The Employees State Insurance Act, 1948
The ESI Act has been passed to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance’ scheme i.e. employee gets benefits if he is sick or disabled.
ESIC:-
Employees State Insurance Corporation (ESIC) has been formed to supervise the scheme under section 3 of the Act. The corporation supervises and controls the ESI scheme.
Applicability of ESI Scheme:-
The scheme is applicable to all factories [Section 1(4)]. The Appropriate Government can also make it applicable to any other industrial, commercial, agricultural or other establishments, by issuing notification and giving 6 month notice. [Section 1(5)].
ESI Act can be made applicable to ‘shops’ also. However, since Government has to provide for hospitals and medical facilities, the Act can be made applicable to different parts of state at different dates.
Thus, if a factory is at a place where ESIC is unable to provide medical facilities, ESI Act may not be made applicable to the area.
Government can exempt a factory or establishment or persons or class of persons from provisions of ESI Act, if the employees are getting better medical facilities [e.g. if Government is convinced that the factory itself is providing very good medical facilities e.g. like TISCO].
Regional Offices/Branch Offices get covered:-
Regional offices of a factory, which have their connection to the factory and where the Principal Employer has control over the regional offices, the regional offices will be covered under ESIC
If head office is covered under ESIC, branch offices are also covered when branch and principal office are inter-dependent and there is unity of relationship.
Outside agencies can be covered:-
Workers were given work of making ‘bidis’ as home. Right of rejection of rejection of bidis was with employer. It was held that test of control and supervisions lies in the right of rejection.
It was held that employees working outside can be covered under ESIC, if there is master servant relationship.
Definition of ‘Factory’ as per ESI Act:-
The ‘Factory’ means any premises where manufacturing process is carried out. If manufacture is without aid of power, the Act is applicable if persons employed are at least 20. If manufacture is with aid of power the Act applies if persons employed are at least 10. [Section 2(12)].
However, ‘mines’ have been excluded. ‘Manufacturing processes has same meaning as defied under Factories Act [Section 2(14AA)].
One a factory or establishment is covered, it continues to be covered even if number of employees reduce [Section 1(6)].
Construction workers not covered:-
Construction workers employed in construction activities are not covered under ESIC. ESIC circular no. P-12(11)-11/27/99 ins. IV dated 14-6-1999.
However, if administrative office employs 20 or more eligible employees, that establishment and employees working in administrative office will be covered.
Employer under ESIC Act:-
‘Principal Employer’ means owner or occupier of factory, head of department in case of Government department and person responsible for supervision and control, in case of any other establishment [Section 2(17)].
Employees working though contractor are also covered.
‘Contractor’ is termed as ‘Immediate Employer’. It means a person who has undertaken the execution, on the premises of factory or establishment to which this Act applies.
He may do on his own or under the supervision of Principal Employer. The work should be part of work of factory or establishment [Section 2(13)].
Primary liability of ESI contribution is of Principal employer [Section 40(1)].
He can recover the contribution paid by him from the ‘immediate employer’ i.e. contractor [Section 41].
Employee under ESI Act:-
Employee’ means any person employed for wages in or in connection with work of a factory or establishment to which the ESI Act applies. Employees drawing wages up to Rs. 15,000 per month can be presently covered under the ESI Act scheme [Section 2(9)].
Employees include persons employed through contractor, apprentices other than those covered under ‘Apprentices Act’, persons employed in administration office, department of branch for purchase or sale of products.
Casual workers engaged in work incidental to or connected with work offactory of establishment.
Employees working at head office when factory is located at different place, canteen staffs watch and ward staff are employees.
Staffs in hospital attached to factory are employees, members of Indian Naval, Military or Air Forces are excluded.
If an employee is drawing wages less than Rs. 15,000 per month at the beginning of his ‘contribution period’, his contributions are payable for whole period of contribution period of six months even if in between his wages go above Rs. 15,000 P.M. [Proviso to section 2(9)].
