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Employees’ State Insurance is a mandatory payroll requirement in India. The primary goal of the Government of India in implementing the Employees’ State Insurance (ESI) plan is to protect workers against health and wellbeing concerns.
These are some examples:
The ESI system enables workers to prevent monetary loss due to long-term or temporary disablement, disorder, or death caused by an occupational accident or sickness. Beneficiaries might also get maternity benefits under the plan.
What is ESIC?
The ESI plan is a workers’ compensation scheme that provides medical treatment for the insured. In addition, their dependents are covered. Finally, ESI provides several monetary compensations for a salary loss or disability. In addition, the system provides a pension known as dependant benefit to the insured person’s family members in the event of an accident or death due to occupational dangers while at work. It should be noted that ESI, along with Provident Fund (PF), Professional Tax (PT), and TDS, is one of the most important payroll compliances.
Features of the ESIC
- Medical: Medical expenditures are covered under the plan through economic and reasonable health care services. Furthermore, the worker or employee is protected from the first day of employment.
- Maternity: The system allows the beneficiary to receive 100% of their daily pay for up to 26 weeks, which can be extended for an additional month based on medical recommendations. The benefit is 6 weeks in the case of miscarriage and 12 weeks in the case of adoption.
- Disability: If a worker is temporarily disabled, they are entitled to a monthly payment of 90% until they recover. In permanent incapacity, 90% of the monthly payment can be obtained for the rest of one’s life.
- Sickness: During medical leave, the plan provides cash flow. The worker might get 70% of the daily salary for up to 91 days. This is also available for two consecutive periods.
- Unemployment: The program provides a maximum of 50% of the average monthly pay for 24 months in the event of involuntary loss of non-employment or permanent incapacity due to an accident.
- Dependents: The program provides financial help to the insured’s dependents in the event of illness or injury at work. Dependents are entitled to monthly compensation in such cases, which are dispersed evenly among remaining dependents.
- Coverage: Workers or employees are protected under the plan from the first day of employment. This includes the insured as well as their dependents.
- Funeral Costs: The ESIC also provides a funeral expense allowance of Rs.15,000. This is paid to the insured’s dependents or the person who performs the insured’s last rites.
- Confinement Charges: If the insured or dependent is confined in a location where the needed medical treatment under the scheme is unavailable, the insured or dependent can claim confinement costs.
- Vocational Rehabilitation: This benefit is also provided by the ESIC, depending on the insured’s needs. This is also given to those who are permanently handicapped and wounded for Vocational Rehabilitation (VR) training at VRS.
- Physical Rehabilitation: This benefit is also based on need, particularly in cases of disability due to an occupational injury.
- Medical Care for the Elderly: When the covered individual reaches the retirement age. Alternatively, under VRS or ERS, if a person is forced to stop work owing to permanent disability, the insured and spouse would get Rs.120 per year.
Where is it Applicable?
The ESI Act applies to all non-seasonal factories with 10 or more employees. State governments have expanded the coverage under Section 1(5) of the Act to include shops, hotels, restaurants, cinemas (including preview theatres), road-motor transport undertakings, newspaper establishments, private medical institutions, educational institutions, and contract and casual employees of municipal corporations/municipal bodies employing 10 or more people in certain states/UTs where the state government is the appropriate government.
The Central Government has extended the coverage under Section 1(5) to Shops, Hotel chains, Eateries, Road Motor Transport Establishments, Cinema including preview theatres, Newspaper Establishments, Insurance Business Establishments, Non-Banking Financial Companies, Port Trust, Airport Management, Warehousing Establishments employing 20 or more People, where the Central Government is the appropriate Government.
The current pay ceiling for coverage under the Act, beginning January 1, 2017, is Rs.21,000/- per month (Rs.25,000/- per month for Persons with Disabilities).
Who is eligible for ESIC?
To be eligible for the ESI plan, the employee’s or worker’s monthly wage must be less than Rs.21,000 per month or Rs.25,000 for those with disabilities.
- Companies that have not been registered under the ESI Act
Companies with more than 20 employees are required to register under the statute.
- Companies already registered under the ESI Act must revise the CTC of all employees with a monthly gross pay of INR 21,000 or less.
