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ESIC and Its applicability Criteria in India

esic

Introduction to Esic

Under the ESI (Employee State Insurance) Act, 1948, Employee State Insurance Corporation (ESIC) was set up as a corporate body functioning under the Ministry of Labour and Employment, Government of India. ESI Act was formulated as a scheme to protect the employees during any situation of financial distress which arises out of various reasons such as death due to employment injuries, sickness, disablement, this was also highlighted in the same of Transport Corpn. Of India v. ESI Corpn.[1]

ESIC and its applicability

The ESIC is a body which manages the funds which are to be granted under the ESI Act. The corporate body has its headquarters in New Delhi. ESIC has regional offices at 23 places and sub-regional offices in 26 places and there are over 800 local offices functioning throughout the country.

ESIC applicability

The social security scheme under the ESI act which is self-financing in nature is effectively applicable to all factories and other establishments which are covered under this act.

The ESIC applicability criteria are:

  1. has a total employee strength of 10 or more and[2];
  2. the monthly wage of such employee does not exceed Rs. 21,000/-.

The amount of Rs. 21,000 has been recently amended with effect from 1 January 2017 from a previous coverage amount being Rs. 15,000/-. The scheme for the state of Maharashtra and Chandigarh, require the minimum employee to be 20 in an establishment for coverage under this act.

An institution covered once in this act will always be covered in this act, even if the number of employees at any time goes below 10 or 20 as required. If the amount of 21,000 is increased at any time, then he continues to be covered under this scheme until the end of that contribution period.[3] The contribution period has two parts: one from 1st April to 30th September and second from 1st October to 31st March

The following persons are not covered under this scheme:

  1. A partner or proprietor whether or not drawing a salary;
  2. A contractor;
  3. A person engaged on a contractual basis like legal consultants, tax consultants
  4. Apprentice covered under Apprentice Act, 1961

ESIC coverage

ESIC requires registration by all companies/firms/organization where 10 or 20 employees, as required by law are employed. The act also extends its applicability to Foreign Companies located in India. This scheme also includes restaurants and hotels engaged in sales, shops, theatres, Newspaper establishment, Private educational institutions. An advertising agency was held to be within the meaning of shop as per ESI Act.[4]

The salient feature of this act is the employees are required to pay as per their capability but are granted the benefit as per their needs. To claim benefits, the employee should be registered duly with ESIC and if not then ESIC incurs no liability, this was decided in the case of Sushil Goyal v Luckson Siddique and others. [5]

Amount of Deduction: The contribution is made both by employer and employee. The amount of insurance is deducted by the employer on behalf of the employee. Employee’s contribution is 1.75 percent of the gross salary of the employees and employer contribution is 4.75 percent. The gross salary does not include overtime wages.

The contribution should be deposited with the authorized bank of the corporation within 15 days of the last day of the calendar month.[6] Non-payment or delay in payment of such amount is a punishable offense under section 85 of the ESI act and also attracts an interest of 12 percent per annum in case of delayed payment.[7]

What are the benefits of ESIC?

The benefits can be broadly categorized in two ways: medical benefits and cash benefits. The benefits are:

  1. Medical benefits: starting from the date of employment, medical benefits are provided for self and family
  2. Sickness Benefit: During a medical leave, 70 % of the average daily wage is provided in cash for 91 days in two consecutive benefit period.[8]
  3. Maternity benefit: this benefit is provided with 100 percent average daily wage for a mother up to 26 weeks, for 6 weeks in case of miscarriage, 12 weeks for a commissioning mother/adopting mother.
  4. Disability Benefit: ESIC grants monthly payment in case of temporary disablement till injury lasts and lifelong in case of permanent disablement.
  5. Dependants’ benefit: In case of death due to employment injury, the monthly payment is granted to dependants. Also, the funeral expenses are born by the ESIC
  6. Unemployment Allowance: if the case is of involuntary loss of employment, ESIC provides for monthly cash allowance for a duration of 24 months (maximum).

Conclusion

The ESIC has been designed for providing security to the employees and their dependent families. The scheme provides for numerous benefits and also covers a large number of employees. The amount deducted is per the capability of employee and the amount given as benefit is as per the need.

[1] (2000) 1 SCC 332

[2] Under Section 1(5) of the ESI Act

[3] Rule 50 of Employee’s State Insurance (Central) Rules, 1950

[4] ESIC v R.K. Swamy, (1994) 1 SCC 445

[5] FAO no. 244/2010

[6] https://www.esic.nic.in/attachments/files/faq.pdf

[7] Regulation 31-A

[8] https://www.esic.nic.in/benefits

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by supriya dash
  1. I read your blog. It’s very nice and very useful for me. Thanks for sharing useful information with us. I’m India Tax and we provide Taxation, Goods and Service Tax , Assurance, Consulting, Mergers and Acquisition to Corporate Financial Advisory and also provide franchise for more information Visit our website.
    https://www.itaxinfo.com

  2. hello,
    i have one Question suppose my CTC more than 15K monthly and and i told my employer that i don;t want PF deduction in that case he agreed on that. so from my CTC PF not deducted but ESIC also waive of from my CTC OR they will deduct Employee Contribution From my CTC.


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