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What is ESI Scheme? It is a comprehensive Social Security Scheme designed to accomplish the task of protecting the ‘employees’ in the organized sector against the hazards of sickness, maternity, disablement and death due to employment injury and to provide medical care to the insured employees and their families.
How the ESIC scheme does help the employees? The scheme provides full medical care to the employee registered under the scheme during the period of his incapacity for restoration of his health and working capacity. It provides financial assistance to compensate the loss of his/her wages during the period of his abstention from work due to sickness, maternity, and employment injury. The scheme provides medical care to his/her family members also.
Who administers the ESI Scheme? The ESI Scheme is administered by a corporate body called the ‘Employees’ State Insurance Corporation’(ESIC) which has members representing Employers, Employees, the Central Government, State Government, Medical Profession and the Parliament. The Director General is the Chief Executive Officer of the Corporation and is also an ex-officio member of the Corporation
What are the other bodies of the ESI Corporation? At the National level, the Standing Committee (a representative body of the Corporation) for administering the affairs of the Corporation, and the Medical Benefit Council, a specialized body which advises the Corporation on administration of Medical Benefit, are functioning. At the Regional Level, the Regional Boards and Local Committees to review the functioning of the scheme and make suggestions for improvement of the scheme have been constituted.
How the ESIC Scheme is funded? The ESI scheme is a self financing scheme.The ESI funds are primarily built out of contribution from employers and employees payable monthly at a fixed percentage of wages.The State Government concerned also contributes its share to meet the cost of Medical Benefit.
Is it mandatory for the Employer to register under the ESIC Scheme? Yes. It is the statutory responsibility of the employer under Section 2-A of the Act read with Regulation 10-B, to register the Factory/Establishment under the ESI Scheme within 15 days from the date of its applicability to them.
What is the procedure for Registration of an employer ESIC? The Factory or Establishment to which the Act is applicable is to be registered within 15 days by submitting an Employer’s Registration Form (Form-01) to the concerned Regional Office and obtain an identification number called the Code number which is to be used in all the Correspondence relating to the Scheme. (Section 2(A) read with Regn. 10-B)
What are the documents to be submitted along with the Employer’s Registration Form ESIC? Documents relating to the constitution of the Factory/Firm/Establishment, evidence in support of the date of commencement of production/business/first sale, List of partners/Directors with their addresses, address proof like pan card/pass port/voter identity card, month wise employment position etc. are the essential documents.
What is a ESIC Code number? It is a 17 digit identification number allotted by the Regional Office on receipt of Form-01 or Survey report from the Social Security Officer, which is to be used by the employer in all the correspondence with the ESI.
What is a ESIC Sub-code number? This is also an identification number allotted by the Regional Office to a sub-unit, branch office, sales office or Registered Office of a covered factory or establishment located in the same State or different State, on receipt of the details from the employer.
What is the definition of a Factory for coverage under ESI? Factory is defined under section 2(12) as “any premises including the precincts thereof whereon ten or more persons are employed or were employed on any day of the preceding twelve months, and in any part of which, a manufacturing process is being carried on or is ordinarily so carried on, but does not include a mine subject to the operation of Mines Act 1952, or a railway running shed.”
Whether all the persons employed who are not coverable under the Act are also counted for 10? Yes. All the persons employed in the premises including the precincts thereof irrespective of their wages including casual, trainees, contract employees are counted for the purpose of coverage of the Factory. Even the Directors employed are to be counted.
Who are the persons not to be counted for coverage of a factory? The following persons are not to be counted
a) A proprietor or a partner whether drawing salary or not;
b) A contractor lending the services of his employee;
c) An apprentice engaged under the Apprentice Act, 1961;
d) Persons employed on contract for service, e.g. legal, technical, tax consultants;
e) Persons employed in branch/sales offices etc. away from the factory premises are not to be counted for the purpose of coverage of the factory. However, they are to be covered as employees under Section 2(9), if their wages does not exceed the ceiling limit prescribed.
