What is the ESI Scheme? A Complete Guide for Employers & Employees

The Employees' State Insurance (ESI) Scheme is a comprehensive social security initiative established under the Employees' State Insurance Act of 1948. It aims to provide financial protection to workers in case of sickness, maternity, disablement, and death due to employment injury. This scheme not only safeguards employees but also fosters a positive company culture by promoting employee welfare.

Understanding the Employees' State Insurance

The ESI Scheme is a self-financing, integrated social security programme that offers medical care and cash benefits to employees and their families. It applies to non-seasonal factories and establishments with 10 or more employees. The scheme is financed through contributions from both employers and employees, ensuring mutual responsibility in providing social security.

Key Benefits Under the Employees' State Insurance

There are certain benefits that you can avail of under the Employee State Insurance. Let us take a quick look at them:

Medical Benefits

Insured employees and their families are entitled to comprehensive medical care from the day they enter insurable employment. This includes outpatient and inpatient services, surgical procedures, and hospitalisation.

Sickness Benefit

Employees who are unable to work due to sickness can avail of cash compensation at the rate of 70% of their daily wages for a maximum of 91 days in two consecutive benefit periods.

Maternity Benefit

Female employees are entitled to maternity benefits at the rate of 100% of their average daily wages for 26 weeks, extendable by one month on medical advice.

Disablement Benefit

In case of temporary disablement due to employment injury, employees receive 90% of their average daily wages until recovery. For permanent disablement, compensation is paid at the rate of 90% of average daily wages for the entire life.

Dependents' Benefit

If an employee dies due to employment injury, their dependents receive compensation at the rate of 90% of the deceased's wages per month.

Funeral Expenses

A lump sum amount is provided to the family for performing the last rites of the deceased insured person.

Retirement Benefit

Employees who have been covered under the ESI Scheme for at least five years can avail of medical benefits even after retirement by paying a nominal annual premium.

Contribution Structure

This scheme is funded through contributions from both employers and employees:

• Employer's Contribution: 4.75% of the wages payable to employees.
• Employee's Contribution: 1.75% of the wages payable to an employee.

Employees earning less than ₹137 per day are exempted from paying their share of the contribution; however, the employer is still required to contribute their portion.

Contributions must be deposited with the Employees' State Insurance Corporation (ESIC) within 15 days from the end of the month.

Eligibility Criteria

To be eligible for coverage under the Employees' State Insurance:

• The establishment must be a non-seasonal factory or establishment with 10 or more employees.
• Employees must earn wages up to ₹21,000 per month. For persons with disabilities, the wage ceiling is ₹25,000 per month.
• The establishment must be registered with the ESIC.

It's important to note that the minimum number of employees required for registration may vary by state. For instance, in Maharashtra and Chandigarh, the threshold is 20 employees, while in other states, it is 10 employees.

Role of Employers in the ESI Scheme

Employers play a crucial role in the effective implementation of the ESI Scheme:

• Registration: Employers must register their establishment with the ESIC within 15 days of becoming applicable.
• Contribution: Employers are responsible for deducting the employee's contribution from their wages and depositing both the employer's and employee's contributions with the ESIC.
• Compliance: Employers must ensure compliance with the provisions of the ESI Act, including maintaining records and submitting returns.
• Employee Awareness: Employers should educate employees about their rights and benefits under the Employees' State Insurance.

By fulfilling these responsibilities, employers not only comply with legal requirements but also contribute to a positive company culture that values employee welfare.

Impact on Company Culture

Implementing the Employees' State Insurance positively impacts company culture in several ways:

• Employee Trust: Providing social security benefits fosters trust and loyalty among employees.
• Attraction and Retention: A comprehensive benefits package makes the company more attractive to potential employees and helps retain existing talent.
• Productivity: Employees who feel secure and valued are more likely to be productive and engaged in their work.
• Legal Compliance: Adhering to the ESI Act ensures compliance with labour laws, reducing the risk of legal issues.

