Employees’ State Insurance Act, 1948

Prepared byJanardan Raccha

ESI Act

Applicability Advantages for employers Coverage - Procedure Individual / Family Coverage Contributions Registers / Returns / Forms Forms Inspection Requirements Benefits Wages Clarifications Donts ( Punishment )

Applicability

Preamble Applies to Non-seasonal factories using power in the

manufacturing process and employing 10 or more persons

Applies to non-power using factories or establishments employing 20 or more persons

Implemented area wise by stages Appropriate Government is empowered to extend – Sec

1 (5) Thus extended to Shops, Hotels, Restaurants, etc. Factories and Establishments are to be registered

Advantage to employers

Employers exempted from Maternity Benefit Act Employers exempted from WC Act Employers are absolved of providing medical facilities Employers have, a productive, well secured workforce Any sum paid by way of contribution under the ESI Act

is deducted in computing ‘income’ under IT Act

Coverage - Procedure

Form 01 is to be submitted within 15 days A factory or establishment once covered will continue to

be covered Allotment of sub-code number Form 01A to be submitted every year before 31st Jan Form 1 ( declaration form ) is to be submitted along with

Form 3 ( return ) within 10 days ESIC 86 – Certificate of employment issued to IP by the

employer

Procedure for coverage of an employee

Particulars in the form are legible and properly filled Details of family are indicated Particulars of ‘nominee’ are necessarily given Declaration forms of females are stamped ‘Female’ Declaration forms must be counter-signed by employer Must be submitted along with Form 3 within 10 days Two postcard size family photographs are enclosed

Individual / Family Coverage

Employees drawing Rs 10000/- pm or less are to be covered

Contract Labour is also to be included Casual employees are to be covered Director of a company – to be covered Part-time workers covered Apprentices under the Apprentices Act are not covered Form 1A – Registration of family Form 2 – Registration of changes in the family

Contribution

Employer’s contribution : 4.75 % Employee’s contribution : 1.75 % The Principal Employer has to pay both the

contributions in the first instance Employees earning a wage of Rs 70 or less per day are

exempted from making employees’ contribution Time limit for remittance : 21 days Contribution for arrears – need not be paid Contribution to be rounded off to the next higher rupee

Registers / Returns / Forms

Register of Wages ( Form 6 ) Return of contributions ( Form 5 ) – within 42 days – in

quadruplicate Accident Register ( Form 11 ) Accident Form ( Form 12 ) – within 24 hours Inspection Register

Forms

Form 28 – Abstention verification ESIC 37 – Certificate of Re-employment / continuing

employment ESIC 53 – Application for change in BO / Dispensary ESIC 72 – Application for duplicate identity card ESIC 105 – Certificate of entitlement for medical

treatment

Inspection Requirement

Attendance Register / Muster roll ( including CLs ) Wages Register Cash Book / Bank Book Account Books ( including ledgers and vouchers,

Balance Sheet ) Register of employees Accident Book Return of Contribution Return of Declaration Forms Copies of Challans Inspection Book

Sickness Benefit

For self Contribution for 78 days in the corresponding CP Standard Benefit Rate ( Roughly 50% of daily wages ) Max period of sickness benefit – 91 days

Extended Sickness Benefit

For Self 34 diseases listed Continuous employment for 2 years and contribution for

156 days in 4 preceding CPs 40% more than SBR ESB is payable for 309 days over and above 91 days of (

SB ) : Total – 400 days

Enhanced Sickness Benefit

For Self For Vasectomy / Tubectomy Contributory Condition : Same as Sickness Benefit Double the SBR ( Not less than the daily wage ) Max : 7 days for vasectomy and 14 days for tubectomy

Disablement Benefit

For Self No ‘contributory conditions’ For temporary disablement, till it lasts For permanent disablement, for life 70% of wages for TDB Proportionate to loss of earning capacity in case of

permanent disablement

Dependent Benefit

For dependents in case of death No ‘contributory conditions’ Eligible dependents : Widow/s, legitimate or adopted

son/daughter till 18 years of age / till marriage ( daughter )

Proportionate rate based on 70% of wages

Maternity Benefit

For Self Contribution for 70 days in two preceding consecutive

CPs 12 weeks in case of normal delivery 6 weeks for miscarriage 16 weeks for pregnancy based sickness Full wages ( appro. )

Funeral Expenses

To a person who performs the last rites of an IP No ‘contributory condition’ A lump sum of Rs 2500. Payable to eldest surviving member of the family ( who

incurs the expenditure on the funeral )

To be deemed as wages ( illustrative list ):

Basic Production incentiveDA Bonus other than statutory BonusHRA Meal / Food allowanceCCA Suspension allowanceOT Lay off compensationNSA Children Education allowance

Not to be deemed as wages ( illustrative list ):

Contribution by employer for PF / ESISum paid to defray special expensesGratuityEncashment of LeaveWashing AllowanceBenefits paid under ESI schemePayment of Inam which does not form part of contract of

emp.Reimbursement of conveyance exp. for duty related

journey

Aids to record keeping – Rubber Stamps

About 1” size with employer’s code no. Name and Designation of the officer who is to counter

sign Name, Address and Code No. of the employer A rubber stamp with the word ‘Female’

Clarifications

Partner of a firm need not be covered Professional Consultants need not be covered Insurance premium subsidy will be ‘wages’ Non-payment of contributions due to non-availability of

finance Contributions payable even if the benefit is not received Contracting out is not possible Dismissal not possible during sickness

Clarifications

OT is considered for contribution purpose and not for coverage

Employee to be covered does not have the right to opt out

Establishments can seek exemption but it is not done now-a-days

Bifurcation of total contract amount Contribution period : 1st Apr – 30th Sep & 1st Oct – 31st

Mar Benefit period : 1st Jan – 30th Jun & 1st Jul – 31st Dec

Clarifications

Applicability to Hospitals A Hotel will be a factory under ESI Act Notional extension of manufacturing process ( service at

customer’s place ) A club is to be covered Manufacturing Process will include tailoring and

garment manufacturing There must be 20 eligible employees ( ESIC Vs M M Suri

& Associates 1998 LLR 1105 SC ) Different sales and service outlets will be clubbed

together Functional integrality

Don'ts

Failure to pay the contributions Deduction of Employer’s contribution from employees Reduction in wages Termination during sickness Failure to submit return Obstructing the inspector All the above warrant imprisonment and fine For delay in paying the contributions, interest and

damages will be levied

Interest and Damages

Rate of interest is 12% for delayed payment Rate of damages is 5% for less than 2 months 10% for 2 to 4 months 15% for 4 to 6 months 25% for 6 months and above