CONTRIBUTION

>> What is 'Contribution'? 

Contribution is the sum of money payable to the Corporation by the Principal employer in respect of an employee and Includes any amount payable by or on behalf of the employer in accordance with the provisions of the Act (Section2(4)). 

>> What Is the Present Rate of Contribution? 

a) Employer's contribution: A sum equal to 4.75% of the wages payable to an employee, rounded off to the next higher rupee; 

b) Employee's contribution: A sum equal to 1.75% of the wages payable to an employee, rounded to the next higher rupee; 

>> Is there any provision for exemption from payment of Employer's contribution? 

With effect from 1 -4-2008, the wage ceiling limit for coverage of employees with disability has been raised to rupees twenty five thousand a month. To encourage the employers for employing more employees with disability, the employer is exempted from payment of Employers share of contribution on the wages paid to the employees with disability for a maximum period of three years from the date of commencement of the contribution period in which such employee with disability is employed. The Central Government shall reimburse this Employers contribution to the ESI Corporation. 

>> What is the time limit for payment of contribution? 

Contribution shall be paid in respect of an employee in to a bank duly authorized by the Corporation within 21 days of the last day of the calendar month in which the contribution falls due for any wage period (Reg. 29 &31). 

>> What is the manner of payment? 

The total amount of contribution (both the shares) in respect of all the employees for each month is to be deposited with the authorized bank branches in cash or by cheque through a challan or demand draft: in the prescribed form in quadruplicate. Chalan prescribed for this purpose shall be supplied free of cost by the concerned Branch Office on placing the indent. The payment can be made online after generating online challan by giving necessary details in online register of employees in Form 5. 

>> What are consequences of non/late payment of employees' contribution deducted but not paid? 

Any sum deducted by the Principal employer from wages under the ESI Act shall be deemed to have been entrusted to him by the employee for the purpose of paying contribution in respect of which it was deducted (Sec. 40(4). Non-payment or delay payment of the Employee's contribution deducted from the wages of the employee amounts to' Breach of trust' and is punishable under IPC406. 

>> Will the delayed payment attract any interest? 

An employer who fails to pay the contribution within the limit prescribed under Regulation 31. shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of default or delay in payment of contribution (Regulation 31-A). 

>> What are the penal provisions for non-payment or delayed payment of contribution? 

1. The employer is liable for prosecution under Section 85(a) of the Act. 

2. The Corporation may levy and recover damages at the following rates, not exceeding the amount of contribution payable for default or delay in payment of the contribution. 

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Period of delay Rate of damages In % p.a.

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Less than 2 months 5% 

2 to 4 months 10%

4 to 6months: 15% 

6 months and above; 25% 

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>> What are the contribution periods and benefit periods? 

The financial year from April to March has been divided in to two six monthly contribution periods i.e. 1st April to 30" September and 1st October to 31st March of next year. The benefit period for each contribution period commences three months after the end of the relevant contribution period i.e. Jan to June and July to December (the calendar year from January to December has been divided in to two six monthly benefits periods).