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2021

Overview of Employees’ State Insurance Scheme in India

Overview of Employees State Insurance Scheme in India

Employees' State Insurance is a self-financing Social Security and Health Insurance Scheme for Indian workers. The fund is managed by the Employees' State Insurance Corporation (ESIC) according to rules and regulations stipulated in the ESI Act 1948. ESIC is a Statutory and an Autonomous Body under the Ministry of Labour and Employment, Government of India.

The Employee State Insurance Scheme (ESI) is one of the largest social security schemes, globally. ESI provides primarily sickness benefits and some other benefits to approximately thirteen crores Indians that include Insured Employees and their dependents.

Applicability of the Scheme:

  • This scheme extends to the whole of India and covers all places of business registered under either in the Factories Act or under the Shops and Establishments Act. However, this scheme is not applicable to the seasonal factory or mine.
  • This scheme is applicable only in the areas defined as ‘Implemented Area’ under this scheme.

Number of Employees:

  • All the above mentioned businesses are covered under this scheme where 10 or more employees are employed.

Wages Threshold Limit:

  • Where a business entity is eligible and covered under ESI Scheme, all employees working in such business whose monthly wages are up to and equal to Rs.21,000/ per month are automatically covered under the scheme.
  • It is the responsibility of the employer to get eligible employees covered under the ESIC scheme.
  • For employees with disability Monthly Salary limit for coverage under the ESIC scheme is Rs. 25,000 p.m.

Note:

  • The scheme under the act also supports restaurants, motor road transports, newspaper establishments and undertakings, movies and purview theatres, hotels, shops.
  • The threshold for coverage of establishment is 20 employees in Maharastra.

 

ESIC Contribution Rates (Reduced w.e.f. 01st July 2019):

  • The scheme is self-financing and being contributory in nature. The funds under the ESI scheme are primarily built out of the contribution from the employees and employers payable monthly at a fixed percentage of wages paid.

Employer Share

3.25%

Employee Share

0.75%

Total

4%

  • The employer makes the contribution from his own share in favor of those employees whose daily average wage is Rs 137 as these employees are exempted from his own contribution.

 

ESI Scheme monthly Payment and Return:

  • The employer is required to pay his contribution and deduct employees’ contribution from wages and deposit the same with ESIC within 15 days from the last day of the calendar month in which the contribution falls due.
  • The payment can either be done online or through designated and authorized public sector banks.
  • Both ESIC payment and Return filling can be done at the same time. Hence, the ESI return due date is the same as that of payment. I.e., ON OR BEFORE 15TH OF EVERY MONTH.

Recent Amendments:

Amendment

Effective Date

Increase in monthly wage limit from Rs. 15,000 per month to Rs. 21,000 per month to cover more employees under the scheme.

1st January 2017

The rate of contribution was reduced from 6.5% to 4% (i.e. employer's share 3.25% and employee's share 0.75%).

1st July 2019

 

Benefits Offered by the ESI Scheme:

  • Broadly speaking, ESI Scheme offers following benefits:
  • Medical benefit;
  • Sickness benefit;
  • Maternity benefit;
  • Disablement benefit;
  • Dependent’s benefit;
  • Funeral expenses;
  • Rehabilitation allowance.
  • Broadly, the benefits under this scheme are categorized under two categories:
  • Cash benefits (which includes sickness, maternity, disablement (temporary and permanent), funeral expenses, rehabilitation allowance, vocational rehabilitation and medical bonus) and,
  • Non-cash benefits through medical care.
  • The employees registered under the scheme are entitled to medical treatment for themselves and their dependents, unemployment cash benefit in certain contingencies and maternity benefit in case of women employees.
  • In case of employment-related disablement or death, there is provision for a disablement benefit and a family pension respectively.
  • Outpatient medical facilities are available in 1418 ESI dispensaries and through 1,678 registered medical practitioners.
  • Inpatient care is available in 145 ESI hospitals and 42 hospital annexes with a total of 19,387 beds.
  • In addition, several state government hospitals also have beds for the exclusive use of ESI Beneficiaries.
  • Cash benefits can be availed in any of 830 ESI centers throughout India.

 

The ESI Corporation may levy and recover damages as per the Regulations at the following rates:

Time-Period of Delay

Rate of Penalty

Delay for up to 2 months

5% per annum

Delay ranging from 2 months to 4 months

10% per annum

Delay ranging from 4 months to 6 months

15% per annum

Delay exceeding 6 months

25% per annum (It may correspondingly go up to 100%)

 

Note: The total amount of penalty shall not exceed the amount of contribution payable for default or delay in payment of the contribution.

Refer to below Flow Chart to understand the Applicability of the Scheme:

 understand the Applicability of the Scheme

 

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