Employee’s State Insurance Act, 1948

  • Blog|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 25 June, 2021
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).  

Also Read:

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Comments are closed.

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied