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A curated and categorised database of common questions regarding the law.

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1 When does the ESI act become applicable?

Under Section 2(12) the Act is applicable to non-seasonal factories employing 10 or more persons.
Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings and newspaper establishments employing 20* or more persons. Further under section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational institutions employing 20* or more persons in certain States/UTs.
*Note: 14 State Govts. / UTs have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons. Remaining State Governments/UTs are in the process of reducing the same.

Even if the number of employees subsequently goes below the threshhold, organisation will continue to be covered
2 Are all the persons employed who are not coverable under the Act are also counted for 10/20 employees to determine eligibility ?

Yes. All the persons employed in the premises including the precincts thereof irrespective of their wages including casual, trainees, contract employees are counted for the purpose of coverage of the Factory. Even the Directors employed are to be counted
3 Can an exemption from ESIC be sought ?

An “appropriate government” may grant or renew exemption under Section 87 of the Act in respect of a Factory/Establishment or class of factories or establishments in any specified area if the employees in such factory/establishment are in receipt of benefits substantially similar or superior to th benefits provided under the Act for a period not exceeding one year at a time to take effect only prospectively.
Provided that an application for renewal shall be made three months before the date of expiry of the exemption period and a decision on the same shall be taken by the appropriate Government within two months of receipt of such application
As per provisions of the Act no exemption shall be granted unless a reasonable opportunity is given to the Corporation to make any representation and the same is considered by the appropriate Govt.

The “appropriate government” may also grant exemption to any person or class of persons employed in a factory/establishment or class of factories/establishments under Section 88 of the Act. Exemption under S ection 90 is granted to a factory/establishment belonging to a local authority such as a Municipality/Corporation, etc. if employees in any such factories/establishments are otherwise in receipt of benefits substantially similar or superior to the benefits provided under the Act


4 How does the scheme help the employers ?

1. The employer is getting an employee protected by ESIC in all respects, who can concentrate on his work without any worry and contribute to more production. 2. The employer is relieved from providing any medical care to the employee and his family. 3. The employer is relieved from payment of any compensation under the Workmen’s’ Compensation Act for any Accident. 4. Employer is relieved from payment of Maternity Benefit to woman employees under the State Maternity Benefit Act. 5. The Employer’s share of contribution paid is exempted from income tax payment.
5 How does the scheme help the employees ?

The scheme provides full medical care to the employee registered under the scheme during the period of his incapacity for restoration of his health and working capacity. It provides financial assistance to compensate the loss of his/her wages during the period of his abstention from work due to sickness, maternity, and employment injury. The scheme provides medical care to his/ her family members also.
6 What are the benefits admissible to an employee?

1. Full Medical care as and when needed.
2. Cash benefit to compensate his/her loss of wages during his abstention from work due to sickness including prolonged sickness, maternity and disablement.
3. Provision of Artificial limbs, spectacle, hearing aids, cervical collar, wheel chair etc. as a part of medical treatment as and when needed.
4. Un-employment allowance during the period of closer of the Factory/estt, retrenchment or permanent invalidity arising out of non-employment injury for a period of six months at 50% of his wages. Medical benefit is also admissible during this period for self and family.
5. Vocational rehabilitation training is provided to improve his skills to find out alternate employment.


7 What is the present rate of contribution?

a) Employer’s contribution: A sum equal to 4.75% of the wages payable to an employee, rounded off to the next higher rupee
b) Employee’s contribution: A sum equal to 1.75% of the wages payable to an employee, rounded to the next higher rupee;
8 What are wages for the purpose of contribution ?

The following items are taken in to account for computation of wages for payment of contribution.
a) Basic Pay, Wages, Salary;
b) D.A./HRA/CCA/Overtime/officiating allowance /Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance /Education allowance/Food & Tea allowance/conveyanceallowance;
c) Wages/salary/pay for weekly off and publicholidays;
d) Commission paid to sales staff;
e) Subsistence allowance paid to an employee during the period of suspension;
f) Attendance Bonus orincentive or exgratia in lieu of Attendance Bonus or production incentive;
g) Regular Honorarium or salary or remuneration paid to a Director;
h) Collection Batta paid to running staff
i) Actual payments made towards leave Salary , lay off compensation , or wages for strike period
9 What is the time limit for deposit of contribution ?

Contribution shall be paid in respect of an employee in to a bank duly authorized by the Corporation within 21 days of the last day of the calendar month in which the contribution falls due for any wage period. (Reg. 29 & 31).
10 Will the delayed payment attract any interest?

An employer who fails to pay the contribution within the time limit prescribed under Regulation 31, shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of default or delay in payment
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