Are you a working professional in India? If so, you may have come across the term "ESIC" or Employee State Insurance Corporation. ESIC is a government initiative aimed at providing social security benefits to employees and their families in times of need.
If you're new to the ESIC claim process and wondering how it all works, you're in the right place.
What is ESIC and why is it Important?
The Employee State Insurance (ESI) Scheme is a comprehensive social security scheme designed to provide medical care and financial protection to workers and employees in India. It was introduced by the Government to ensure the well-being and safety of employees covered under the ESI Act.
The origins of the ESI Scheme can be traced back to 1948 when the ESI Act was first passed. Over the years, the Act has been amended several times, including in 1975, 1984, 1989, and 2010, with the aim of enhancing social security and health insurance in the country. The Act was notified by the Parliament of India.
The ESI Scheme offers a range of benefits to industrial employees and workers in the event of sickness, maternity, or employment injury. These benefits include cash benefits and medical care. Additionally, in the unfortunate event of death or injury to the insured person, the scheme provides pension benefits to their family members.
Similar to Provident Fund, Professional Tax, and TDS, compliance with the ESI Scheme is essential for organisations operating in India. It is a vital component of payroll compliance that ensures the organisation fulfils its obligation to provide social security and medical care to its employees.
Coverage under the ESI Scheme
The Employees' State Insurance (ESI) scheme offers comprehensive coverage to employees and their families, providing both medical and financial assistance. Here are the four key areas covered under the ESI scheme:
- Complete medical care
The ESI scheme ensures that employees who meet the eligibility criteria receive complete medical care and attention. This includes healthcare services, hospitalisation, specialist consultations, diagnostic tests, medicines, and rehabilitation, all aimed at restoring the employee's health and working capacity during periods of incapacity.
- Compensation for wage loss
When employees are unable to attend work due to illness, maternity, or accidents, resulting in a loss of wages, the ESI scheme provides financial assistance. Employees receive compensation to cover the wage loss they experience during their absence from the office or factory, helping them maintain their financial stability during such periods.
- Coverage for family members
The ESI scheme extends its medical care coverage to the family members associated with the employee. This means that not only the employee but also their dependents can benefit from the scheme's healthcare facilities. As of March 31, 2019, the ESI scheme covered a total of 13.32 crore beneficiaries, including family members.
- Cash and non-cash benefits
The benefits provided by the ESI scheme can be categorised into cash benefits and non-cash benefits:
- Cash benefits: The scheme offers direct cash assistance in various situations such as sickness, disablement, maternity, funeral expenses, rehabilitation allowance, vocational rehabilitation, and medical bonuses. These cash benefits provide financial support to employees during times of need.
- Non-cash benefits: Alongside cash benefits, the ESI scheme also provides non-cash benefits in the form of insurance and medical care. This includes comprehensive insurance coverage and access to quality healthcare services, ensuring that employees and their families receive necessary medical treatments and support.
Key Features of the ESI Scheme
The ESI scheme is characterised by several key features that ensure its effectiveness and sustainability. Let's delve into these features:
- Self-Financing and Contributory Nature: The Employees' State Insurance (ESI) scheme operates on a self-financing basis, meaning it does not rely on government funding alone. Instead, it is sustained through contributions from both employees and employers. These contributions are calculated as a fixed percentage of the employees' wages and salaries, and they form the funds that support the scheme.
- Reduced Contribution Rates: Effective from July 1, 2019, the ESI contribution rates have been reduced, providing relief to both employers and employees. The current and reduced rates are summarised below:
Employer Share: 4%
Employee Share: 1%
Employer Share: 3.25%
Employee Share: 0.75%
This reduction in contribution rates has lightened the financial burden on employers and employees while still ensuring the sustainability of the scheme.
- Exemption for Low-Wage Earners: Employees whose daily average wage is below 137 rupees are exempted from contributing to the ESI scheme. In such cases, the employer solely bears the contribution burden. This exemption provides financial relief to low-wage earners and ensures their inclusion in the scheme's benefits.
- Timely Payment of Contributions:Employers are required to pay both their share and the employee's share of the contribution within 15 days from the last day of the calendar month. The payment can be made conveniently through online platforms or authorised public sector banks. This timely payment ensures the smooth functioning of the scheme and the availability of funds for providing benefits to the employees.
Benefits provided by ESIC
Employees' State Insurance (ESI) registration offers several exclusive benefits to registered employees, ensuring their well-being and financial security in various circumstances. Some of the notable benefits include:
- Prolonged Illness: In case of prolonged illness, registered employees can claim 70% of their monthly salary as a cash benefit. This financial assistance helps cover medical expenses and provides support during periods of extended illness.
- Family Medical Help: The ESI scheme extends medical assistance not only to registered employees but also to their immediate family members. This provision ensures that the entire family receives necessary medical care and support when needed.
- Maternity Benefits: Women employees registered under ESI are entitled to maternity benefits, which include a maternity leave of 26 weeks. This allows expectant mothers to take time off from work to focus on their health and well-being during pregnancy and childbirth.
- Paternity Benefits: In addition to maternity benefits for women, ESI registration also provides paternity benefits. Male employees can avail themselves of paid leave for a specified period after the birth of their child, allowing them to actively participate in their child's care and support their partner during the crucial postnatal period.
