EMPLOYERS’ GUIDE TO ESI SCHEME
1.What is ESI Scheme?
The ESI Scheme is a comprehensive social security scheme devised to protect the employees covered under the Scheme against financial distress arising out of events of sickness, maternity, disablement/death due to employment injuries and to provide medical care to the employees and their families. The Scheme is based on the principle of ‘pooling of risks and resources’, wherein that section of the population which is exposed to risks of the same nature, come together to mitigate the physical and financial distress arising out of such risks.
2.To whom is the Scheme applicable to?
The Scheme is applicable to only those areas where the Scheme is extended/made applicable by the State Government by notification. The Scheme applies to all factories, shops, and establishments located in the implemented areas, where ten or more persons are employed. Thus, the Scheme is applicable to all factories, shops, hotels, restaurants, cinema theaters, offices, medical institutions, educational institutions, etc. subject that:
i) The employer is located in an area to which the Scheme is extended to by the State Government, and
ii) Ten or more persons are employed
The Scheme is NOT applicable to:
a) Seasonal factories exclusively engaged in one or more of the following manufacturing processes, viz., cotton ginning, cotton or jute pressing, decortication of ground-nuts, the manufacture of coffee, indigo, lac, rubber, sugar or tea or any manufacturing process which is incidental to or connected with any of the aforesaid processes
b) Mines, subject to the operation of the Mines Act.
3.Which of the employees are eligible to avail benefits under the Scheme?
All employees of a covered unit, whose monthly remuneration (excluding overtime) does not exceed Rs.15,000/- per month, are eligible to avail benefits under the Scheme.
4.Who is responsible for the administration of the Scheme?
The Scheme is administered by the Employees State Insurance Corporation, set up under the ESI Act, 1948. The Corporation (similar to Board of Governors) the comprises of representatives of the employers, employees, the Central Government, State Governments, eminent medical professionals and that of the Parliament. Besides the Corporation, there is a Medical Benefit Council which advises the Corporation on matters related to the extension of medical care to the beneficiaries of the Scheme.
The Director-General is the Chief Executive of the Corporation is the ex-officio member of the Corporation. At the state level, Regional Boards have been constituted and at the grass-root level, Local Committees have been constituted for the smooth functioning of the Scheme. The Regional Boards and Local Committees comprise of representatives of employers and employees of the respective jurisdiction, so as to cater to the local and varied needs of the employers/employees.
The Corporation has its headquarters in New Delhi, besides regional offices/sub-regional offices in the states and over 800 local offices throughout the country. While the administration of the Scheme, including coverage, a collection of contribution, disbursement of cash benefits, etc. are under the Corporation, the extension of medical care is administered by the respective State Governments on a cost-sharing basis.
5.How is the Scheme financed?
The Scheme is funded by the contributions raised from the employees and employers of the covered employers. The rates of contribution, as a percentage of wages paid / payable to the employees, are as under:
Employees’ contribution – 1.75% of the wages.
Employers’ contribution – 4.75% of the wages.
Thus, in respect of each of the employee, 6.50% of the wages (including overtime allowance) is to be paid as a contribution to Scheme. The Scheme does not receive any budgetary support from the Government. The State governments, as per the provisions of the Act, contribute 12.5% of expenditure on medical care on ESI beneficiaries in their respective States within the per capita ceiling.
6.What benefits do the employers avail under the Scheme?
The various benefits that the employers reap out of the Scheme are:
a) No expenditure to be incurred towards administration of medical care to the employees / their dependents.
b) No requirement for a medical insurance policy as all medical facilities, including Super specialty treatment, is extended to the beneficiaries, without any ceiling on expenses.
c) Employers are exempted from the provisions of / liabilities under:
i) Maternity Benefit Act
ii) Employees’ Compensation Act
7.What are the benefits that the employees get out of this Scheme?
The benefits available under the Scheme to the employees can be categorized under two broad heads, viz., cash benefits and non-cash benefit, viz., medical care.
1. Sickness benefit – for employees during the period of sickness
2. Maternity benefit – for employees during the period of confinement
3. Disablement benefit:
4. Dependants’ Benefit – for dependents of employees; in case of death of employee due to
8.How should an employer register as per the provisions of the ESI Act?
Any employer who becomes coverable under the Act can register online (www.esic.in) and get registered. While registering online, the employer has to give correct and complete details. (the employer would be contacted through the email for communicating the access credentials to the employer portal, reset password, etc.); once registered, the employer will be allotted a 17 digit employer code. Except for employers who supply manpower, all the employers can proceed with the compliance under the Act, without even visiting the ESI offices, as all activities, like registering the employees employed, filing contribution, generating challan for remitting contribution, filing periodical returns, etc. can be done online.