Following are not employees:-
Persons drawing wages over Rs. 15,000 per month, member of Army, Navy of Air Force.
Partners of firm are not employees even if they are drawing wages, persons employed in government establishments.
Construction workers engaged in raising additional building subsequent to initial set up of factory.
Contribution to ESIC Fund:-
Both employee and employer have to make contribution to ESIC. The employer has to deduct contribution from wages of employee and pay to ESIC both the employer’s contribution as well as employee’s contribution [Section 39(1)].
The contribution is payable for ‘wage period’ i.e. the period in respect of which wages are payable to employee [Section 39(2)]. Normally, ‘wage period’ is a month.
The Employee’s contribution is 1.75% of wages. It should be rounded off to next 1 Rupee. Employees contribution is not payable when daily wages are below Rs. 15/-.
Employer contribution is 4.75% of total wage bill of all employees in respect of every wage period. Thus, it is not necessary to calculate employer’s contribution separately for each employee.
4.75% of gross wages should be calculated and rounded off to next 1 Rupee. Employees drawing wages lower than Rs. 25 per day do not have to pay employee’s share.
The contribution has to be paid within 21 days from close of the month. It is payable by a challan in authorized bank.
If the contribution is not paid in time, interest @12% is payable [Section 39(5) (a)].
In addition, ESIC authorities can impose ‘damages’ varying 5% to 25% of arrears of contribution u/s 85B.
Employer cannot deduct employer’s contribution from the salary of employee [Section 40(3)].
Liability of principal employer:-
In case of employees of contractor, liability is of principal employer.
Wage for purpose of ESI Act:-
‘Wages’ means all remuneration paid of payable in cash to employee according to terms of contract of employment and includes any payment made to an employee in respect of period of authorized leave, lock-out, lay-off, strike which is not illegal and other additional remuneration paid at interval not exceeding two months.
It does not include contribution paid by employer to any pension fund or provident fund, traveling allowance, reimbursement of expenses made by nature of employment of the employee.
Thus, wages include basic pay, dearness allowance, city compensatory allowance, payment of day of rest, overtime wages, house rent allowance, incentive allowance, attendance bonus, meal allowance and incentive bonus. However, wages do no include annual bonus, unilateral rewards scheme (inam), ex gratia payments made every quarter or every year traveling allowance, retrenchment compensation, encashment of leave and gratuity.
Contribution period and Benefit period:-
Contribution period is (a) 1st April to 30th September (first half) & (b) 1st October till 31st March.
The corresponding benefit period is (a) following 1st July to 31st December (b) following 1st January to 30th June.
Thus, ‘Benefit period’ starts three months after the ‘contribution period’ are over.
The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period’.
Thus and employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.
An employee is entitled to get benefits which are medical benefits as well as cash benefits. He also can get disablement benefit.
ESI Excess Paid adjusted:-
For adjusting excess/short payment.
If the mistake is before the contribution period ends the amount can be adjusted. I.e. in case the contribution period is 1st April – 30th of September, 1st of October – 31st of March.
e.g.:-
In case, adjustment can be made in the succeeding month before the half yearly returns are to be submitted (i.e.) the months fall in between the contribution period 1/4/06 – 30/9/06, wherein the returns are to be submitted only after the payment of September 06 is made. So you have the option of reversing this payment in the month of august 06 or September 06.
The difference needed to be highlighted in the contribution register that is maintained every month.
ESIC Resignation related Enquires:-
Whenever you are filling the half yearly returns you will automatically show the authorities that the employee has left the organization on a particular date.
Half yearly returns are for the period 1st April to 30th September (first half) & from 1st October till 31 March.
The forms will have to be submitted in quadruplicate to the local ESI office with a challan of the monthly returns which you will be having in your records.
In half year return “Return of Contribution” Form no.6, there is a column no.7A which state that “Whether still continues working & drawing wages within the insurable wage ceiling” under this column you have to mention “No”.