- Free and Subsidised Facilities: ESI registration enables employees to access free or subsidised facilities such as medical consultations, medicines, diagnostic tests, and specialist care at ESI dispensaries, hospitals, and tie-up healthcare centres. This ensures that registered employees can receive quality healthcare services at an affordable cost.
- Work-related Injuries: In case of temporary or permanent work-related injuries, registered employees are eligible for monetary benefits. These benefits provide financial aid to cover medical expenses and compensate for any loss of income due to the injury.
- Death Benefits: In the unfortunate event of the death of a registered employee during working hours, the immediate family members are eligible to claim 90% of the employee's salary every month. This financial support helps the family cope with the loss and maintain financial stability during a difficult time.
When is ESI registration required?
ESI registration becomes mandatory when a company or entity employs ten or more employees within their organisation. This requirement applies to all significant establishments, factories, and units, and falls under the provisions of the ESI Act of 1948. Once the employee threshold is met, the organisation must apply for ESI registration within 15 days.
The registration process for ESI can be conveniently conducted online by following specific steps and submitting the necessary documents. While the registration process may initially seem daunting, it is actually straightforward, provided the required documents are prepared and ready for submission.
The following documents are essential for the ESI registration process:
- Registration certificate obtained under either the Factories Act or the Shops and Establishment Act.
- Certificate of Registration, Memorandum of Association, and Articles of Association (for companies or LLPs) or Partnership Deed (for partnerships).
- A complete list of employees currently working in the establishment, along with their respective compensation details.
- PAN card of the business entity under which the organisation operates.
- Comprehensive lists of the company's directors and shareholders.
- Bank statement of the organisation, providing evidence of the commencement of operations.
- Attendance records of employees, serving as an attendance register.
By ensuring the availability and submission of these required documents, the ESI registration process can be completed smoothly. It is important for organisations to comply with this mandatory registration to provide employees with the benefits and security offered under the ESI scheme.
- How often are ESIC payouts made?
ESIC payouts are typically made on a monthly basis. Once your claim is approved, you will receive regular monthly payments until your recovery or until the end of the benefit period.
- Can I buy ESIC for myself?
No, you cannot buy ESIC (Employees' State Insurance Corporation) for yourself as it is a social security scheme provided by the government for workers in certain industries.
- Can I buy ESIC for my employees?
As an employer, you can enroll your eligible employees under the ESIC scheme. It is mandatory for employers in specified industries to provide ESIC coverage to their eligible employees.
- Why can't I buy the ESI scheme for my white-collar employees?
The ESI scheme is primarily designed to benefit workers engaged in manual or non-white-collar jobs in specific industries. It focuses on providing social security benefits to workers in lower-income groups whose monthly wage doesn’t exceed Rs 21,000 and who may not have access to adequate healthcare facilities. Therefore, white-collar employees are not typically covered under the ESI scheme.
- Are ESIC payouts taxable?
No, ESIC payouts are not subject to income tax. The benefits received under the ESIC scheme are exempt from taxation.
- What is the interest rate for delayed ESIC payouts?
ESIC provides interest on delayed payouts at the rate of 12% per annum. If there is a delay in receiving your entitled benefits, you may be eligible for interest on the delayed amount.
- How long does it take to receive ESIC payouts after claim approval?
Once your ESIC claim is approved, it usually takes around 15-30 days for the payouts to be credited to your bank account. However, the exact timeframe may vary depending on the processing at the ESIC office.
- Can I choose to receive ESIC payouts in cash instead of a bank transfer?
No, ESIC payouts are made through electronic fund transfer (EFT) directly to the beneficiary's bank account. Cash payments are not facilitated under the ESIC scheme.
- Are there any deductions or charges applied to ESIC payouts?
Generally, there are no deductions or charges applied to ESIC payouts. The full entitled amount is credited to the beneficiary's bank account.
- What happens to ESIC payouts if the insured person passes away?
In the event of the insured person's death, ESIC provides benefits to the eligible dependents. The eligible dependents will receive monthly payouts in the form of a pension or a lump sum amount, depending on the circumstances.
- Can I receive ESIC payouts if I am receiving benefits from another insurance scheme?
ESIC benefits can be received even if you are enrolled in another insurance scheme. However, the benefits provided by ESIC are subject to certain conditions and limitations based on your eligibility and the terms of the other insurance scheme.
- Can I claim ESIC payouts for a dependent family member's medical expenses?
ESIC payouts are primarily for the insured person's medical expenses. However, dependent family members can avail of medical benefits directly under the ESIC scheme.
- How is the amount of ESIC payouts determined?
The amount of ESIC payouts is based on the insured person's average daily wages and the specific benefits they are eligible for, such as sickness benefits, disablement benefits, or maternity benefits.
- What is the maximum limit for ESIC claim reimbursement?
The maximum limit for ESIC claim reimbursement is 70% of the average daily wages during the period of incapacity.
- Is there a limit on the duration of ESIC sickness benefits?
Yes, ESIC sickness benefits are provided for a maximum of 91 days in two consecutive benefit periods. Each benefit period consists of consecutive days of sickness.