ESI
ESI
The ESI scheme which benefits a number of labourers and workers who are employers for the specific work in the factory or any company or the industries. Under these schemes it provides various benefits to protect the employee and employer. Registering your company under this scheme which avail more benefits from the government.
What is ESI?
ESI stands for Employee’s State Insurance, and it is a social security and health insurance scheme for Indian workers. The ESI Act, 1948, governs this scheme, and it is administered by the Employees’ State Insurance Corporation (ESIC), an autonomous body working under the Ministry of Labour and Employment. The primary objective of ESI is to provide financial and medical benefits to employees in case of sickness, maternity, disablement, or death due to employment injury. Every company or establishment that employs 20 or more employees is required to register with the ESI scheme. Certain establishments, even with fewer than ten employees, fall under the ambit of ESI registration. This includes a diverse range of entities such as shops, restaurants, hotels, cinemas, educational institutions, newspaper establishments, warehouses, insurance companies, non-banking financial institutions, companies engaged in motor transportation, as well as airports and ports. Employees whose monthly gross salary is below a specified threshold (as per the current limit) are required to make contributions towards ESI. The employer also contributes to the ESI fund on behalf of the employee.
Employers are required to maintain records and registers related to employees covered under ESI, contributions, and other relevant details. These records should be readily available for inspection by authorised officials. Employers must register their establishments under the ESI Act and comply with the rules and regulations. This includes timely payment of contributions, submission of necessary documents, and adherence to the reporting requirements. Non-compliance with the ESI Act can result in penalties and legal consequences. It is essential for employers to ensure timely compliance with all the provisions of the ESI Act to avoid any legal issues.
NEED FOR THE INDEMNITY AGREEMENT
When the two parties are entering into a business relationship, there are a lot of risks bound in the business. So this agreement should protect the parties from the risk of financial and other damages which are bound by the party. So this indemnity agreement which helps him from the losses or the damages. It is necessary used for the following business those are,
- Business contracts.
- Real estate transactions.
- Construction contracts.
- Rentals and lease.
- Event works and other activities.
- High risk services.
For the following businesses the indemnity agreement is necessary.
Advantages of ESI registration :
Benefits for Employees:
Comprehensive Medical Coverage:
Family Coverage: ESI ensures that not only the employees but also, their spouses, children, and parents receive medical benefits, providing a holistic healthcare solution for the entire family.
Access to Quality Healthcare: Employees have access to a network of ESI hospitals and dispensaries, ensuring quality medical care for various health needs.
Sickness Support:
Financial Stability during Hospitalisation: ESI covers 70% of an employee’s wages for a period of 91 days when they are hospitalised, offering crucial financial support during times of illness.
Facilitating Recovery: The financial support provided by ESI enables employees to focus on their recovery without the added stress of income loss.
Maternity Support:
Extended Paid Maternity Leave: Women enrolled in ESI can benefit from up to 26 weeks of paid maternity leave, providing necessary time for recovery and bonding with the newborn.
Medical Benefits for Maternity: ESI covers medical expenses related to maternity, ensuring comprehensive support for pregnant employees.
Disablement Benefits:
Compensation for Employment-Related Disabilities: In the unfortunate event of a work-related injury resulting in partial or total disablement, ESI provides compensation to the affected employee.
Rehabilitation Services: ESI may offer rehabilitation services to employees with disabilities, facilitating their return to the workforce in a suitable capacity.
Dependent's Benefits:
Financial Assistance to Dependents: In the event of an employee’s demise due to employment injury, ESI extends financial support to the dependents, helping them cope with the loss.
Educational Benefits: ESI may provide educational assistance to the dependent children of deceased employees, ensuring continued support for their education.
Funeral Expenses:
Coverage for Funeral Costs: ESI may cover funeral expenses in case of the death of an insured employee, alleviating the financial burden on the family during a challenging time.
Extended Medical Coverage for Retired Employees:
Continued Medical Benefits for Retirees: ESI may extend medical benefits to retired employees, ensuring ongoing healthcare support beyond their active employment period.
Conveyance Allowance:
Financial Assistance for Travel: ESI may provide a conveyance allowance to employees to cover transportation costs related to medical treatment, ensuring accessibility to healthcare services.
Vocational Training:
Skill Development Opportunities: ESI may offer vocational training programs to employees with disabilities, enhancing their skills and employability.
Reimbursement of Medical Expenses during Unemployment:
Temporary Support for Unemployed Individuals: ESI may provide reimbursement of medical expenses for a limited period to eligible individuals during periods of unemployment.
