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Employee State Insurance Act of 1948

The Employee State Insurance Act of 1948 requires businesses to file ESIC returns. This statute grants medical, financial, maternity, disability, and dependent benefits to employees in the event of illness, maternity, or injury at work.

The Employee State Insurance (ESI) scheme is a social security initiative aimed at providing financial and medical benefits to employees. Employers registered under the ESI Act, 1948, are required to file periodic returns to ensure compliance. Proper filing of returns is crucial to maintaining transparency and availing benefits under the scheme.

 

Filing ESI returns is mandatory for employers with 10 or more employees (threshold may vary by state) earning a monthly salary of ₹21,000 or less (₹25,000 for employees with disabilities). It ensures that both employer and employee contributions are accurately accounted for and that employees can access ESI benefits such as medical care, maternity benefits, and disability compensation.

 

Comprehensive Medical Benefits

Employees and their dependents receive free or subsidized medical care, including hospitalization, surgery, and outpatient treatments.

Sickness Benefits

Cash compensation for employees unable to work due to illness (up to 70% of wages) for up to 91 days in a year.

Maternity Benefits

Female employees are entitled to paid maternity leave and medical care during pregnancy and childbirth.

Accident and Disability Coverage

Compensation for work-related injuries, disabilities, or death. Permanent and temporary disability benefits are provided to the insured.

Unemployment Allowance

The Atal Beemit Vyakti Kalyan Yojana provides financial assistance to employees who lose their jobs involuntarily or due to retrenchment.

Dependents’ Benefits

The legal liability of a private limited company's stockholders is restricted. You will be responsible for paying the liabilities of the company as a shareholder to the extent of your contribution. This protects your personal assets to cover the company's debts.

Employee State Insurance (ESI) Eligibility Summary

 

  • For Employers:

    • Applicable to factories and establishments (e.g., shops, hotels, educational institutions) employing 10 or more workers (state thresholds may vary).
    • Mandatory registration within 15 days of eligibility.

    For Employees:

    • Employees earning a monthly wage of ₹21,000 or less (₹25,000 for persons with disabilities).
    • Covers permanent, temporary, casual, and contract workers.

    Contributions:

    • Employee: 0.75% of wages.
    • Employer: 3.25% of wages.

    Exemptions:

    • Employees earning above the wage limit.
    • Establishments with fewer than the required number of workers.

Here’s a comprehensive checklist for employers to ensure compliance with the Employee State Insurance (ESI) Scheme:

  • Registration

    Register Establishment:

    • Register on the ESIC Portal within 15 days of becoming eligible.

    • Obtain the 17-digit ESI Code Number for the establishment.

    Employee Registration:

    • Ensure all eligible employees are registered under ESI and receive their unique Insurance Number.

    Update Employee Records:

    • Maintain accurate details, including employee names, wages, family details, and Aadhaar numbers.

    2. Contribution Compliance

    Deduct Employee Contributions:

    • Deduct 0.75% of gross wages for employees earning ₹21,000 or less (₹25,000 for persons with disabilities).

    Employer Contributions:

    • Contribute 3.25% of gross wages for eligible employees.

    Timely Payments:

    • Deposit contributions on or before the 15th of the following month via the ESIC portal.

Documents Required for ESI Registration and Compliance

  • Business Registration Proof:

    • Registration Certificate under Shops and Establishments Act or Factories Act.
    • Certificate of Incorporation (for companies).
  • PAN Card:

    • PAN of the business or organization.
  • Address Proof:

    • Utility bills (electricity, water, etc.) or rent agreement of the business premises.
  • Employee Details:

    • Names, designations, and wage details of employees.
    • Aadhaar cards and other identity proof for employees.
  • Bank Details:

    • Bank statement or canceled cheque for the organization.
  • Monthly Salary Details:

    • Gross salary and breakup of wages for all employees.
  • Number of Employees:

    • Declaration on the total number of employees.
  • Digital Signature:

    • Registered DSC of the authorized signatory.

