Introduction

The Employee’s State Insurance Corporation (ESIC) is a statutory body under the Ministry of Labour and Employment, Government of India. It administers the Employee’s State Insurance (ESI) scheme, which provides social security and health insurance to employees working in various sectors.

What is ESIC?

ESIC is an autonomous organization that ensures employees receive medical care, financial benefits, and social security in case of sickness, maternity, disability, or employment injury. The scheme is applicable to establishments covered under the ESI Act, 1948.

Applicability of ESIC

The Employee’s State Insurance Corporation (ESIC) scheme applies to various establishments based on specific criteria.

1. Coverage of Establishments

• Applicable to factories, shops, hotels, restaurants, cinemas, road transport services, educational institutions, hospitals, and private medical institutions.
• Any establishment notified by the State or Central Government under the ESI Act, 1948.

2. Employee Coverage

• Employees earning a total salary of up to Rs. 21,000 per month (Rs. 25,000 for disabled employees).
• If an employee’s wages exceed Rs. 21,000 during the contribution period, they remain covered until the end of that contribution cycle.
• Employees working in both organized and unorganized sectors.

3. Minimum Employee Requirement

• Mandatory for employers with 10 or more employees in most states.
• In some states, the threshold is 20 or more employees.

Contribution to ESIC

The Employee’s State Insurance Corporation (ESIC) scheme is funded through contributions made by both employers and employees based on their wages.

Contribution Rates

Contribution rate (as a percentage of earnings)

Employer: 3.25% of employee’s wage

Employer: 0.75% of employee’s wage

Key Points:

• Total Contribution: 4% of the employee’s gross salary.
• Employee Exemption: Employees with daily earnings below ₹176 are not required to make contributions, but the employer must still contribute.
• Wage Ceiling: Applicable to employees with a gross salary of up to Rs. 21,000 per month (Rs. 25,000 for disabled employees).
• Payment Deadline: ESIC contributions must be deposited by the 15th of the following month.
• NOTE:- Employees earning less than Rs. 176 per day are exempted from their contribution.

Benefits of ESIC

ESIC provides several benefits to insured employees and their dependents:

1. Medical Benefit

• Full medical care for the insured person and their family.
• Covers hospitalization, outpatient services, and specialist consultations.

2. Sickness Benefit

• 70% of wages paid for up to 91 days in a year in case of certified illness.
• Extended sickness benefit for chronic diseases up to 2 years.

3. Maternity Benefit

• 100% of wages paid for 26 weeks (extendable by 1 month).
• Available to female employees who have contributed for 70 days in the preceding two years.

4. Disability Benefit

• Temporary Disability: 90% of wages as long as the disability continues.
• Permanent Disability: Monthly pension based on the disability percentage.

5. Dependent Benefit

• Monthly pension to dependents in case of an employee's death due to an employment injury.

6. Funeral Expenses

• A lump sum of Rs. 15,000 is provided to the family for funeral expenses.

7. Unemployment Allowance (Rajiv Gandhi Shramik Kalyan Yojana)

• 50% of wages for up to 24 months in case of job loss due to retrenchment or factory closure.

ESIC Registration Process

1. Employer Registration on the ESIC portal (www.esic.gov.in).

2. Submission of employer details and documents (PAN, address proof, list of employees, etc.).

3. Generation of a 17-digit Employer Code Number.

4. Registration of employees and generation of ESI numbers for them.

Penalty for Non-Compliance

• Failure to register: Fine up to Rs. 5,000.
• Non-payment of contributions: Interest at 12% per annum.
• Non-compliance with ESIC rules may lead to legal action, penalties, and imprisonment.

Salary or Wages Components Included in ESI Scheme

Under the Employee’s State Insurance (ESI) Scheme, wages are broadly defined as all remuneration paid to an employee while on duty or on leave, including various allowances. The components of wages covered for ESI contribution include:

1. Components Included in ESI Wages:

• Basic Salary
• Dearness Allowance (DA)
• House Rent Allowance (HRA)
• Conveyance/Transport Allowance
• Medical Allowance
• City Compensatory Allowance (CCA)
• Overtime Wages (if paid regularly)
• Night Shift Allowance
• Meal/Food Allowance
• Bonus/Incentives (if paid monthly)
• Leave Encashment (paid during service)
• Attendance Bonus
• Commission (if paid regularly)

2. Components Excluded from ESI Wages:

Certain components are not considered for ESI contribution, such as:

• Statutory Bonus (Annual bonus)
• Gratuity
• Retrenchment Compensation
• Encashment of Leave (at the time of termination/resignation)
• Employer’s Contribution to PF and ESI
• Overtime Allowance (if paid occasionally)
• Service Compensation
• Production Incentive (if paid yearly)

Is ESI Contribution Amount Refundable?

No, the Employee’s State Insurance (ESI) contribution amount is generally non-refundable. The contributions made by both the employer and employee go towards providing medical, disability, maternity, and other social security benefits under the ESI scheme.

Exceptions Where Refund May Be Possible:

In certain cases, refunds may be processed:

1. Excess Contribution Paid:

• If an employer mistakenly overpays ESI contributions, they can apply for a refund.
• The refund is processed after verification by the ESIC department.

2. Deduction from Ineligible Employees:

• If an employee earns above Rs. 21,000 per month but ESI contributions were deducted mistakenly, they may be eligible for a refund upon request.

3. Wrongful Deduction After Resignation/Exit:

• If ESI was deducted after an employee left the organization or was no longer eligible, the employer can apply for a refund.

4. Technical or Banking Errors:

• If a transaction fails or an amount is debited twice, ESIC may process a refund upon proof of the issue.

Process for Refund Application:

• Employers must submit a written request or apply through the ESIC online portal.
• Supporting documents such as salary records, bank statements, and challans may be required.
• Refund processing depends on ESIC verification and may take a few weeks to months.

Conclusion

The ESIC scheme is a crucial social security initiative that provides comprehensive benefits to employees and their families. Employers must ensure timely compliance with ESIC regulations to avoid penalties and support employee welfare.

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