What are the establishments that attract coverage under ESI? According to the notification issued by the State Governments concerned under Section 1(5) of the Act, the following establishments employing 20 or more persons for wages attracts ESI coverage.
1. Shops;
2. Hotel or restaurants not having any manufacturing activity, but only engaged in ‘sales’.
3. Cinemas including preview theatres;
4. Road Motor Transport Establishments;
5. News paper establishments. (That is not covered as factory under Sec. 2(12));and
6 Private Educational Institutions(those run by individuals, trustees, societies or other organizations)and Medical Institutions(including Corporate, Joint Sector, trust, charitable, and private ownership hospitals, nursing homes, diagnostic centers, pathological labs). However, Medical and Educational Institutions established and run by Ramakrishna Math and Ramakrishna Mission are excluded from this coverage.
A factory or establishment once covered can go out of coverage if the number of persons employed therein goes down the minimum limit prescribed? Once a factory or an Establishment is covered under the Act, it continues to be covered notwithstanding the fact that the number of persons/coverable employees employed therein at any time falls below the required limit or the manufacturing process there in ceases to be carried on. Thus, there is no need to examine the continuity of coverage of a factory or establishment every time. (Section 1(6) of the Act)
Is there any provision for ‘exemption of a factory or establishment’ from ESI coverage? Yes. If the employees in a factory or establishment are other-wise in receipt of benefits substantially similar or superior to those provided under the ESI Act, on an application made, the State Government
may grant exemption to such factory or establishment for a period of one year at a time prospectively. Application for renewal is to be made three months before the date of expiry of exemption period. (Section 87)
What is the wage ceiling limit prescribed for coverage of an employee? It is Rs. 15,000 per month from 1st May, 2010. It was Rs. 10,000/- per month from 1-10-2006 to 30-4-2010. It was Rs. 7,500/- per month from 1-4-2004 to 30-9-2006. The wage ceiling for coverage of an employee with ‘disability’ is Rs. 25,000/- per month from 1-4-2008.
What is ‘Average daily wages’? Average daily wages: 1. In respect of an employee who is employed on time-rate basis, the amount of wages which would have been payable to him for the complete wage period had he worked on all the working days in that wage period divided by 26 if he is monthly rated, 13 if he is fortnightly rated, 6 if he is weekly rated and 1 if he daily rated.
2. In respect of piece rated employee, the amount of wages earned during the complete wage period divided by the number of days in full or part for which he worked for wages in that wage period. (Rule 1-B)
How wages are computed for payment of contribution? The following items are taken in to account for computation of wages for payment of contribution.
a) Basic Pay, Wages, Salary;
b) D.A./HRA/CCA/Overtime/officiating allowance /Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance;
c) Wages/salary/pay for weekly off and public holidays;
d) Commission paid to sales staff;
e) Subsistence allowance paid to an employee during the period of suspension;
f) Attendance Bonus or incentive or ex gratia in lieu of Attendance Bonus or production incentive;
g) Regular Honorarium or salary or remuneration paid to a Director;
h) Collection Batta paid to running staff.
i)Actual payments made towards leave Salary, lay off compensation, or wages for strike period.
If the wages of an employee exceeds Rs. 15,000 in a month, can he be treated as not covered and deduction of ESI contribution from his wages is stopped? If the wages of an employee (excluding remuneration for overtime work) exceeds the wage limit prescribed by the Central Government after April or October for the contribution periods from April to September, and October to March, he continues to be an employee till the end of that contribution period and contribution is to be deducted and paid on the total wages earned by him.
Is there any provision for exemption from payment of Employer’s contribution? With effect from 1-4-2008, the wage ceiling limit for coverage of employees with disability has been raised to rupees twenty five thousand a month. To encourage the employers for employing more employees with disability, the employer is exempted from payment of Employer’s share of contribution on the wages
paid to the employees with disability for a maximum period of three years from the date of commencement of the contribution period in which such employee with disability is employed. The Central Government shall reimburse this Employer’s contribution to the ESI Corporation.

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