ESI refers to Employees State Insurance. This is a self-financing social security and health insurance scheme for the working class and is run by ESI Corporation. In this scheme, an employee contributes part of salary as an insurance premium. The employer also contributes to the scheme. ESI contribution is mandatory for all employees who draw a gross of less than 21000/-
ESI Working
The ESIC will be an agent providing benefit schemes to the employee. Similar to the Provident Fund (PF), the ESI gathers premium by deducting 1.75 percent of the employee’s salary, and employers contribute 4.75 percent to ensure the security of their employees. Rates have been reduced to 1% and 4% from 15-feb., 2019.
The ESIC, on the other hand, works like an insurance company. They take the pooled funds as premium and allow the insured parties to avail many benefits, not only for themselves but also for their families.
ESI Act Applicability
The ESI Act, 1948 in the first instance, applies to:
- Factories using power in the manufacturing process and employing 10 or more persons
- Non-power using factories or establishments employing 20 or more persons for wages.
The Act contains an enabling provision under which Appropriate Government is empowered to extend the provision of the ESI Act, 1948 to other classes of establishments.
- Industrial
- Commercial
- Agricultural or otherwise
Under these provisions the State Governments have extended the provisions of the ESI Act to the following classes of establishments.
- Shops
- Hotels & Restaurants
- Cinemas including preview Theaters
- Road Motor Transport Undertaking
- News Paper Establishments
Wage Ceiling
Employees of covered units and establishments drawing wages up to Rs. 21,000 per month ( effective from 01 Sep., 2016), come under the purview of the ESI Act 1948 for multi dimensional social security benefits.
ESI Contribution
ESI scheme is financed by contribution raised from employees covered under this scheme and their employers as a fixed percentage of wages. Rates of contribution are as follows:
- Employees contribution 1.75% of wages
- Employer’s contribution 4.75% of wages.
- Rates have been reduced to 1% and 4% as from 15-feb., 2019
Safeguard for Insured Employees
- The right to receive payment of any benefit under the Act are not transferable.
- The employer shall not dismiss, discharge or reduce the wages or otherwise punish a covered employee during the period he/she is in receipt of Sickness Benefit or Maternity Benefit etc.
- By reason of his liability to pay his share of contribution under the ESI Act, no employer shall directly or indirectly reduce the wages of a covered employee.
- The right to register their grievances/complaints at any level for immediate redressal.
- Right to approach ESI Court against any action/decision of the Medical Board etc
Duties of Employer
- An employer shall apply in Form-01 for coverage under the ESI Act, within 15 days after the Act becomes applicable to a factory or establishment.
- The employer shall submit a Declaration Form in respect of all coverable employees in the unit.
- The employer shall deposit both employees’ and employers’ contributions as per specified rates within 21 days of the following month.
- The Employer shall maintain all such records and registers as are required under the Act and produce them for verification/inspection.
- The employer shall submit a half-yearly Return of Contributions (RC) by 12th May/11th November every year with all columns properly filled.
- The employer will report any change in business activity, address, ownership, or the management to ESIC authorities forthwith.
