Employee State Insurance Act set the foundation for Employee State Insurance (ESI) in 1948 in India. It is one of the many saving schemes in India. Social security schemes safeguard the economically underprivileged and working class from financial instability.
For example, unemployment pay-outs ensure that people who lose jobs have some financial cushion to fall back on until they find another employment. Employment, health, retirement, childcare benefits, girl child benefits and food security are covered under different social security schemes.
Similarly, ESI or Employees’ State Insurance, CGHS (Central Government Health Scheme) provide a financial support structure for healthcare.
Other social security schemes include employment guarantee schemes such as:
✓Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Provides for at least 120 days of employment per household in a given year.
✓Atal Pension Yojana (APY): Supports retired citizens with a guaranteed pension that will help sustain old age when income from employment ceases.
It is a self-funded healthcare scheme where the members contribute to build their corpus. The advantage of this scheme is the concessional healthcare facilities provided to the members through the network of ESI hospitals.
ESI covers the following benefits:
✓ Medical Care
✓ Sickness Benefit
✓ Maternity Benefit
✓ Disablement Benefit
✓ Dependants Benefit
✓ Funeral and Confinement Expenses
Healthcare is an area of growing concern. The financial support ESI offers can help families retain their financial backbone and avoid falling into poverty due to unforeseen emergencies.
ESI is provided on the contribution of a nominal 0.75% of the wage by the employee. Whereas, the larger 3.25% chunk is borne by the employer. The amount of contribution depends on the total wages earned per month. The upper limit on wages to be eligible for ESI is Rs.21000 per month.
Ramesh earns Rs. 18,000 working in a pharmaceutical manufacturing plant.
A total contribution of Rs. 720 will be made, and the employer is accountable for depositing the amount with the ESIC in the same calendar month.
Employees working in organizations established under Factory Act and Shops & Establishments Act are eligible to be covered under ESI. Their monthly wages should not exceed Rs. 21,000, and their employer should have ten or more employees registered on the payroll.
ESI coverage has many features to make the life of covered employees easier. Some of the features of the scheme are listed below:
Benefits of the Employee State Insurance scheme from ESIC have been categorised under various heads for better clarity. Here are more details about them:
Unemployment benefit is available to ESI members after being a member for at least two years. The benefit applies to those who lose their jobs due to factory closure, retrenchment or permanent invalidity. The allowance under this benefit includes:
✓ 50% of the last wages for up to two years during the pfetime
✓ Medical care for the member and their family for the period of the allowance at ESI hospitals and dispensaries
✓ Expenses related to the vocational training to upgrade skills
Medical care is the primary benefit of the scheme and is available to the members and their dependent families from the first day of membership. It is also available for retired and permanently disabled members and their spouses for a nominal premium of Rs 120 p.a.
Upon contributing for at least 78 days in a six-month contribution period, members become eligible for sickness benefits. The benefit provides 70% of the wages for the sickness period. The maximum sickness period allowed in a year is 91 days.
The ESI scheme provides two types of disability benefits:
If the female member has contributed for at least 70 days in the preceding two contribution periods, she’s eligible to receive a maternity benefit for up to 26 weeks. The benefit is equal to 100% wage.
The benefit is extendable by a month.
In case of a member’s death due to occupational hazards, the dependent family member receives up to 90% of the wage every month.
The dependents will receive Rs 15,000 upon the untimely death of a member. Confinement benefit is payable to the member female or member spouse of a female where ESI facilities are not available.
Any establishment employing at least 10 employees or workers should register itself under ESIC. The number of employees/workers is 20 for Maharashtra and Chandigarh. Employees with a salary of up to Rs 21,000 or Rs 25,000 in the case of employees with disabilities are eligible for the ESI membership.
Eligible employees contribute 1.75% of their wages while the employer contributes 4.75%. Workers with a daily wage of Rs 50 or less are exempt from contributing to the scheme and only their employers will contribute.
The following documents are necessary for securing ESI membership:
Once you have all the documents, you can follow the online registration process for ESI membership:
Step 1: Visit the ESIC Portal and ‘Sign Up’ as a new user.
Step 2: Enter your details like company/employer name, state, region, email ID, and phone number.
Step 3: Tick the checkbox to confirm your establishment’s labor contract - manpower suppliers, security agencies, or contractors supplying labor categories.
Step 4: Submit the form, and you will receive an email with login credentials.
Step 5: Visit the ESIC Portal to ‘Login’.
Step 6: Use the username and password received in the email to ‘Login’ to your portal.
Step 7: Select ‘New Employer Registration’.
Step 8: Select the type of unit and click on submit.
Step 9: On the next page, enter the name of the unit, postal address, and the police station under whose jurisdiction your unit is.
Step 10: Enter if the building or the premises of the factory or the establishment is owned or hired, and click on ‘Next’ to proceed.
Step 11: Provide details like the nature of the business, category, PAN details, etc. and click ‘Next’.
Step 12: Enter the date of commencement of the establishment/factory and license details (if any).
Step 13: Provide the ownership details - the constitution of ownership, and details of owners. Click ‘Next’ after completing. You should ‘Save’ the form while you complete the details.
Step 14: Enter the total number of employees in your establishment and the number of employees earning less than Rs. 21,000 and click on ‘Save’.
Step 15: Enter the date when the first 10/20 employees were employed and click on ‘Employee Declaration Form’.
Step 16: Select ‘No’ if IP is not registered. If already registered, select ‘Yes’ and provide the IP number and date of joining. Click on ‘Continue’ once done.
Step 17: Enter the name of the IP and their details like the father’s name, address, date of birth, gender, marital status, family details, and date of joining. Click on the checkbox and click on ‘Submit’ once complete.
Step 18: ‘Close’ the new page after ensuring all details are complete.
Step 19: Select the nearest ESI branch and inspection division.
Step 20: Click the declaration checkbox and ‘Submit’. You’ll be redirected to a new page.
Step 21: On the next page, you will need to pay the first contribution. Check ‘Pay Initial Contribution’ and click ‘Submit’. You will receive a Challan Number for future reference.
Step 22: Continue to the required payment gateway and complete your payment. You will receive an ESI registration letter C-11 in your e-mail. The letter acts as proof of your successful registration.
When you started your career, your monthly wage may have been Rs. 21,000 or lower which made you eligible for benefits under the ESI act. Over the years, you would have received increments. Your monthly wage, now, does not entitle you to this social security benefit provided by ESI.
However, it does not mean you have to go without a backup for funding emergency medical treatments. Once you no longer qualify for social security schemes like ESI, you should start considering commercial schemes.
You must look at other aspects of life where there is a risk and cover those with relevant life insurance policies. Some of these are listed below:
A term plan provides affordable financial safety for your family. It gives your family financial protection in case of your unfortunate, untimely demise. They will receive the death benefit and manage expenses during your absence. If you have a term cover of Rs. 1 Crore and you pass away at 72, your nominee will receive this amount.
Learn more about Canara HSBC Life Insurance - iSelect Smart360 Term Plan.
Guaranteed Saving Plans work best if you are looking for pay-outs to match future expenses at specific milestones. These plans are ideal for you if you are looking to build wealth safely as the returns are guaranteed.
Know more about Canara HSBC Life Insurance - iSelect Guaranteed Future.
ULIPs give you options to invest in both debt and equity instruments because of which you benefit from the higher returns from equity while having the safety of debt. Social security schemes such as ESI are excellent options to protect yourself and avail healthcare facilities with a nominal investment. However, broader insurance plans give you more benefits. You must consider upgrading to an insurance plan when you can.
Similarly, life insurance plans, Public Provident Fund (PPF) are savings schemes that help to build a habit of saving among the working class. These schemes help you save tax, grow your savings, and build a better future for your family. The Payment of Gratuity Act encourages employees to stay long within an organization and reap loyalty rewards.
The full form of ESI is Employees’ State Insurance.
Employees and workers of establishments with 10 or more employees/workers are covered under the ESI scheme. The number goes to 20 for establishments and factories operating in Maharashtra and Chandigarh.
The due date for paying and filing monthly ESI contributions and returns is the 15th of every month.
Under ESI Act, non-payment delayed payment, or falsifying payments can lead to imprisonment and a fine. The imprisonment period can extend up to 2 years with a fine of up to Rs 5,000.
As per the act, all employees whose earnings are Rs. 15,000 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.
Employers with more than 10 employees or workers (20 in Maharashtra and Chandigarh) are legally required to register under ESIC. Employees or workers with salaries of less than Rs 21,000 p.m. (Rs 25,000 in the case of workers with disabilities) are automatically eligible for ESI membership.
The ESI Code number is a 17-digit code which is allotted to every establishment or factory registered under the Employees’ State Insurance (ESI) Act, 1948. The number is generated automatically by the ESIC portal after you complete the details and register as an employer.
You can check the claim status under ESIC using your smartphone with the following steps:
The employer is responsible for paying the employee’s and own parts of ESI contribution into the authorised ESIC account within 15 days of the previous month’s ending.
If an employee’s wages exceed Rs 21,000 (or Rs 25,000 in the case of an employee with a disability) the employee will remain a member of ESI until the contribution period ends in April or October. Thus, the employee will keep contributing as per the new wages until the period and membership ends.
The ESI Scheme applies to factories and establishments such as transport firms, hotels, restaurants, cinemas, newspapers, shops, and educational and medical Institutions. All such establishments employing 10 or more persons must avail of the ESI membership. The maximum exempt number for employers is 20 for establishments in Maharashtra and Chandigarh.
Employers should maintain the following records for ESI compliance:
The immediate employer must also maintain the Employees’ Register for the employees deployed to the principal employer.