ESI Registration

Why ESI Registration is Mandatory?

We are looking at the significance of ESI registration in this article but before that let’s understand its meaning.

What is ESI?

Employee State Insurance (ESI) is a self-financing social security plan and health insurance scheme for Indian workers. It is governed by the ESI Act 1948. Funds under ESI are managed by the ESI Corporation which comes under the Ministry of Labour And Employment, Government of India.

ESI Registration is to be mandatorily done when the employers are having more than 10 employees but it applies to employees with low earnings. As per the act, all employees whose earnings are INR 15000 or less per month, it is required for them to contribute 0.75% of their pay towards the ESI and 3.25% by the company towards ESI.

This scheme provides various benefits related to medical benefit & cash benefit to the employees and their families such as a large network of hospitals, dispensaries all over the country for effective medical treatment. Medical treatment includes surgical treatment, the supply of drugs, ambulance services in addition to this it also provides sick pay benefits. This scheme improves the morale of workers. It provides social protection to the employees in the business.

Which entities are covered under ESI?

Under the ESI Act of 1948, many establishments are eligible for registration. The entities that are covered include the following:

• Shops;
• Restaurants or hotels;
• Road Motor Transport Establishments;
• Newspaper establishments;
• Private Educational Institutions;
• Cinemas.

Significance of ESI Registration

The significance or its importance can be gauged by the following points:

• One can gain sickness benefits at the rate of 70% of such employee’s salary;
• Medical benefits is also provided;
• Women can enjoy maternity benefits in the form of paid leaves;
• Funeral expenses are also covered in case of death of any employee under ESI;
• Medical care and benefits can be enjoyed after retirement or in old age;
• If there is a case of permanent disablement to the insured person, 90 per cent of his salary shall be given as monthly payment.

Contribution of Employees and Employers

Employee’s Contribution	0.75% of the compensation
Employer’s Contribution	3.25% of the Compensation

Collection of the Contribution

The employer is liable to pay a contribution of employees and deduct a contribution of employees from their wages and have to pay these contributions to the ESI Corporation^[1] on the specified rates within 21 days from the last day of the month.
The Corporation has the designated branches of the banks to receive the payments.

Contribution Period and Cash Benefit Period

Contribution Period	Cash Benefit Period
1st April to 30th September	1st January of the following year to 30th June
1st October to 31st March	1st July to 31st December

As per the act, the existing limit is Rs. 15000/ Per Month. ESI contribution is required for all the employees earning up to 15000 Per Month.

All those employees who are earning more than 21000 Per Month are exempted from the ESI contribution. The ceiling for an employee with a disability is Rs. 25000/ – Per Month.

Penal Provisions in case of Delay

The corporation can levy and recover damages according to the regulations at the rates mentioned below, not exceeding the amount of contribution payable for default or a delay in the payment.

Period of Delay	Rates
Less than 2 months	5%
2 to 4 Months	10%
4 to 6 Months	15%
6 Months and above	25%

Record Maintenance

The employer is required to maintain the following registers:

1. Employee’s Register in Form 6;
2. Accident Register in Form 11;
3. Inspection Book.

For the immediate employer, it is required to maintain a register of employees to the principal employer.

Conclusion

The provision of ESI registration has been made for the betterment of workers and for their benefit. The employer should make sure that this purpose is served sincerely. In case of any other information regarding ESI or related laws, consider reading our blogs.

Read our article: Employee State Insurance: ESI Registration