All About ESI - History, Benefits and Coverage

What is the meaning of ESI?

ESI full form is Employee State Insurance. Employee State Insurance Corporation is the main controlling body of ESI contributions in India and is responsible for managing various ESI provisions. ESI not only caters insurance protection to employees in the public and private sectors but also provides additional health and medical benefits. Furthermore, these benefits encompass insurance in the event of maternity, disability, sickness, death, or any work-related injuries. Moreover, it extends to cover medical care for the employee’s families.

Inception of ESI

In 1920, the formation of a Royal Commission marked the birth of ESIC as a contributory insurance system against sickness, disability, and death due to employment injury. Subsequently, over the years, ESIC has implemented numerous changes and introduced various benefits for establishments employing more than 10 people. These benefits include, but are not limited to, medical care, hospitalization bill coverage, coverage for dependents, confinement costs, funeral costs, and more.

How the contributions to ESI are made?

The employer contributes 3.25% of the employee’s wage to ESIC, whereas the employee bears 0.75% of the contribution. The contribution depends on the total wages earned per month. The employer must contribute towards ESIC by deducting employee's contributions from their wages, combining them with their contribution, and depositing the combined contributions within the stipulated timeframe.

Non-compliance or delay of ESIC contribution can lead to the employer facing severe penalty fines and imprisonment based on the nature of the offence.

The ESI is calculated based on the various parts of the employee’s salary, including Basic Salary, DA, City Compensatory Allowance, HRA, Incentives, Attendance and Overtime Payments and more.

Penalty for non-compliance of ESI

To ensure employers contribute towards the ESIC scheme on time, the court system of India has set punishments for failing to meet the scheme's obligations. The following provisions describe the offences and the related penalty for non-compliance

Section 84: Penalty for false statements

Making false statements while attempting to avail of scheme benefits can result in the person being fined up to Rs 2,000 and/or imprisoned for up to 6 months..

Section 85(a): Penalty for failure to pay a contribution

All employers must pay a contribution to ESI Corporation to benefit the employees. Moreover, any delay or non-compliance to this rule can lead to imprisonment of up to 3 years and a Rs 5,000 fine.

Additionally, if the employer has deducted the contribution from the employee but not submitted it to ESI, the employer can face minimum imprisonment for up to 1 year and a fine of Rs 10,000.

Section 85(b) to (g): Penalty for non-compliance with other requirements

Apart from contribution payment, there are other obligations that an employer must follow. Non-compliance can lead to imprisonment of a maximum 1 year and /or a fine of up to Rs 4,000

Section 85-A: Punishment for repeating an offence

If an employer repeats an offence they have been convicted for, they could receive imprisonment for up to 2 years and a fine of Rs 5,000

Section 85-B: Power of ESI Corporation to recover contributions

If the employer fails to make the contribution payment, the ESI Corporation is authorized to recover the payment from the employer.

Section 85-C: Court’s power to direct payment of contribution

When an employer has been previously convicted of non-compliance charges, the court can ask to pay his ESIC contribution for the duration of his sentence. The amount can also be extended periodically.

Section 86-A: Offences by companies

If a company commits an offence, the person running the company is held responsible for the offence and liable for punishment.

Read More:ESI Calculation and Contribution Rate 2023

Why should you have an ESIC account?

ESI is a government-sanctioned social security scheme that provides health benefits and medical assistance to the employee's family and their dependents in the event of a work-related injury, sickness, distress, disability or any other unprecedented event.

Who regulates ESI?

The Employee State Insurance Corporation (ESIC) manages the provisions of ESI under the Ministry of Labor and Employment, Government of India, and is regulated by the ESI Act of 1948. Under its legal framework, ESI is authorized to obtain loans and discharge the required loan for employee benefits after obtaining approval from the central government.

What benefits does ESIC cover?

ESI encompasses all the businesses across India that fall under the Shops and Establishments Act or the Factory Act with more than 10 employees. These businesses include shops, restaurants, cinemas, newspaper establishments, private educational institutions and more.

Benefits and Provisions Offered by ESIC

ESI provides many provisions and benefits for employees and their families under the following categories.