Employees State Insurance Act (ESI) Benefits and Features
| Applicability | Contribution | Benefit Period | Benefits |
| Sickness Benefit | Contribution for at least 78 days in the relevant contribution period. | 91 days in any two consecutive periods. | 70% of Daily Average Wage/Salary. |
| Extended Sickness Benefit (34 Specified Long Term Diseases) | Continuous Employment for a period of 2 years and contribution for 156 days in 4 consecutive contribution periods. | 2 years. | 80% of Daily Average Wage/Salary. |
| Enhanced Sickness Benefit (Sterilization for Family Welfare) | Contribution for at least 78 days in the relevant contribution period. | 1 Week for vasectomy and 2 weeks for tubectomy; extendable in cases in post operative complication etc. | 100% of daily average wages |
| Temporary Disablement Benefit | He/She should be an employee on the date of Employment Injury. | Till the Time person remains incapable of discharging his/her duties. | 90% of the Daily Average Wages/Salary. |
| Permanent Disablement Benefit | He/She should be an employee on the date of Employment Injury. | Lifetime | As determined by the Medical Board setup for the same. |
| Dependent’s Benefit | The deceased should be an employee on the date of fatal accident. | To Widow till Life or until remarriage. To Legitimate or adopted Children dependent on the deceased till they attain 25 years of age, or in case of daughter till she gets married, in case of infirmity till such infirmity lasts. To other dependents depending on the clause set for the same. | 90% of the daily average Wages distributed among the dependants in prescribed ratio. |
| Maternity Benefit | Payment of Contribution for at least 70 days immediately preceding one or two contribution periods. | Maximum of 12 weeks of which not more than six weeks should precede the expected date of delivery. 6 weeks for miscarriage and additional 1 month for sickness arising out of pregnancy, premature birth of child or miscarriage. | Full Wages. |
| Confinement Expenses | To an Insured Woman or an Insured Person in respect of his wife incase facilities for confinement are not available in ESI Institutions. | Up to two confinements only. | Rs. 2,500/- in each case. |
| Funeral Expenses | He/She should be covered under ESI Act. | Expenditure should not exceed Rs 10,000/-. | |
| Rehabilitation Allowance | Medical Benefits in case of disablement due to injury at time of employment. | Each day on which insured person remains admitted in Artificial Limb- Centre for fixation/repair or replacement of artificial limb. | 100% of Average Daily Wages. |
| Medical Benefit | Any Insured Person and his Family. | Till the illness/disease/disability lasts. | Full Medical Care and Treatment. |
| Medical Benefits to Retired & Disabled Insured Person and Spouse | On payment of Rs.120/- p.a. for one year in advance by any insured, persons who retire from insurable employment on attaining the age of superannuation or under VRS or prematurely after being in insurable employment for not less than five years, by insured persons who cease to be in insurable employment on account of permanent disablement due to an employment injury. | Period for which contribution is paid. Insured Persons are entitled for full medical care for self and spouse only, Period for which contribution is paid, till attaining the age of superannuation. | Full Medical Care and Treatment. |
| Unemployment Allowance | An Insured Person who has lost employment due to closure of factory, retrenchment or permanent disablement of at least 40% arising out of non-employment injury and the contribution in respect of him have been paid for a minimum of three years prior to the loss of employment. | Maximum period of one year during life time | 50% of average daily wage. |
| Vocational Rehabilitation Skill Development Scheme (under Rajiv Gandhi Shramik Kalyan Yojana) | Insured Person should be in receipt of Unemployment Allowance under Rajiv Gandhi Shramik Kalyan Yojana | Short duration of 10 weeks or other longer duration courses of upto six months at Advance Vocational Training Institutions. | Entire fee charged by the Institutions is to be paid by the Corporation. To and fro Rail/Bus fare For travelling to attend the training program , is reimbursed. |
| Conveyance Allowance to Permanent Disablement Beneficiaries (PDB) | Insured under the ESI Act and in receipt on benefit under Permanent Disablement Scheme. | Conveyance Allowance on their personal visit to Branch Office for submission of Life Certificate Annually. | Rs 100/- to be a paid for each annual visit. |
Definitions
According to Section 2 (m) of Factories Act, 1948,
(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months
(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on.
According to Section 2 (k) of Factories Act, “manufacturing process” means any process for
(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal
(ii) pumping oil, water, sewage or any other substance
(iii) generating, transforming or transmitting power
(iv) composing types for printing, printing by letterpress, lithography, photogravure or other similar process or bookbinding; lra-6 ] [ lra-7 or lra-7 ]
(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; (vi) preserving or storing any article in cold storage;
Identity Card
- An employee is required to file a declaration form upon employment in a factory or establishment to show that he is covered under the Act. On registration, every insured person is provided with a temporary identification certificate which is valid ordinarily for a period of three months but may be extended, if necessary, for a further period of 3 months.
