leave for a maximum period of 91 days in two successive benefit periods.
5. Unemployment Allowance: ESI provides a monthly cash allowance for a maximum period of 24 months in case of permanent invalidity due to a non-employment injury or due to involuntary loss of employment.
6. Dependent’s Benefit: In case the employee meets with an untimely death due to an injury at the place of employment, ESIC will provide monthly payments apportioned among the surviving dependents.

Other benefits that are offered with ESI are:

1. Confinement Expenses
2. Funeral Expenses
3. Physical Rehabilitation
4. Vocational Training
5. Skill Up-gradation Training under Rajiv Gandhi Shramik Kalyan Yojana (RGSKY)