Employee’s State Insurance Act, 1948

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ESIC Act applies to factories. It can be made applicable to shops also. The ‘Factory’ means any premises where manufacturing process is carried out and persons employed are at least 10. Once a factory or establishment is covered, it continues to be covered even if number of employees reduce.
 
Employees drawing wages upto Rs.21,000 per month are presently covered under the ESIC scheme w.e.f. 1-1-2017 [The limit was Rs.15,000 upto 31-12-2016, Rs. 10,000 upto 30-4-2010, Rs.7,500 upto 30-9-2006 and Rs. 6,500 p.m. upto 31-3-2003].
 
The employee’s contribution is 1.75% of wages, rounder to next higher rupee. Employer’s contribution is 4.75% of wages payable to each employee, rounded off to next higher rupee.
 
The contribution has to be paid within 21 days from close of the month. If the contribution is not paid in time, interest @ 12% is payable.

‘Wages’ means all remuneration paid or payable in cash to employee according to terms of contract of employment and includes any payment made to an employee in respect of period of authorized leave, lock-out, lay-off, strike which is not illegal and other additional remuneration paid at interval not exceeding two months. It does not include: i) Contribution paid by employer to any pension fund or provident fund ii) Travelling allowance iii) Reimbursement of expenses made by nature of employment of the employee iv) Gratuity Thus, wages include basic pay, dearness allowance, city compensatory allowance, payment of day of rest, overtime wages, house rent allowance, incentive allowance, attendance bonus, meal allowance and incentive bonus. Contribution period is: a) 1st October to 31st March – corresponding benefit period is following 1st July to 31st December b) 1st April to 30th September – corresponding benefit period is following 1st January to 30th June. Thus, ‘benefit period’ starts three months after the ‘contribution period’ is over. The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period’. However, other benefits e.g. medical benefit, disablement benefit, dependant’s benefit and funeral expenses are available during contribution period also. When an employee joins, his declaration in Form I has to be obtained. The declaration should be submitted within 10 days to ESIC office. Temporary Identification certificate is also to be issued. Employer has to maintain register of all employees in form 6.

Return of Contribution of employees (employed through Principal as well as Immediate Employer) shall be submitted in form 5. The return is to be certified by Chartered Accountant if the number of employees are 40 or more. If number of employees are less than 40, self declaration is to be made by employer regarding maintenance of records and registers, submission of declaration forms, distribution of TIC/PIC received/distributed to employees engaged directly or through immediate employer and wages paid. Due dates are 12th May and 11th November. Every employer has to submit annual declaration by 31st January in form 01(A).  

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