Documents necessary for filing SPICe+ form (INC-32) for the registration of a private limited company are outlined as follows:

A. For Indian Nationals serving as directors and subscribers:
  • Affidavit on stamp paper: a declaration by all subscribers affirming their intention to become shareholders of the company
  • Office address proof like the Rental Agreement or Ownership Deed
  • Electricity bill, water bill and other utility bills of the last two months
  • Copy of approval if required
  • Trademark registration details
  • NOC from property owner
  • Proof of identity and address
B. Required Documents For Foreign Nationals serving as directors/Shareholders
  • Passport: Proof of identity
  • Address proof: Accepted documents include a driving license, residence card, bank statement, or government-issued identification with a valid address.

Types of Employee State Insurance Return Filing

 The Employee State Insurance (ESI) return filing process involves different types of returns that employers need to file to comply with the ESI Act. These returns help in reporting employee details, contributions, and other necessary information. The key types of ESI returns are:

Half-Yearly Return (Form 6)

This return is filed twice a year by the employer to report the contribution details of employees for the last six months.

Monthly Contribution Return

Employers are required to submit monthly returns for the contributions made during that month.

Accident Return (Form 11)

Employers must submit a return for any accidents or injuries occurring in the workplace. This form is used to report workplace accidents and injuries, ensuring that workers' compensation benefits are provided.

Employer’s Annual Return (Form 5)

An annual return that consolidates the monthly and half-yearly returns and gives an overall view of the contributions for the year.

Electronic Return Filing

Employers can file all ESI returns electronically through the ESIC Portal for both monthly and half-yearly contributions, making the process more streamlined.

Summary of Employee State Insurance (ESI) Characteristics

  • Social Security Scheme:
    ESI provides medical, sickness, maternity, and accident benefits to employees.

  • Mandatory Coverage:
    Applicable to establishments with 10 or more employees earning ₹21,000 or less per month (₹25,000 for persons with disabilities).

  • Contribution-Based:
    Employees contribute 0.75% of their wages, while employers contribute 3.25% to the fund.

  • Employee Benefits:
    Includes medical care, cash benefits during sickness, maternity leave, disability compensation, and dependents’ benefits in case of death.

  • Broad Coverage:
    The scheme covers a wide range of establishments, including factories, shops, and certain other industries.

To register your establishment and employees under the Employee State Insurance (ESI) scheme, follow these steps:

step

Step 1: Prepare Required Documents

Ensure you have the following documents for both the employer and employees:

  1. Business Registration Proof:

    • Certificate under Shops and Establishments Act or Factories Act, or Certificate of Incorporation.

  2. PAN Card:

    • PAN of the business/organization.

  3. Address Proof:

    • Utility bill (electricity/water) or rental agreement for the business premises.

  4. Bank Account Details:

    • Bank statement or canceled cheque for the business.

  5. Employee Details:

    • Employee names, Aadhaar numbers, designation, and monthly salary.

  6. Wage Register:

    • Monthly wage details for all employees.

  7. Digital Signature Certificate (DSC):

    • For authorized signatories.

Step 2: Visit the ESIC Portal

  • Go to the ESIC Portal to begin the registration process.

Step 3: Employer Registration

  1. Create an Employer Account:

    • Click on “Employer Registration” and fill out the necessary details about your business.

    • You will need to provide information such as the business type, number of employees, wages, etc.

  2. Submit the Registration Form:

    • After filling in the details, submit the form online.

  3. Obtain the ESI Code Number:

    • Upon successful registration, you will be assigned a 17-digit unique ESI Code for your establishment.

Step 4: Employee Registration

  1. Register Employees:

    • Add all eligible employees under the scheme using their personal details such as Aadhaar number, designation, and wage details.

  2. Generate ESI Insurance Numbers:

    • Each employee will receive a unique Insurance Number (ESI No.) upon registration.

Step 5: Payment of Contributions

  • Monthly Contributions:

    • After registering employees, ensure monthly contributions (0.75% from employees and 3.25% from employers) are paid by the 15th of the following month.

    • Use the ESIC Portal to generate and pay challans.

Step 6: Compliance with Regular Filings

  • Submit Half-Yearly Returns:

    • File Form 6 for the April-September period by November 11, and the October-March period by May 11.

  • File Monthly Returns:

    • Submit monthly contribution details via the ESIC Portal.

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