- The identity card serves as a means of identification and has to be produced at the time of claiming medical care at the dispensary/clinic and cash benefit at the local office of the corporation. In the event of a change of employment, it should be produced before the new employer as evidence of registration under the scheme to prevent any duplicate registration.
Employers’ / Employees’ Contribution
ESI scheme is a self-financing health insurance scheme. Contributions are raised from covered employees and their employers as a fixed percentage of wages. Presently covered employees contribute 1.75% of the wages, whereas as the employers contribute 4.75% of the wages, payable to the insured persons. Employees earning less than and up to Rs. 50 per day are exempted from payment of contribution.
There are two contribution periods each of six months duration and two corresponding benefit periods.
- Contribution period – 1st April to 30th September,
- Contribution period – 1st October to 31st March
Certification of Return of Contribution by Auditor
The salient features of amendments made in the Returns of Contribution are as under:-
- Self-declaration by Employers regarding maintenance of records and registers, submission of Declaration Forms, employees engaged directly or through immediate employers, and wages paid to the workers.
- All the Employers employing 40 and more employees shall have to append a certificate duty certified by a Chartered Accountant, in the revised format of Returns of Contribution.
- Employers employing less than 40 employees will have to provide self- certification without any certification from the Chartered Accountants in Return of Contribution.
ESI Act Compliances
Records to be maintained for inspection by ESI authorities
- Attendance Register / Muster Roll
- Salary / Wage Register / Payroll
- EC (Employee’s & Employer’s Contribution) Statement
- Employees’ Register
- Accident Book in new Form-11
- Return of Contribution
- Return of Declaration Forms
- Receipted Copies of Challans
- Books of Account viz. Cash/Bank, Expense Register, Sales/Purchase Register, Petty Cash Book, Ledger, Supporting Bills and Vouchers, Delivery Challans.
- Form of annual information on a company
Important Forms to be submitted under the Act
| Form | Details |
| Form 01 | Employers’ Registration Form |
| Form 01(A) | Form of Annual Information on Factory/Establishment |
| Form 1 | Declaration Form |
| Form 1A | Family Declaration Form |
| Form 1B | Changes in Family Declaration Form |
| Form 3 | Return of Declaration Forms |
| Form 4 | Identity Card |
| Form 4(A) | Family Identity Card |
| Form 5 | Return of Contributions |
| Form 7 | First/Intermediate/Final Certificate |
| Form 8 | Special Intermediate Certificate |
| Form 10 | Abstention verification in r/o Sickness Benefit/Temporary Disablement Benefit/MB |
| Form 12 | Sickness of Temporary Disablement Benefit |
| Form 12A | Maternity Benefit for Sickness |
| Form 13 | Sickness or Temporary disablement or maternity benefit for sickness |
| Form 13A | Maternity benefit for sickness |
| Form 14 | Sickness or temporary disablement or maternity benefit for sickness |
| Form 14A | Maternity Benefit for Sickness |
| Form 16 | Accident report from employer |
| Form 17 | Dependant’s or funeral benefit (Death Certificate) |
| Form 18 | Dependant’s Benefit (Claim Form) |
| Form 18A | Dependant’s Benefit (Claim for periodical payments) |
| Form 19 | Maternity Benefit (Notice of Pregnancy) |
| Form 20 | Maternity Benefit (Certificate of Pregnancy) |
| Form 21 | Maternity Benefit (Certificate of expected confinement) |
| Form 22 | Claim for Maternity Benefit |
| Form 23 | Maternity Benefit (Certificate of confinement or miscarriage) |
| Form 24 | Maternity Benefit (Notice of work) |
| Form 25 | Claim for Permanent Disablement Benefit |
| Form 26 | Certificate for permanent disablement benefit |
| Form 27 | Declaration and certificate for dependant’s benefit |