Health Insurance Coverage

ESI helps cover health insurance for the employee’s families and dependents. It includes medical expenses, hospitalization bills, maternity benefits and more.

Maternity Coverage

ESI offers various benefits for female employees, including paid maternity leave and medical expenses related to childbirth. This enables the women to care for their child without worrying about incurring high costs or losing their income.

Disability Benefits Coverage

ESI provides various benefits for employees who are temporarily or permanently disabled due to work-related injury

Sickness Coverage

ESI enables financial assistance to the family and dependents when the employee is unable to work due to sickness. This ensures that employees continue to receive a portion of their wages during their illness, reducing financial stress during such times.

Unemployment Coverage

ESI enables employees to care for their family and dependents when they lose their job due to workplace injury, sickness or any other unprecedented event.

Dependents Benefits

When the employee is unable to work due to disability, sickness or injury at work, the scheme enables the dependents to receive various benefits such as financial assistance, hospitalization, medical benefits and more to help them get through difficult times.

Funeral Cost Coverage

ESI provides financial assistance to the family of the employee in the event of the employee’s demise so that they can manage the funeral costs at a difficult time.

Confinement Costs

In case the event occurs where the scheme cannot cover medical care, the insured or dependent can avail confinement costs under the scheme.

Rehabilitation Cost Coverage

ESI offers schemes for rehabilitation and training to employees after a work-related injury so that they may regain their confidence and re-enter the workforce if possible

How to register for ESIC?

Any employer with more than 10 workers whose monthly wages are not more than Rs 24,000 can register their establishment under ESI. The workers will contribute 1.75% of their wages, and the employer will contribute 4.75% towards the scheme, except for workers with a daily wage of Rs 50, in which case only the employer will contribute towards the scheme.

The following documents are necessary for securing ESI membership:

• Registration certificate under the Shops and Establishment Act or Factories Act.
• Registration certificate for the company or partnership firm.
• Article of Association and Memorandum of Association.
• List of directors and shareholders of the company.
• List of all employees and workers at the establishment.
• Compensation details of all employees and workers.
• PAN card details of the organization and employees.
• A cancelled cheque for the company bank account.
• Attendance details of all employees.

ESI Common Myths and Misconceptions

People may have certain myths and misconceptions about ESI and its benefits and policies. Here are some of the common ones, which we clarify with an explanation

ESI is the same as EPF (Employee Provident Fund)

People may believe that ESI (Employee State Insurance) and EPF (Employee Provident Fund) are the same. In reality, ESI provides health and medical benefits, whereas EPF is a retirement savings scheme.

Only blue-collar workers are eligible.

Some may believe ESI only applies to blue-collar jobs (factory workers, manual labourers, etc). ESIC covers not only blue-collar workers but also white-collar and company employees.

ESI is a voluntary scheme

ESIC is a government-mandated obligation for employers, ensuring employee and dependent welfare and security through regulations.

Employers can deduct ESI contributions from an employee's salary

Employers cannot directly deduct the employee’s contribution from their wages. The employers are only responsible for contributing their share towards ESIC. The employer deducts the employee's share and remits it on the employee's behalf.

ESI covers only hospitalization expenses

ESIC covers more than just hospitalization expenses. It also covers various other services, including medical, sickness, maternity, disablement and dependent benefits.

ESIC benefits are taxable

Even though some of the ESIC benefits may appear taxable, ESIC is considered non-taxable income for the employees..

ESI is available only for government employees

ESIC applies to employees of both private and public sectors, provided they meet the eligibility criteria

ESI covers all medical expenses

ESIC covers numerous health expenses but not all. Be mindful of coverage and terms when considering the scheme.

Registration in ESI can be complicated

Contrary to popular belief, the registration process for ESIC is simplified and streamlined with proper guidance and documentation.

Conclusion

ESI is a government scheme under the ESI Act to provide various health and medical benefits to employees of all spectrums. In most cases, employers are required to provide financial protection in the event of employee sickness, injury, disability, or death.

Written by Lokesh Aggarwal Brand Name - Tankha Pay Wesbite: https://www.tankhapay.com/