Benefits for Employees:
Legal Compliance:
Mandatory for Establishments with 20 or More Employees: ESI registration is mandatory for companies with more than 20 employees. Early compliance helps employers avoid legal action, penalties, and ensures a smooth business operation.
Adherence to Labor Laws: Registering with ESI demonstrates a commitment to adhering to labour laws and regulatory requirements, fostering a culture of compliance within the organization.
Enhanced Productivity:
Minimising Employee Challenges: ESI provides a safety net for employees, minimising disruptions caused by health-related challenges. This, in turn, enables employees to focus on their work, leading to increased productivity.
Healthy and Engaged Workforce: By addressing healthcare needs, ESI contributes to maintaining a healthy and engaged workforce, positively impacting overall productivity and efficiency.
Building Corporate Reputation:
Goodwill with Stakeholders: ESI registration enhances the company’s reputation, building goodwill with investors, consumers, and other stakeholders. It demonstrates a commitment to employee well-being and social responsibility.
Trust and Credibility: Communicating ESI registration to stakeholders instils trust in the company’s commitment to employee welfare, fostering credibility in the business community.
Attracting and Retaining Talent:
Employee Value Proposition: ESI becomes part of the employee value proposition, making the company an attractive employer in the job market. It can aid in attracting and retaining top talent who value comprehensive employee benefits.
What is the percentage contribution to the ESI scheme?
For every employee earning less than Rs.21,000/- per month, the employee has to contribute 0.75% of his salary and the employer has to contribute 3.25%, making a total of 4.00% (FY 2023-24). (In case of a person with a disability this limit is ₹25,000/-). The above fund is collected and managed by ESIC. E.S.I.C. contribution rates are reduced W.E.F. 1st July 2019.
Documents required for ESI registration:
The indemnity agreement should mainly deal with the parties who are involved into the indemnity agreement. In this clause it is clearly mentioned who is an indemnitor and who is the indemnifier. All the relevant information of the both parties should be clearly mentioned. (Parties name, address and identifications, point of contract).
- PAN Card of the Company:
- Valid PAN Card: Ensure that the PAN card is valid and up to date.
- Company’s Legal Name: The name on the PAN card should match the legal name of the company.
- Company Registration Documents:
- Certificate of Incorporation: Provide a copy of the Certificate of Incorporation issued by the Registrar of Companies (RoC).
- Memorandum and Articles of Association (MOA & AOA): Include the MOA and AOA, which outline the company’s objectives and rules governing its operations.
- Partnership Deed (if applicable): For partnership firms, include the Partnership Deed.
- Licences and Registrations:
- GST Registration Certificate: Submit a copy of the Goods and Services Tax (GST) registration certificate.
- MSME Registration Certificate (if applicable): Include a copy if the company is registered under the Micro, Small, and Medium Enterprises Development (MSMED) Act.
- Photographs:
- Including recent photographs of the authorised signatories or key personnel or employees can be required for identity verification.
- Address Proof for the Company:
- Rental Deed: Provide a copy of the rental agreement along with any utility bills as proof of the company’s registered address.
- Ownership Deed (if owned): If the premises are owned, submit the ownership deed as proof of address.
- Employee Details:
- List of Employees: Provide a detailed list of employees, including their names, addresses, Aadhar card numbers, and other relevant details.
- Salary Details: Include salary particulars, as the ESI contributions are based on employee salaries.
- Bank Account Details: Furnish the bank account details of employees for ESI transaction purposes.
- Financial Documents:
- Audited Financial Statements: In some cases, audited financial statements may be required to validate the financial status of the company.
- Power of Attorney (If Applicable):
- Power of Attorney Document: If someone other than the proprietor, partners, or directors is handling the ESI registration process, a valid Power of Attorney document may be necessary.
- Compliance Declaration:
- ESI Compliance Declaration: Submission of the ESI declaration form with a statement affirming the company’s compliance with the ESI Act and regulations, duly filled, and signed, is a standard requirement for the registration process.
- Bank Details:
- Company’s Bank Account Details: Submit the company’s bank account details for ESI transactions.
ESI Registration Process
Step 1: Submission of Form 1 and Required Documents:
Complete Form 1 with accurate details such as company name, address, nature of business, PAN number, and other relevant information.
Attach necessary documents as stated above like, PAN card, address proof, a list of employees, and other documents as specified by the ESI authorities.
Step 2: Verification Process:
The submitted form and documents undergo thorough verification by the concerned ESI officials.
Verification may include cross-checking the provided information with official records and conducting on-site inspections if required.
