Employee State Insurance, or ESI, is a scheme launched by the Government of India to provide workers with medical, monetary, and other benefits. Employee State Insurance Corporation is the independent authority in charge of ESI, which is overseen by the Ministry of Labour and Employment.
Any company with more than ten employees is required by law to have ESI. In some states, the maximum number of employees is twenty. The insurance is deducted from the income of employees earning more than $21,000 per month, including basic salaries and dearness allowance.
Additionally, taxpayers with a turnover of fewer than 1.5 crores can use the composition plan to avoid time-consuming GST formalities and pay GST at a fixed rate of turnover.
What is ESI Registration?
The Employee State Insurance Corporation, an autonomous organization within the Ministry of Labour and Employment of the Government of India, manages and regulates employee state insurance (ESI). The ESI plan was established for Indian employees to provide monetary, medical, and other benefits from the employer.
Currently, any factor or employment or any establishment that employs more than 10 people with minimum pay of Rs. 21,000 is required to register with the ESIC.
Eligibility for ESI registration in India
To be eligible for ESI registration, you must employ more than ten people. In some areas, firms can only register for ESI if they have more than 20 employees. Here are some additional conditions that must be met in order to receive ESI registration.
1. With the support of the employer, an employee with a gross salary of up to Rs. 21,000 per month can benefit from this.
2. The establishment is EPFO-registered.
3. The overall ESI contribution is 6.5 per cent of the gross pay and is distributed as follows:
- The employer contributes 4.75 per cent.
- 1.75 per cent of the employee
4. Employees with a salary of less than Rs.21,000 are required to register for ESI in industrial units where there is a risk of accidents or health difficulties.
The following documents must be submitted by the employer along with the application to obtain ESI registration in India:
- Certificate of Registration under the Shops and Establishment Acts.
- The Factories Act
- Proof of Principal Place of Business Address
- PAN Card Copies
- Statement of Account (Latest)
- Depending on the type of entity, the Memorandum and Articles of Association or the partnership agreement or trust deed.
- The registration number for a Certificate of Commencement
The monthly pay sheet is also necessary for calculating each employee’s contribution amount for ESI filings.
Definition of Factory under ESI Act
A factory is defined as any premise where 10 or more people are engaged or were employed for wages on any day in the preceding twelve months, and in any part of which a manufacturing process is carried out with or without the use of power. If many departments are located within the same premises of a factory and the departments are engaged in work related to or incidental to the factory’s manufacturing process, the departments will separate from the factory.
This definition of a factory under the ESI includes a seasonal factory that operates for a period of no more than seven months per year and is engaged in any process related to the blending, packing, or repacking of tea or coffee or other manufacturing processes that have been notified by the central government.
Mines are not covered in this description since they are subject to the Mines Act, 2952 or a railway operating shed.
As a result, if the number of people working in the factory premises is 10 or more, the premise is a factory, regardless of whether they are paid salaries or not. Furthermore, not everyone who works in the workplace must be involved in the manufacturing process.
Definition of Establishment under ESI Act
An establishment is defined as an organized group of men or women or an institution under the ESI Act. It is not necessary for an establishment to be confined to a specific premise or site. If an establishment employs 20 or more people, it must get ESI registration in India. As a result, firms with less than 20 employees earning less than Rs.21,000 per month should not be required to register for ESI.
Under the ESI Act, shops must also be registered. A store, according to the Supreme Court, is any place where economic operations that lead to the sale or purchase of goods are carried out. As a result, the important component for determining a shop is that services are provided to the consumer. As a result, service providers such as advertising agencies, liaison offices, consulting services, and real estate services will be required to obtain ESI registration in India.
Hospitals, dispensaries, offices of auditors and attorneys, chartered accountants, and private commercial hospitals are not permitted in this educational institution.
Employees who register for ESI can take advantage of a variety of benefits provided by the Employees State Insurance Corporation plan.
- Medical Aid- Beginning on the first day of employment, registered ESI members and family members receive comprehensive medical care and insurance. Retired members, permanently disabled insured persons, and their spouses can also receive medical treatment for Rs.120 annual subscription.
- Maternity benefits- Pregnant women can receive maternity benefits for up to 26 weeks. On medical advice, this maternity leave term can be extended by 30 days at the rate of full wage, subject to contribution for 70 days in the preceding year.
- Disablement benefit- From the first day of employment, regardless of contribution, 90 percent of the wage is payable as long as the temporary disability continues. As a monthly payout, a permanent disablement benefit of 90% of the earnings is payable.
- Sickness benefits- Absence from work due to illness is permitted for a maximum of 91 days per year, with 70 percent of monthly payments paid.
- Dependent benefits- In the event of an employee’s untimely death while on the job, the dependents of the deceased employee will receive 90 percent of his or her monthly wage.
- Funeral expenditures- Family members of dead employees are entitled to an additional Rs.10,000 for funeral expenses.
- Confinement expenditures- Confinement expenses are available under the ESI program in the event of confinement of an insured lady or wife of the employee with no medical facilities.
Employees who are permanently physically challenged and are insured are eligible for vocational rehabilitation training at VRS.
- Physical Rehabilitation: This can be obtained by employees in the event of physical disablement, injury, or risks as a result of their employment.
- Old Age Medical Care: For an annual contribution of Rs.120, ESI employees or those opting for VRS/ERS can obtain medical care benefits. Members who retire due to persistent incapacity can also take advantage of this benefit.
- Extended Sickness Benefits: Insured personnel suffering from chronic ailments can get an extended sickness benefit for up to two years after their 91-day sick leave has expired.
- Enhanced Sickness Benefit: The enhanced sickness benefit was designed to induce ESI employees to have vasectomy or tubectomy for the sake of the family’s wellbeing. If there are any post-operative difficulties, this benefit can be extended.
The ESI system is a comprehensive social security scheme meant to socially protect employees in the organized sector in the event of sickness, maternity, disablement, or death due to workplace damage.