Article explains about Applicability of Employee State Insurance Scheme, Employees Covered under ESI Scheme, Benefits of ESI Registration, Contribution under ESI Scheme and Registration under ESIC Scheme.

Overview of Employee State Insurance Scheme or ESI scheme

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.

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Applicability of Employee State Insurance Scheme

By law, any company/ factory/ establishment that have more than 10 employees mandatorily need to have ESI. In some states, the number of employees is 20. Have look on the list given statewise:-

Minimum Number of Employees required for registration of Establishment/ Factory/ Establishment
S.no. State name Minimum Employees to be registered
1 Himachal Pradesh 20
2 Jammu & Kashmir 20
3 Jharkhand 10
4 Kerala 10
5 Madhya Pradesh 20
6 Maharashtra 20
7 Manipur 20
8 Meghalaya 20
9 Mizoram 20
10 Nagaland 20
11 Orissa 10
12 Pondicherry 10
13 Punjab 10
14 Rajasthan 10
15 Sikkim 20
16 Tamil Nadu 20
17 Tripura 10
18 Uttar Pradesh 20
19 Delhi 10
20 Karnataka 10
21 West Bengal 10
22 Andhra Pradesh 10
23 Arunachal Pradesh 20
24 Assam 20
25 Bihar 10
26 Chattishgarh 10
27 Goa 20
28 Gujarat 10
29 Haryana 10
30 Uttarakhand 10
31 Chandigarh 20
32 Daman and Diu 20
33 Dadra and Nagar Haveli 20
34 Andaman and Nicobar 20
35 Lakshadweep 20
36 Outside India 20

It is the statutory responsibility of the employer under Section 2-A of the Act read with Regulation 10-B, to register the Factory/Establishment under the ESI Scheme within 15 days from the date of its applicability to them.

Employees Covered under ESI Scheme

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

  • Basic Pay, Wages, Salary;
  • A./HRA/CCA/Overtime/officiating allowance /Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance;
  • Wages/salary/pay for weekly off and public holidays;
  • Commission paid to sales staff;
  • Subsistence allowance paid to an employee during the period of suspension;
  • Attendance Bonus or incentive or ex gratia in lieu of Attendance Bonus or production incentive;
  • Regular Honorarium or salary or remuneration paid to a Director;
  • Collection Batta paid to running staff.
  • Actual payments made towards leave Salary, lay off compensation, or wages for 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 Central Government from time ti time keeping in mind the inflation rate, economy growth and other indirect factors.

Benefits of ESI Registration

ESI Registration ensures that employees enjoy the following advantages under the Employees’ State

ESI Registration ensures that employees enjoy the following advantages under the Employees’ State

  • Medical aid

From the very first day of employment, registered ESI members and their families are entitled to enjoy the benefits of complete medical care and insurance.

  • Maternity aid

Pregnant women are entitled to maternity benefits that are payable upto twenty six weeks. This period can be extended by 30 days on medical advice. To qualify for maternity benefits, employers are required to contribute their wages for 70 days in the preceding two contributions periods.

  • Disablement benefits

Disabled employees can get 90% of their monthly salaries as disablement benefits.

  • Sickness benefits

Absence from work during illness can be taken for a maximum of 91 days per year along with 70% of the monthly wages.

  • Dependent benefits

In the unfortunate event of the demise of an employee during the employment, the dependents of the deceased will receive 90% of his/her monthly salary.

  • Funeral expenses

The family of the deceased employee is entitled to an additional amount of Rs.10,000 towards funeral expenses.

  • Confinement expenses

In the case of confinement of an insured woman or wife of an employee occurring in a place with no medical facilities under the ESI scheme, confinement expenses can be availed.

In addition, some of the need-based benefits:

  • Vocational rehabilitation

Permanently physically challenged, insured employees are entitled to undergo vocational rehabilitation training at VRS.

  • Physical rehabilitation

Available to employees in the case of physical disablement due to an employment injury or occupational hazards.

  • Old age medical care

An annual payment of Rs.120 ensures medical care benefits for retiring ESI employees or for those who are opting for VRS/ERS. Insured ESI members retiring on account of permanent disabilities are also entitled to the same benefits.

  • Extended sickness benefits

ESI members suffering from chronic diseases can avail the extended sickness benefit for upto 2 years, provided the sick leave of 91 days are expired. Among other conditions, the criteria for eligibility for this benefit include that the concerned ESI member should have been working for at least 2 years at the onset of the sickness and its subsequent diagnosis.

  • Enhanced sickness benefit

This benefit was introduced in 1976 as a measure to encourage ESI employees to undergo vasectomy or tubectomy for family welfare. Registered ESI members willing to undergo the sterilisation procedures are eligible for enhanced sickness benefit of 100% of their daily average wages. This benefit also allows a recuperating period of 7 days for vasectomy and 14 days for tubectomy from the date of surgery or admission in the hospital. Extension of this benefit can also be availed in case of post-operative complications

Contribution under ESI Scheme

E.S.I. Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time.

Currently, the employee’s contribution rate (w.e.f. 01.07.2019) is 0.75% of the wages and that of employer’s is 3.25% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage upto Rs.137/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

Collection of Contribution under ESI Scheme

An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 15 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.

Contribution Period and Benefit Period under ESI Scheme

There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

Contribution period Corresponding Cash Benefit period

Contribution Period Cash Benefit Period
1st April to 30th Sept. 1st Jan of the following year to 30th June
1st Oct to 31st March of the year following. 1st July to 31st December.

Registration under ESIC Scheme

Earlier it was all manual process to get a company/ factory/ establishment registered. However, with the initiative by government for ease of doing business, a whole new online process is introduced, one can register under this by visiting www.esic.in. So that any employer falling into the eligibility can get its company/ factory/ establishment registered easily without physical papers submissions or visit to concerned ESIC office.

Disclaimer:  The above article briefs the important highlights of main provisions of Employees State Insurance Act of 1948 read with Employees State Insurance (Central) Rules of 1950 and Employees State Insurance (General) Regulation of 1950. There are other important aspects which the readers are required to go through full provision once, before coming to conclusion. Any further amendments in provision may lead to change in its interpretation accordingly. The author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

(The Author is Corporate Consultant and provides varied array of services including Start-ups, Secretarial, Legal, Intellectual property, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- triptishakyacs2017@gmail.com)

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5 Comments

  1. Abhishek Badiyala says:

    If there are no employees falling under 21k salary per month, is it still mandatory to register under ESIC? And if yes, what is the expectation after registration on the portal?

  2. pvsmurthy says:

    Whether ESI is applicable to Trusts? where number of employees are more than 20. Whether Trusts will fall in the category of ‘Establishment’. Trusts like Educational Trust, NGO Trusts etc is ESI applicable?
    thanks
    pvsmurthy

  3. Aniket says:

    The contribution rate given above is incorrect. Since 01/07/2019 the ESIC contribution rate has been decreased in total to 4%. Employee share – 0.75% and Employer share – 3.25%. This is a very important point to be corrected in the above article.

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