Step 3: Issue of Certificate and Unique Identity Code:
Upon successful verification, the ESI authorities issue a certificate of registration.
A 17-digit unique identity code is assigned to the registered employer, which serves as a distinct identification for the establishment. This unique number will be used in correspondence related to the scheme. A declaration in Form 3 accompanies Form 1.
Step 4: Issuance of Unique ID Card for Enrolled Employees:
All enrolled employees will receive a unique identification card containing their ESI number and relevant details.
This card serves as proof of enrollment and facilitates access to ESI benefits for the employees.
Step 5: Reporting of Enrolled Employees:
The details of newly enrolled employees are reported to the ESI authorities.
This ensures that the authorities have an up-to-date record of the workforce covered under the ESI scheme.
Step 6: Periodic Compliance and Reporting:
Employers are required to regularly update the ESI authorities regarding any changes in the workforce, such as new hires, terminations, or other relevant modifications.
Compliance with ongoing requirements, including timely payment of contributions and submission of necessary reports, is essential for maintaining the registration.
Step 7: Utilising ESI Benefits :
Once registered, both employers and employees can avail themselves of the various benefits provided under the Employees’ State Insurance scheme, including medical benefits, sickness benefits, maternity benefits, and more.
It is crucial for employers to stay informed about any updates or changes in ESI regulations to ensure continuous compliance and access to benefits for their employees. Regular communication with the ESI authorities and adherence to reporting deadlines contribute to a smooth and effective ESI registration process.
Compliances After ESIC Registration :
Maintaining Attendance Register: Regular and accurate maintenance of an attendance register is crucial. It should record daily attendance, including the arrival and departure timings of employees, ensuring compliance with labour laws.
Register of Wages for Workers: The establishment is required to maintain a comprehensive register of wages for all workers, detailing their salary components, deductions, and other relevant details.
Inspection Book: Keeping an inspection book is important for documenting inspections conducted by ESIC officials. This book should detail the nature of inspections, findings, and any actions taken to address identified issues.
Accident Register: A specific register should be maintained to record any accidents that occur on the premises. This includes details of the incident, the individuals involved, and the actions taken for the well-being of the affected employee.
Monthly Return Filing: Establishments are required to submit monthly returns to the ESIC authorities. This includes providing details of the number of employees, their wages, and other relevant information. Filing should be done within the stipulated time frame.
Challan Submission: Alongside the monthly return, the establishment needs to submit the corresponding challan, reflecting the ESI contributions made for the covered employees. This ensures timely payment to the ESIC fund.
Displaying ESI Code: The ESI Code, once assigned, should be prominently displayed at the workplace. This ensures transparency and facilitates any inspections or audits by ESIC officials.
Employee Awareness Programs: Conducting periodic awareness programs for employees to educate them about the benefits and processes related to ESI. This helps in ensuring that employees are informed about their entitlements.
Documenting Employee Communications: Maintaining records of communications with employees regarding ESI-related matters, such as policy changes, benefits, or any other relevant information.
Internal Compliance Audits: Periodic internal audits should be conducted to ensure that all ESI-related records and processes are in compliance with the regulations. This proactive approach helps in identifying and rectifying potential issues.
Adherence to Amendments and Updates: Keeping abreast of any amendments or updates to the ESI Act and ensuring prompt incorporation of these changes into the establishment’s practices.
Statutory Notices and Posters: Displaying posters and notices related to ESI benefits, contribution rates, and other relevant information at conspicuous locations within the establishment.
Cooperation during Inspections: Cooperating fully with ESIC officials during routine inspections or audits, providing access to relevant records, and addressing any concerns raised during such visits.
Documentation of Compliance Records: Keeping a well-organised record of all compliance-related documents, ensuring easy retrieval and reference when needed.
FAQ
FAQ ON ESI:
1. What is ESI and what is ESIC?
ESI stands for Employee's State Insurance and is a self-funding social security and health insurance scheme for employees in India. Employees enrolled under the ESI scheme are entitled to medical treatment for themselves and for the dependents of enrolled employees.
They are also entitled to disability or permanent invalidity benefits and even death benefits. The ESI Act 1948 is the governing legislation for ESI and the Employees' State Insurance Corporation administers the fund. ESIC is an autonomous body under the Ministry of Labour and Employment.
2. When is ESI mandatory for organizations?
As mentioned above, any organization with more than 20 employees is required to register under the ESI scheme. Any organization with more than 20 employees must register under the scheme within one month of reaching 20 employees. Small organizations with less than 20 employees can also voluntarily register under the ESI scheme.
