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ESI Applicability and its benefits
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Employees’ State Insurance Act, 1948
Prepared byJanardan Raccha
ESI Act
Applicability Advantages for employers Coverage - Procedure Individual / Family Coverage Contributions Registers / Returns / Forms Forms Inspection Requirements Benefits Wages Clarifications Donts ( Punishment )
Applicability
Preamble Applies to Non-seasonal factories using power in the
manufacturing process and employing 10 or more persons
Applies to non-power using factories or establishments employing 20 or more persons
Implemented area wise by stages Appropriate Government is empowered to extend – Sec
1 (5) Thus extended to Shops, Hotels, Restaurants, etc. Factories and Establishments are to be registered
Advantage to employers
Employers exempted from Maternity Benefit Act Employers exempted from WC Act Employers are absolved of providing medical facilities Employers have, a productive, well secured workforce Any sum paid by way of contribution under the ESI Act
is deducted in computing ‘income’ under IT Act
Coverage - Procedure
Form 01 is to be submitted within 15 days A factory or establishment once covered will continue to
be covered Allotment of sub-code number Form 01A to be submitted every year before 31st Jan Form 1 ( declaration form ) is to be submitted along with
Form 3 ( return ) within 10 days ESIC 86 – Certificate of employment issued to IP by the
employer
Procedure for coverage of an employee
Particulars in the form are legible and properly filled Details of family are indicated Particulars of ‘nominee’ are necessarily given Declaration forms of females are stamped ‘Female’ Declaration forms must be counter-signed by employer Must be submitted along with Form 3 within 10 days Two postcard size family photographs are enclosed
Individual / Family Coverage
Employees drawing Rs 10000/- pm or less are to be covered
Contract Labour is also to be included Casual employees are to be covered Director of a company – to be covered Part-time workers covered Apprentices under the Apprentices Act are not covered Form 1A – Registration of family Form 2 – Registration of changes in the family
Contribution
Employer’s contribution : 4.75 % Employee’s contribution : 1.75 % The Principal Employer has to pay both the
contributions in the first instance Employees earning a wage of Rs 70 or less per day are
exempted from making employees’ contribution Time limit for remittance : 21 days Contribution for arrears – need not be paid Contribution to be rounded off to the next higher rupee
Registers / Returns / Forms
Register of Wages ( Form 6 ) Return of contributions ( Form 5 ) – within 42 days – in
quadruplicate Accident Register ( Form 11 ) Accident Form ( Form 12 ) – within 24 hours Inspection Register
Forms
Form 28 – Abstention verification ESIC 37 – Certificate of Re-employment / continuing
employment ESIC 53 – Application for change in BO / Dispensary ESIC 72 – Application for duplicate identity card ESIC 105 – Certificate of entitlement for medical
treatment
Inspection Requirement
Attendance Register / Muster roll ( including CLs ) Wages Register Cash Book / Bank Book Account Books ( including ledgers and vouchers,
Balance Sheet ) Register of employees Accident Book Return of Contribution Return of Declaration Forms Copies of Challans Inspection Book
Sickness Benefit
For self Contribution for 78 days in the corresponding CP Standard Benefit Rate ( Roughly 50% of daily wages ) Max period of sickness benefit – 91 days
Extended Sickness Benefit
For Self 34 diseases listed Continuous employment for 2 years and contribution for
156 days in 4 preceding CPs 40% more than SBR ESB is payable for 309 days over and above 91 days of (
SB ) : Total – 400 days
Enhanced Sickness Benefit
For Self For Vasectomy / Tubectomy Contributory Condition : Same as Sickness Benefit Double the SBR ( Not less than the daily wage ) Max : 7 days for vasectomy and 14 days for tubectomy
Disablement Benefit
For Self No ‘contributory conditions’ For temporary disablement, till it lasts For permanent disablement, for life 70% of wages for TDB Proportionate to loss of earning capacity in case of
permanent disablement
Dependent Benefit
For dependents in case of death No ‘contributory conditions’ Eligible dependents : Widow/s, legitimate or adopted
son/daughter till 18 years of age / till marriage ( daughter )
Proportionate rate based on 70% of wages
Maternity Benefit
For Self Contribution for 70 days in two preceding consecutive
CPs 12 weeks in case of normal delivery 6 weeks for miscarriage 16 weeks for pregnancy based sickness Full wages ( appro. )
Funeral Expenses
To a person who performs the last rites of an IP No ‘contributory condition’ A lump sum of Rs 2500. Payable to eldest surviving member of the family ( who
incurs the expenditure on the funeral )
To be deemed as wages ( illustrative list ):
Basic Production incentiveDA Bonus other than statutory BonusHRA Meal / Food allowanceCCA Suspension allowanceOT Lay off compensationNSA Children Education allowance
Not to be deemed as wages ( illustrative list ):
Contribution by employer for PF / ESISum paid to defray special expensesGratuityEncashment of LeaveWashing AllowanceBenefits paid under ESI schemePayment of Inam which does not form part of contract of
emp.Reimbursement of conveyance exp. for duty related
journey
Aids to record keeping – Rubber Stamps
About 1” size with employer’s code no. Name and Designation of the officer who is to counter
sign Name, Address and Code No. of the employer A rubber stamp with the word ‘Female’
Clarifications
Partner of a firm need not be covered Professional Consultants need not be covered Insurance premium subsidy will be ‘wages’ Non-payment of contributions due to non-availability of
finance Contributions payable even if the benefit is not received Contracting out is not possible Dismissal not possible during sickness
Clarifications
OT is considered for contribution purpose and not for coverage
Employee to be covered does not have the right to opt out
Establishments can seek exemption but it is not done now-a-days
Bifurcation of total contract amount Contribution period : 1st Apr – 30th Sep & 1st Oct – 31st
Mar Benefit period : 1st Jan – 30th Jun & 1st Jul – 31st Dec
Clarifications
Applicability to Hospitals A Hotel will be a factory under ESI Act Notional extension of manufacturing process ( service at
customer’s place ) A club is to be covered Manufacturing Process will include tailoring and
garment manufacturing There must be 20 eligible employees ( ESIC Vs M M Suri
& Associates 1998 LLR 1105 SC ) Different sales and service outlets will be clubbed
together Functional integrality
Don'ts
Failure to pay the contributions Deduction of Employer’s contribution from employees Reduction in wages Termination during sickness Failure to submit return Obstructing the inspector All the above warrant imprisonment and fine For delay in paying the contributions, interest and
damages will be levied
Interest and Damages
Rate of interest is 12% for delayed payment Rate of damages is 5% for less than 2 months 10% for 2 to 4 months 15% for 4 to 6 months 25% for 6 months and above