Employee State Insurance (ESI)
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Employee State Insurance (ESI)

What is ESI?

Employee State Insurance Scheme of India is a multidimensional social system tailored to provide socio-economic protection to the working population and their dependents covered under the scheme.

It provides full medical care for self (contributor) and their dependents, which is admissible from day one of insurable employment.

Insured persons are also entitled to a variety of case benefits in times of physical distress due to sickness, temporary or permanent disablement, and such which results in loss of earning capacity, the confinement in respect of insured women, dependents of insured persons who die in industrial accidents or because of an employment injury or occupational hazard are entitled to a monthly pension called the defendant’s benefit.

ESI applicability

  1. ESI Act applies to all non-seasonal factories (including Government factories) which employ 10 or more employees and carry on a manufacturing process with the aid of power.
  2. This ESI Act is also applicable for all non-seasonal and factories not using power employing 20 or more persons
  3. The scheme was further extended to shops, hotels, and other establishments with 20 or more employees

ESI coverage and contribution

All employees, casual, temporary, or contract workers whose gross earnings are less than Rs.21,000 per month (from January 2017) are covered under the act.

ESI contribution

The Government of India has reduced the ESI contribution rate from 6.5% to 4%. The employers’ contribution is reduced from 4.75% to 3.25% and employees’ contribution is reduced from 1.75% to 0.75%. Reduced rates will be effective from 1st July 2019.

Both the employer and the employee will make a contribution to ESI.

The rate of contribution is:

  • Employee’s contribution – 1.75% of the gross earnings
  • Employer’s contribution – 4.75% of the gross earnings

A total of 6.50% has to be calculated and remitted by the employer.

The due date for payment of ESI is on or before the 21st of the following month, the month to which the salary relates. E.g.: If ESI is deducted from the salary of July month, then the remittance is done on or before the 21st of August.

If the employee is drawing up to Rs.75/- as a daily average wage, he is exempt from the payment of his share of contribution. The employer is however to pay the employer’s share of 4.75% of the salary received/receivable by the employee.

There are two contribution periods, each of six months duration, as follows:

  • 1st April to 30th Sept.
  • 1st Oct to 31st March of the year following

ESI benefits

The benefits under the ESI scheme can be broadly classified as follows:

  • Primary medical care
  • Specialists and diagnostic services
  • In-patient care
  • Maternity needs
  • Super-specialty treatments
  • Disablement benefits
  • Dependent benefits
  • Miscellaneous benefits like Funeral expenses, Rehabilitation allowance, Old age medical care, etc.