9.Should an employer who has operations all over the country, register only once where it’s head office is located, or should it get registered separately for each of its branch offices also?
An employer who is already registered under the ESI Act (who is having a 17 digit code) need not apply for registration afresh in respect of its branch offices located in different locations of the country. Instead, the employer can get a sub-code generated in respect of its branch offices (can be generated online) so as to comply with the provisions of the Act. Sub-codes need to be generated only in respect of offices located outside the jurisdiction of the Regional Office / Sub-regional office in which the main office is located. In other words, if the branch office is located in the same state in which the main office is also located, a separate sub-code need not be generated for the branch office; the branch can comply with the main code itself.
10.Once registered, can an employer edit the details already furnish online?
As regards details pertaining to the employer, like the name of the employer, address, etc., the employer may submit a request online, supported by documentary evidence, and on approval by the competent authority, the change will get effected in the system. As regards, details pertaining to the employees registered by the employer, except for the name and insurance number of the employer, all the other details, including dependent details, the address of the employee, etc., can be edited by the employer.
11.How can an employer, who is registered under the Act, register its employees under the Scheme?
The employer once allotted the ESIC registration number, can login to the employer portal and register it’s employees, as soon as they are employed by it. In case of first employment ( the employee has not worked anywhere before joining the employer), the employee has to register the employee under the ESI Scheme, submitting the details of the employee, his family members, place of residence of himself and that of his family members, the dispensary to which they want to avail medical treatment, etc; once registration is completed, the employee will be allotted an insurance number, which is unique and will be valid throughout the life of the employee, even if the employee changes job. In case, the employee is already having an insurance number, the employer has to enter that number and proceed with updating the details of the employee.
12.Should the employer register all the employees employed by it under the Scheme, even if they are not entitled to benefits under the Scheme?
No. As only those of the employees whose monthly remuneration (excluding overtime wages) does not exceed Rs.15,000 per month are entitled to coverage under the Scheme, the employer needs to register those employees alone. (However, for the purpose of coverage under the Scheme, i.e., whether the employer has employed ten or more employees, all employees employed by the employer, irrespective of the salary are reckoned).
13.Is it necessary to register temporary employees, casual labor, etc., employed by the employer apart from registering the employees on their role?
Yes. All employees, including casual labor, temporary employees, employees employed through contractors (outsourced) etc. have to be registered by the employer.
14.Who is responsible for the registration of contract employees employed in an organization – the organization where the contract employees are deployed, or, the contractor who has employed them?
The organization which utilizes the services of the contract employees need not register these employees under the Scheme if they are already registered by the contractor. However, as the principal employer, that organization would be responsible for the remittance of contribution in respect of such employees by the contractor under the ESI Act. So, the organization employing outsourced employees should ensure that the contractor through whom these employees are employed is complying with the provisions of the Act.
15.What is the proof of registration of employees?
Once registered, in respect of employees who are being registered under the Scheme afresh, an insurance number is allotted and a Temporary Identity Card (TIC) is generated; this TIC is valid for a period of 3 months from the date of registration, within which the employee has to enroll for the Pehchan card. In the case of employees who are already registered, their name would be linked to the current employer, which can be checked in the employer’s portal as well as the employees’ portal.
16.Whether any special provisions are there in respect of for physically disabled employees?
Yes. In respect of physically disabled employees, the wage ceiling is Rs.25,000/-, i.e., they are entitled to the benefits under the Scheme, till their monthly remuneration exceeds Rs.25,000 per month. As regards remittance of contribution, the employer is exempt from payment of contribution for four years in respect of the disabled employees (the Central government remits the contribution on their behalf). (However, the employee’s share need to be remitted by the employer).
17.Are there any other exemptions in respect of any special category of employees?
Yes. In respect of employees whose average daily wages is less than Rs.100 per day, the employee’s share need not be paid. However, the employer’s share (4.75% of the wages) need to be paid.
18.How is a contribution to be paid by an employer arrived at and submitted?
The employer has to file the details of contribution payable in respect of each month, latest by the 21st of the succeeding month, online. If the contribution is not filed and the amount payable remitted by 21st of the succeeding month, the employer would be liable to pay interest and damages for delayed payment. The employer can file the contribution in the respective screens in the employer portal, or it can use the prescribed spreadsheet template (MS-Excel) which can be downloaded from the employer portal and upload the template file, duly filled in.