Under column no. 8 of Form no.6 under “Remarks” you are required to declare the “Date of Leaving” of the employee.
This information as declared by employer in Form 6 with respect to of leaving insurable employment by an employee will be forwarded by Local ESIC office to concerned ESI dispensary for necessary updates.
For obtaining the Employer’s code you are required to submit the following information with respective office (Regional Director ESI):
Form No.01
List of employees along with their salaries
Registration under Shop & Commercial Establishment Act.
Memorandum & article of association.
Certificate of Incorporation under the companies Act.
List of Directors.
Bank account details of your company (CC account number)
Pan Number issued to your company by Income Tax Authorities.
Contribution Rate
The percentage of contributions made to the ESIC authorities are as under:
By the eligible employees 1.75% of Gross wages
By the employer 4.75% of Gross wages including administrative charges
Thus company will bear an additional burden of 4.75% to comply with the ESIC monthly on the gross wages.
Employees covered under the scheme are persons whose monthly gross salary is of less then Rs.15,000.
[ Before the 1.10.2006 all employees whose wages dose not exceeds Rs. 7,500 per month become coverable under the ESI Act, 1948 ]
[w.e.f 01.10.2006 wages ceiling Rs. 10,000 per month would become coverable under the ESI Act, 1948]
[All employees whose wages dose not exceeds wages (ceiling w.e.f 01.04.2010) Rs. 15,000 per month would become coverable under the ESI Act, 1948.]
The above amount is to be deposited in challan form prescribed under the act.
A half yearly return on Form 6 is to be submitted with local ESI office.
Declaration forms are to be submitted with local office of ESI within 10 days of new joining.
Before doing all this for ESI applicability please check with the local ESI office whether the ESI scheme is applicable in your area or not because this is a scheme which applicable on areas notified by ESI authorities.
As per ESI Act, it applies even to Domestic Servants, which includes casuals, contractual, but excludes Apprentices appointed under Trade Apprentice Act.
When if a person appointed as trainee, he should be paid stipend – No one in the organized set-up should be allowed to get exploited on his work extraction by any of the nomenclature give to him.
However, it is been very sure that ESI should be deducted on salary alone (Compensation paid for work done) & not the stipend (which is monetary inducing measure to increase performance during training).
No dismissal or punishment during period of sickness:-
Section 73 of the Act provides that no employer shall dismiss, discharge or reduce or otherwise punish an employee during the period employee is in receipt of sickness benefit or maternity benefit.
He also cannot dismiss, discharge or otherwise punish employee when he is in receipt of disablement benefit or is under medical treatment or is absent from work due to sickness.
This gives protection to employee when he is in receipt of sickness benefit or maternity benefit. Employer cannot take disciplinary action against employee in such cases. This provision is grossly misused by employees.
Month wise Statutory Deposits & Returns
January :
ESIC Challan - Before 21st of every preceding month
Monthly Statutory Register Daily/End of the month
February to April
Same as January Month
May :
Before 21st ESIC Challan
Before 12th May ESIC Half yearly Returns
Monthly Statutory Register Daily/End of the month
June to October :
Same as January Month
November :
Before 21st ESIC Challan
Before 11th November ESIC Half Yearly Returns
Monthly Statutory Register Daily/End of the month
December :
Same as January Month
Statutory Forms :
• Form 01 : Employer’s Registration From
• 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 Form
• Form 4 : Identity Card
• Form 4A : Family Identity Card
• Form 6 : Return of Contributions
• Form 7 : First/Intermediate/Final Certificate, Employee Register
• 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 (Regulation 68)
• 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 of Maternity Benefit
• Form 23 : Maternity Benefit (Certificate of the Confinement of 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
• ESIC 37 : Certificate of re-employment/employment
• ESIC 53 : Application for change in particulars of insured person
• ESIC 72 : Application for Duplicate Identity Card