By integrating the ESI Scheme into the company's operations, employers demonstrate a commitment to the well-being of their workforce, leading to a more positive and productive work environment.

Recent Developments and Future Outlook

The ESI Scheme has undergone several reforms to enhance its effectiveness:

• Wage Ceiling Increase: The wage ceiling for coverage under the ESI Act was increased from ₹15,000 to ₹21,000 per month, expanding the scope of the scheme.
• Infrastructure Expansion: The ESIC has established numerous hospitals, dispensaries, and clinics across the country to provide accessible healthcare services to insured employees and their families.
• Digital Initiatives: Introducing smart cards and online services has streamlined processes and improved service delivery.

Looking ahead, the focus is on further improving healthcare services, increasing awareness about the scheme, and ensuring that more employees benefit from the social security provisions.

Related Article : Everything You Need to Know About ESIC and Its Benefits

Concluding Thoughts

The ESI Scheme is a vital component of India's social security framework, offering comprehensive benefits to employees and their families. For employers, participating in the scheme not only ensures legal compliance but also contributes to a positive company culture that prioritises employee welfare. By understanding and effectively implementing the ESI Scheme, both employers and employees can secure a healthier and more secure future.

For additional health coverage beyond statutory schemes, Niva Bupa’s group health insurance plans offer tailored solutions for organizations of all sizes. With flexible benefits, easy claim processes, and wide network coverage, our plan can help businesses further enhance employee well-being.

FAQs

1. Who is eligible to be covered under the ESI Scheme?

   Employees working in non-seasonal factories or establishments with 10 or more workers and earning wages up to ₹21,000 per month (₹25,000 for persons with disabilities) are eligible for coverage under the ESI Scheme.

2. What medical benefits are provided under the ESI Scheme?

   The scheme offers comprehensive medical care, including outpatient treatment, specialist consultations, hospitalization, and maternity services, for insured employees and their dependents from day one of employment.

3. Is it mandatory for employers to register under the ESI Scheme?

   Yes, registration with the Employees' State Insurance Corporation (ESIC) is mandatory for eligible establishments. Employers must register within 15 days of the scheme becoming applicable to them.

4. Is employee insurance part of CTC?

   Yes, employee insurance is generally included as part of the Cost to Company (CTC). Many organisations offer health coverage under the employee insurance scheme to provide financial protection for their workforce. While the premium paid by the employer is considered a benefit to the employee, it also reflects in the overall CTC structure. This is why understanding the employee insurance scheme becomes important; it ensures employees know exactly what protection they are receiving as part of their salary package.

5. What is the amount of ESI in salary?

   The Employees’ State Insurance (ESI) is a mandatory contribution under the ESI scheme and its benefits. As of current norms, employees contribute 0.75% of their gross salary, while employers contribute 3.25% of the employee’s gross salary toward the ESI fund. Together, this ensures medical, disability, maternity, and other benefits under the employee insurance scheme. The government may revise the contribution percentage from time to time, so employees should stay updated.

6. What is the minimum number of employees required for registration of establishment?

   The minimum number of employees for ESI registration is usually 10 in most states (and 20 in some states, depending on the notification issued). Once an establishment crosses this threshold, it must register under the ESI Act. This ensures workers are covered under the ESI scheme and its benefits, such as medical treatment, sickness benefits, maternity support, and more. Employers who fail to comply can face penalties, so understanding the minimum number of employees for ESI registration is crucial for businesses.

7. How many family members can be added in ESI?

   Under the ESI scheme and its benefits, employees can extend coverage to their family members. Typically, dependents include a spouse, minor children, and parents who are financially dependent on the insured employee. In certain cases, unmarried daughters and dependent siblings can also be included. This makes the employee insurance scheme more comprehensive, as it ensures not only the worker but also their immediate family is financially protected in times of medical emergencies.