3. Is ESIC registration required for startups?
Yes, this act applies to every corporate or registered organization having:
- Non-seasonal factories employing 10 or more persons
- Shops,
Hotels,
Restaurants,
Cinemas including preview theatres,
Road motor transport undertakings,
Newspaper establishments,
Establishments engaged in Insurance Business,
Non-Banking Financial Companies,
Port Trust,
Airport Authorities and Warehousing establishments having 10 or more persons in employment. - Private Medical and Educational Institutes having 10 or more persons in employment.
Entities falling within these categories are obligated to undergo ESI registration, ensuring that both employers and employees can avail themselves of the comprehensive benefits outlined by the ESI Act. It is noteworthy that the specific regulations and requirements for ESI registration may vary across states, with diverse rules and provisions in place. This underscores the importance of businesses staying informed about the state-specific nuances to ensure compliance with the ESI regulations and maximise the benefits accessible to both employers and employees.
4. How are ESI and medical insurance different?
ESI (Employee State Insurance) and medical insurance serve different purposes. ESI is a life insurance scheme for employees earning up to ₹21,000 per month. It provides a cover amount to the nominee in case of the policyholder's mishap, and treatment is limited to ESI empaneled hospitals.
On the other hand, medical insurance offers a broader coverage. There are various policies based on medical history and financial capabilities. With medical insurance, one can be admitted to any network hospital affiliated with the insurer, and the policy covers medical expenses, reducing the financial burden. ESI functions like a life insurance policy and is limited to specific hospitals. Medical insurance, with its wide hospital network, allows flexibility in choosing where to receive treatment. It is advisable to have both ESI and medical insurance for comprehensive coverage and potential tax benefits.
5. How to claim ESIC benefits in India?
To claim benefits of the ESIC employee or their dependent has to fill a particular form according to the benefits that they are seeking. The list of the various forms are as follows:
- Permanent Disablement Benefits:
Form-14: Claim for Permanent Disablement Benefit by ESIC
Purpose: Used to claim permanent disablement benefits under the ESIC scheme.
Instructions: Users must carefully read the form and provide accurate information as per the given instructions.
Form-32: Wage/Contributory Record for Disablement Benefit
Purpose: Records wages and contributions related to disablement benefits.
Instructions: Employers fill this form to provide the necessary financial details for calculating disablement benefits.
Form-23: Life Certificate for Permanent Disability Benefits
Purpose: Submission of a life certificate for continuing permanent disability benefits.
Instructions: Ensures the ongoing eligibility of the beneficiary for permanent disability benefits.
- Maternity Benefits:
Form-19: File Claim for Maternity Benefit and Notice of Work
Purpose: Used by insured women to claim maternity benefits and notify about resuming work after maternity leave.
Instructions: Provides a structured format for claiming maternity benefits and updating work status.
Form-20: To File a Claim for Maternity Benefit After the Death of an Insured Woman Leaving Behind the Child
Purpose: Allows filing a claim for maternity benefit after the death of an insured woman, where a child is left behind.
Instructions: Ensures appropriate benefits for the child in case of the mother's demise.
- Dependent Benefits:
Form-15: Claim for Dependent Benefit by ESIC
Purpose: Used to claim dependent benefits under the ESIC scheme.
Instructions: Beneficiaries need to carefully fill the form based on provided instructions for claiming benefits on behalf of dependents.
Form-16: Claim for Periodical Payment of Dependent Benefits
Purpose: Enables the claimant to seek periodical payments for dependent benefits.
Instructions: Users must follow the instructions on the form for accurate submission.
Form-24: Declaration and Certificate for Dependent Benefits
Purpose: Submission of a declaration and certificate for claiming dependent benefits.
Instructions: Users are required to provide accurate details as per the guidelines mentioned.
- Funeral Expenses:
Form-22: Funeral Expenses Claim
Purpose: Allows beneficiaries to claim funeral expenses under the ESIC scheme.
Instructions: Instructions on the form guide users in filling out the necessary details for the claim.
- Conveyance Allowance:
Form-142: Claim for Conveyance Allowance
Purpose: Enables claiming conveyance allowance under the ESIC scheme.
Instructions: Beneficiaries should carefully fill out the form following the provided instructions.
- Accident and Reporting:
Form-11: Accident Book
Purpose: Used to record details of accidents that occur in the workplace.
Instructions: Employers maintain this record to comply with safety regulations and document workplace incidents.
Form-12: Accident Report
Purpose: Allows reporting details of an accident that occurred to an employee.
Instructions: Employers use this form to provide a comprehensive account of workplace accidents.
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