Employees State Insurance (ESI)
The Employees' State Insurance (ESI) scheme is a social security and health insurance program in India, operating under the Employees' State Insurance Act of 1948. It provides medical and financial support to eligible employees and their families during health-related situations.
- Purpose : The scheme aims to protect employees from the financial burdens of sickness, maternity, disability, employment injury, and death due to occupational hazards.
- Administration : The Employees' State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment, manages the scheme.
- Applicability : ESI applies to factories and establishments with 10 or more employees (or 20 or more in some states) and covers employees earning up to Rs. 21,000 monthly (or Rs. 25,000 for those with disabilities).
- Contributions : Funding comes from both employers and employees :
- Employer's Contribution: 3.25% of wages.
- Employee's Contribution: 0.75% of wages.
Employees with a daily average wage up to Rs. 176 are exempt from their contribution share, though employers must still contribute for them.
Benefits :
ESI provides various benefits to insured employees and their dependents, including comprehensive medical care, cash compensation during sickness (Sickness Benefit), financial aid and paid leave for pregnant women (Maternity Benefit), compensation for temporary or permanent disablement due to work-related injuries (Disablement Benefit), monthly payments to dependents if an employee dies from a work injury (Dependants' Benefit), a lump sum for funeral expenses, and other benefits like confinement expenses and unemployment allowance under specific schemes.
Registration and Deadline :
Establishments must register with ESIC within 15 days of becoming eligible.Online registration is available via the ESIC portal.Employers are required to deduct and deposit contributions by the 15th of the following month.
The ESI scheme is crucial for providing a social safety net, ensuring Indian workers and their families have access to medical care and financial assistance when needed.Managing Employees' State Insurance (ESI) compliance is crucial for businesses in India to ensure adherence to statutory requirements, avoid penalties, and provide essential benefits to their employees.
Understand ESI applicability :
- Employee Threshold :ESI is applicable to businesses with 10 or more employees (or 20 or more in some states like Maharashtra and Chandigarh).
- Salary Limit :Employees earning a gross monthly salary of up to ₹21,000 (or ₹25,000 for persons with disabilities) are eligible for coverage.
- Establishment Types :It applies to various sectors, including factories, shops, hotels, restaurants, transport, cinemas, newspaper establishments, private medical and educational institutions.
Registration with ESIC :
- Mandatory Registration :Employers must register with the Employees' State Insurance Corporation (ESIC) within 15 days of becoming eligible.
- Online Process :The entire registration process can be completed online via the official ESIC portal.
- Documents Required :You'll need documents like the business's PAN card, list of employees with salary details, and incorporation documents or other relevant certificates depending on the business structure.
- Registration Number :Upon successful registration, you'll receive a unique 17-digit Registration Number.
Employee registration and record maintenance :
- Employee Registration :Register all eligible employees and obtain an Insurance Number (IP Number) for each.
- Accurate Records :Maintain detailed and up-to-date records, including :
- Attendance registers
- Wage registers
- Accident records (Form 16)
- Employee registers (Form 6)
- Details of employee contributions and deposits
Contribution payment and deadlines :
- Contribution Rates : Employers contribute 3.25% of the employee's wages, and employees contribute 0.75%.
- Due Date : Contributions must be deposited by the 15th of the following month.
- Online Payment : You can make online payments through the ESIC portal or authorized banks.
- Consequences of Delay: Late payments incur a 12% annual interest penalty and potential damages.
Filing ESI returns :
- Monthly/Half-Yearly Returns : Submit monthly contribution details (Form 5) and half-yearly returns (Form 5) with employee and contribution details. The due dates for filing returns are :
- October to March : Due by April 30th.
- April to September : Due by November 12th.
- Timely Filing : Prompt and accurate filing is essential to avoid penalties and legal action.
- Even if No Contributions : File ESI Nil Returns with the ESIC Department even if there was no employee contribution for the month.
Audit and inspection preparedness :
- Maintain Records : Keep all ESI-related records (wages, attendance, contributions, etc.) organized and readily available for inspections.
- Periodic Audits : Consider conducting internal or external audits to ensure ongoing compliance and identify any discrepancies proactively.
- Respond to Queries : Be prepared to respond to ESIC officials' queries during inspections.
To safeguard the interest of the business owners and overcome the compliance burden related to PF and ESI, our team is dedicated to handle the entire compliance from taking registration under the PF and ESIC act and undertake for filling of monthly and annual returns within time limit prescribed under the said act and further will assist employees in the followings :
- To educate and train employees
- Communicate Benefits of PF and ESI
- Issue ESI Cards and Facilitate Claims
- To make stay updated with the new regulations
By proactively implementing these strategies, organizations can effectively manage PF compliance, safeguard employee benefits, avoid penalties and foster a culture of trust and commitment within the workforce.