ESIC Contribution Rates
The employer and the employee contribute to collecting cash for the ESI system. Previously, this contribution was:
- 6.5% overall with
- The employer’s fund is 4.75%.
- and the employee pays the remaining 1.75%.
However, according to the most recent ESIC rule:
- The employee contributes 0.75%.
- and the employer’s contribution is 3.25%
- This amounts to 4% of the employee’s monthly salary.
ESIC Contribution Period
| Contribution | Cash Benefit |
| 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. |
How to Register for ESIC?
Step 1: Access the ESIC Portal.
- An employer must first register with the ESIC site.
- Employers can register on the ESIC portal by going to the home page and clicking on the ‘Employer Login’ option.
- On the following screen, click the ‘Sign Up button.
- Employers must fill out the form and submit it after clicking the ‘Sign up’ option.
Step 2: Confirmation Email
- After submitting the portal sign-up form, the employer will get a confirmation email to the registered email address and cellphone number submitted during sign-up.
- The email will include information on registering as an employer and employee under the ESIC plan and the login and password.
Step 3: Fill out the Employer Registration Form-1.
- Log in to the ESIC site by selecting ‘Employer Login’ from the main screen and entering the username and password you got in the email. This will take you to a website where you may register as a new employer.
- Select the ‘New Employer Registration’ tab.
- Then, choose the ‘Type of Unit’ from the drop-down list and press the ‘Submit’ button.
- The ‘Employer Registration – Form 1’ will display, and the employer must complete it.
- The employer must fill out the Employer Registration Form-1 (ESI Registration Form) with information on the employer’s unit, employer details, factory/establishment data, and employee details. Once the employer has completed the form, he or she must click the ‘Submit’ button.
Step 4: Registration Fee Payment
- Following the completion of the ESI Registration Form, Form-1, the ‘Payment of Advance Contribution’ page will appear, where the employer must enter the amount to be paid and pick the payment mechanism.
- The employer must pay the advance payment for six months.
Step 5: Registration Letter
When the six-month advance contribution is successfully paid, the ESIC department sends the employer a system-generated Registration Letter (C-11), which includes a 17-digit Registration Number.
The Registration Letter (C-11) is legal proof of the employer’s registration.
The Registration Letter (C-11) is legal proof of the employer’s registration. The Registration Letter (C-11) example is provided below.
Documents Required for ESIC Registration
The following documents are necessary for registration:
- A registration certificate issued under one of the following circumstances:
- Factories Act, Shops and Establishment Act, and Partnership Act
- Certificate of Registration in the case of a Company, and Partnership deed in the case of a Partnership.
- The Company’s Memorandum of Association and Articles of Association.
- A list of all personnel employed by the establishment.
- PAN Card of the Business Entity and all Employees Working for the Entity
- Compensation information for all workers.
- A canceled cheque from the Company’s bank account.
- The Company’s Board of Directors
- List of the Company’s Shareholders
- Employee attendance register.
ESI Coverage
Aside from complete medical care for self and dependents, which is available from the first day of insurable employment, insured persons are also obligated to a wide range of cash benefits in occasions of physiological anguish due to sickness, temporary or permanent disablement, etc. resulting in loss of earning capacity, confinement in the case of insured women, and dependents of insured persons who end up dying in industrial accidents or as a result of employment injury or occupational hazard. The ESI Act of 1948 covers specific health-related scenarios that employees are frequently subjected to, such as sickness, maternity, temporary or permanent disablement, occupational disease, or death due to a job accident, resulting in pay or earning capacity loss-total or partial.
The Scheme has now been expanded to include cinemas, hotels, shops, restaurants, road motor vehicle ventures, and newspaper establishments employing 20 or more people.
Benefits of ESIC
- Employees and dependent relatives are entitled to medical benefits.
- Sickness benefits of 70% of daily pay in cash for any certified sickness that lasts for a maximum of 91 days per year.
- Maternity Benefit is payable during the pregnancy for 26 weeks and can be advanced to one month on the opinion of a medical official.
- In the event of an employee’s death while on the job, 90% of the entire income is paid to the employee’s dependents each month following the death.
- The same benefits are available in the event of an employee’s disability.
- Funeral costs
- Medical costs for the elderly
