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ESI Law & Compliances

ESI Law & Compliances

by CA Jai Kumar Shah, October 22, 2021

Introduction

Employees are the most important resources in any organisation and to take the utmost care is the responsibility of the employer. The government has introduced various schemes for the benefits of the employees, one such scheme is Employee State Insurance i.e., ESI.

ESI aims to medical insurance to employees who earn less Rs. 21,000/- a month. It includes various types of medical benefits to the employees during and after the employment. In ESI, employer contributes 3.25% of the Salary and employee contributes 0.75% of the Salary. This contribution is paid to the government through the monthly challans and employee becomes eligible for the benefits under the ESI.

Few benefits that an employee enjoys under ESI:

Employee and his family members get the medical benefits through ESI hospitals or ESI medical practitioners.

Maternity benefits in the form of paid leaves can be availed.

If any sickness lasts for 91 days, employee gets 70% of the salary.

If employee dies or becomes disabled during the work then employee or his dependents get 90% of the salary.

Employee’s dependents are paid funeral expenses.

Employee is also paid old age medical expenses.

Applicability:

Barring few exceptions ESI is applicable once you have more than 10 employees in the organization. Once an organisation crosses applicable threshold limit, they need to apply for ESI registration through online portal following the below process:

Process of ESI Registration:

The first step is to register for login id and password at the common registration portal for ESIC and Portal i.e website of shram suvidha. 

At the next step the employer will receive an email and message on mobile number confirming the details and sending the login id and password for the login. 

The next step is to login using the login id and password received on the email id. 

Once logged in, select registration tab on the left and select Registration for EPFO-ESIC link. Once done select “Apply for new registration” on the right and fill the form comprising of details like organisation’s details like PAN, date of commencement of organization, business of the organisation etc. 

After completing the form, submit the form for approval. After approval, a letter in Form C-11 will be generated emailed along with user id and password.

Documents required for ESI Registration: 

  1. PAN Card of the organisation and employees.
  2. Registration certificate of Factories Act or Shop and Establishment Act If any.
  3. GST
  4. Incorporation certificate.
  5. Memorandum of Association, Article of Association.
  6. List of employees and their basic details, family details and bank account
  7. Cancelled Cheque.
  8. Salary of all the employees.
  9. List of directors/partners.

 Time Required

The time required from the submission of the documents is 5-10 days.

FAQs

The employer is required to register under ESI Act when organisation has more than 10 employees and the salary of employees does not exceed Rs. 21,000. It means that ESI will be contributed for only for the employees having salary up to Rs. 21,000.

The Registration is valid throughout the life of the organization. ESI Code is 17-digit code.

For the following are the contribution rates:

  • Employer contributes 3.25% of the salary.
  • Employee contributes 0.75% of the salary.
  • Earlier the contribution rates were as follows:

  • Employer contributed 4.75% of the salary.
  • Employee contributed 1.75% of the salary.

The employee whose salary is less than Rs. 176 per day is exempted for his contribution.

The employer needs to do the following compliances:

  • ESI monthly returns and challans.
  • Register of attendance to be maintained.
  • Register of Accident.
  • Register of Wages.

The ESI registration is required for each and every unit of an organisation having more than 10 employees and having salary up to Rs. 21,000.

ESI registration is not applicable where all the employees in the organisation are withdrawing salary more than 21,000.

The employer must apply for registration of ESI within 15 days of its applicability to the organisation.

The ESI is deposited monthly. The due date for depositing the ESI challan is 15 days from the end of the month to which the contribution relates. Late depositing of ESI challans attract interest rate of 12% p.a. each day of default and disallowance of ESI contribution while computing income tax.

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