What is Employee State Insurance(ESI)?

Employee State Insurance is a health benefits scheme managed by the ESIC(Employee State Insurance Corporation).The primary purpose of ESI is to provide financial and medical benefits to employees in case of maternity, sickness, disability, or death due to employment injury. 

Eligibility of ESI

  1. Employees earning up to Rs. 21,000 per month are eligible for ESI. And it should not exceed INR 25000 for disabled people as employee CTC mentioned.
  2. Companies must be registered under the ESI act if they have over 20 employees.

Entities covered under ESI: 

The following establishments are covered under the act

  1. Cinema Theatres
  2. Transport establishments
  3. Shops, Hotels, and Restaurants
  4. News establishments
  5. Medical and educational institutions

Contribution rates

Employees contribute 0.75% and employers contribute 3.25% of their salary towards ESI.

Benefits of Employee State Insurance

Employee State Insurance provides a range of benefits to employees, including medical care, maternity benefits, disability benefits, and death benefits.

  1. Disability benefits: It provides financial assistance to employees who are temporarily or permanently disabled. This includes a monthly pension of 90% until they recover in case of temporary disablement and 90% for their entire life in case of permanent disability.
  2. Medical care: They cover the medical care of employees and their families, including hospitalization, medicines, and diagnostic tests.
  3. Maternity benefits
    • It provides financial assistance to female employees for up to 26 weeks of maternity leave.
    • In case of miscarriage, it is payable up to 6 weeks from the date of miscarriage.
    • Maternity benefit is available with 100% of average daily wages.
  4. Sickness benefits: It provides financial assistance to employees who cannot work due to illness/injury for 91 days for up to 70% of the average daily wages.
  5. Unemployment: The Unemployment benefits in Employee State Insurance provide financial assistance to employees who have lost their jobs involuntarily. It offers a maximum of 50% of the average monthly wages for 2 years.
  6. Dependents: It provides financial assistance to the dependents of an employee who has died while at work.
  7. Funeral cost: Funeral cost benefits are given to dependants and typically cover up to a maximum of Rs. 15,000.
  8. Vocational rehabilitation: Vocational rehabilitation under employee state insurance is a benefit that provides vocational rehabilitation training to employees who are permanently disabled.
  9. Physical rehabilitation: The Physical rehabilitation benefit helps employees to access physical rehabilitation services in case of disability.
  10. Old-age medical care: It provides financial assistance to employees who have attained retirement. It gives Rs. 120 per financial year for medical benefits.

How to calculate ESI

Employee State Insurance (ESI) is calculated based on the employee’s salary and the employer’s contribution rate. 

ESI = Employee contribution + Employer Contribution

For example,

Let us say an employee named Mr. X works at ABC company, and his monthly wage is Rs. 18000. 

  1. Employee share = 18000 * 0.75% = 135
  2. Employer share = 18000 * 3.25% = 585

ESI = Rs 135 + Rs 585 = Rs 720

Due date of ESI payment

Your employer must deposit your ESI contribution on or before the 15th of the subsequent month. For the May month of ESI contribution, the amount should be deposited before April 15th.

Penalty for non or late payments 

Penalty for delayed payment of employee state insurance shall be as follows:

Delay period Percent of interest per annum

Less than 2 months

5%
2 to 4 months 10%
4 to 6 months 15%
6 months and above

25%

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