ESI stands for Employees’ State Insurance. It is a social security and health insurance scheme in India, managed by the Employees’ State Insurance Corporation (ESIC), a statutory corporate body under the Ministry of Labour and Employment, Government of India.
The ESI scheme was launched under the Employees’ State Insurance Act, 1948, with the primary aim of providing socio-economic protection to employees in the organized sector against financial burdens arising from sickness, maternity, disability, or death due to employment-related injuries.
Core Objectives and Benefits of ESI
The ESI scheme is designed to provide comprehensive medical and cash benefits to insured employees and their dependents. The benefits include.
Medical Benefit
- Full medical care is provided to the insured person and their family members (spouse, dependent children, and dependent parents) from the very first day of insurable employment.
- This covers hospitalization, surgeries, diagnostic tests, medicines, specialist consultation, and even super-specialty treatment.
- There is no limit on the expenditure for the treatment of the insured person or their family members.
- Services are provided through a network of ESI hospitals, dispensaries, and tie-up hospitals.
Sickness Benefit
- Cash compensation at the rate of 70% of wages is payable during certified sickness for up to 91 days in any two consecutive benefit periods.
- Extended Sickness Benefit (ESB): For certain long-term or malignant diseases (e.g., TB, Cancer, Paralysis), an increased rate of 80% of wages is paid for up to 2 years.
- Enhanced Sickness Benefit: Full wages are paid for up to 7 days for vasectomy and 14 days for tubectomy.
- Eligibility: An insured person must have contributed for 78 days in a 6-month contribution period.
Maternity Benefit
- Full wages (100% of average daily wages) are provided for a period of 26 weeks during confinement or pregnancy. This can be extended by an additional month on medical advice.
- Also covers 6 weeks for miscarriage and 12 weeks for adoption.
- Eligibility: The insured woman must have contributed for at least 70 days in the two preceding contribution periods.
- Confinement Expenses: If childbirth occurs in a place where essential medical facilities under ESI are unavailable, a lump sum amount (currently ₹7,500 per case) is paid as confinement expenses.
Disability Benefits
- Temporary Disability Benefit (TDB): Paid at 90% of wages from the first day of employment-related injury, until the disability lasts.
- Permanent Disablement Benefit (PDB): Paid at 90% of wages in monthly installments for the entire life of the insured person, based on the loss of earning capacity certified by a Medical Board.
Dependents’ Benefit (DB)
If an insured employee dies due to an employment-related injury or occupational disease, their dependents (widow, children, dependent parents) are entitled to monthly payments at the rate of 90% of the daily wages. These payments are disbursed equally among the surviving dependents.
Funeral Expenses
- An amount of ₹15,000 (currently) is paid towards the funeral expenses of the deceased insured person. This is payable to the eldest surviving member of the family or to the person who incurs the expenditure, from day one of entering insurable employment.
Unemployment Allowance (Rajiv Gandhi Shramik Kalyan Yojana – RGSKY)
- Provides financial support to insured persons who become unemployed involuntarily (e.g., factory closure, retrenchment, permanent invalidity due to injury).
- Benefits include 50% of the average daily wages for a maximum of 24 months, medical care, and vocational training if needed.
Applicability and Eligibility Criteria
Establishment Coverage
- The ESI Act applies to all factories and other establishments (including shops, hotels, restaurants, cinemas, road transport establishments, newspaper establishments, educational/medical institutions, etc.) that employ 10 or more persons.
- State-specific variations: In some states/UTs like Maharashtra and Chandigarh, the threshold for certain establishments (e.g., shops, hotels) is 20 or more employees. In Delhi, it’s generally 10 or more.
Employee Eligibility (Wage Limit)
Employees earning a gross monthly salary (Basic Wages + Dearness Allowance + other regular allowances, excluding certain specific allowances like conveyance) of up to ₹21,000 are covered under the ESI scheme.
- For persons with disabilities, the wage ceiling is extended to ₹25,000 per month.
- Employees earning daily wages of ₹176 or less are exempted from payment of their share of contribution (employer still contributes).
- Coverage starts from day one of employment.
ESI Contribution Rates (Current Rates, effective from July 1, 2019)
- Employee’s Contribution: 0.75% of the gross wages (Basic Wages + Dearness Allowance + other regular allowances).
- Employer’s Contribution: 3.25% of the gross wages.
Total Contribution: 4.00% of wages.
The employer is responsible for deducting the employee’s share from their wages and remitting both the employer’s and employee’s contributions to ESIC within 15 days of the end of the month in which contributions are made.
ESI Registration Process (for Employers)
The registration process for employers under ESI is entirely online through the ESIC portal (https://www.esic.gov.in/).
Steps for Employer Registration:
Visit ESIC Portal
Go to the official ESIC website.
Sign Up
Click on “Employer Login” and then “Sign Up.” Fill in basic details like employer name, organization type, email ID, and mobile number.
Confirmation
You will receive a confirmation email and SMS with your username and password.
Login and Fill Form-1
Log in to the ESIC portal using the received credentials. Click on “New Employer Registration” and select the “Type of Unit.” Fill in “Employer Registration Form-1” with comprehensive details about the unit (name, address, nature of business, PAN), employer (name, designation, contact), factory/establishment details (Shop & Establishment Act/Factories Act registration, number of employees), and employee details.
Pay Initial Contribution
After submitting Form-1, a prompt for payment of an initial advance contribution (usually for six months) will appear. Make the payment online through the integrated payment gateway. A Challan Number will be generated.
Receive Registration Letter (C-11)
Upon successful payment, a system-generated Registration Letter (Form C-11) containing a unique 17-digit ESIC Registration Number will be emailed to the employer. This letter serves as official proof of registration.
Documents Required for ESIC Registration (commonly):
Registration Certificate under Factories Act or Shops and Establishment Act.
- Certificate of Incorporation (for companies), Partnership Deed (for partnerships), or other relevant business registration documents.
- GST Registration Certificate.
- PAN Card of the establishment/entity.
- PAN Card of employees.
- Address proof of the establishment (utility bills, rental agreement, property tax receipt).
- Bank account details (cancelled cheque).
- List of directors/shareholders (for companies).
- List of all employees with their wage details.
- Attendance register/muster roll.
Compliance After Registration
Once registered, employers have ongoing compliance requirements:
- Maintaining attendance and wage registers.
- Deducting and depositing contributions on time (by the 15th of the succeeding month).
- Filing monthly/half-yearly returns.
- Maintaining an accident register.
- Generating and distributing “Pehchan Cards” (ESI cards) to employees.
ESI is a vital social security net, providing significant medical and financial protection to a large segment of India’s workforce. Employers must ensure timely registration and compliance from our experts for avoid penalties and provide due benefits to their employees.