State the Rules Regarding Contribution of Employees and Employers under the Employees State Insurance Act 1948.

The Employees State Insurance Scheme is basically a health insurance scheme. It aims at providing for cash benefits to the employees in the event of sickness, maternity and employment injury. Both employers and employees have to make contributions under this scheme. The provisions relating to Contributions’ are given in Sections 38 to 45 of the Act. The contribution payable under this Act in respect of an employee shall comprise Of employer’s contribution and employee’s contribution. The contribution shall be paid to ESI Corporation.

Rates of Contribution : The rates of contribution payable by employers and employees are as under

  • Employer’s contribution — 4.75% of the worker’s wages
  • Employee’s contribution — 1. 75%. of the worker’s wages.

Employees in receipt of an average daily wage below the wages as may be prescribed by the Central Government are exempt from payment of contribution.

Contribution Periods and Benefit Periods : In a year, there are two contribution periods of six months each and two ‘benefit periods’ of six months each corresponding to the contribution period.

Contribution Period

  • 1st April to 30th September
  • 1st October to 31st March of  the year following

Corresponding Benefit Period

  • 1st January of the year following to 30th June
  • 1st July to 31st December

In case of a new employee, the contribution period’ hall commence from the date of such employment and the corresponding ‘benefit period for him shall commence after the expiry of the period of nine months from the date of such employment.

The contributions payable in respect of each wage period shall ordinarily fall due on the last day of the wage period. The contribution must be deposited in cash or by cheque or demand draft with a Scheduled Bank duly authorized by the ESI Corporation in the Account of the Employees’ State Insurance Fund. The employer has to pay the contributions within 21 days of the last day of the calendar month in which the contributions fall due. If the day is a holiday, the contribution may be deposited on the next day. If an employer who does not pay contribution within the period specified above, he shall be liable to pay simple interest at the rate, of 12 % per annum till the date of its actual payment.

It is the duty of the principal employer to deposit his own as well as employee’s contributions in respect of all employees including the employees employed through an immediate employer. The principal employer can recover the employee’s contribution by way of deductions from his wages.

In respect of employees employed through an immediate employer, the principal employer can recover the amount of contribution so paid from the immediate employer. The employer shall furnish a Return of Contributions along with the Challans for the amount deposited in the Bank to the appropriate Regional Office of ESIC.

Registration of factories : Before collecting and depositing the contributions, the employer is required to get his factory or establishment registered with the appropriate Regional Office of the ESI Corporation within 15 days after the Act becomes applicable to it and obtain the Employer’s Code Number. Application shall be made in Form No. 01 (Employer’s Registration Form). After having being satisfied with the particulars of the Employer’s Registration Form, the appropriate Regional Office of ESIC will allot a code number to the employer. He shall also inform the employer of that number. Employer’s Code Number must be quoted in all documents and correspondence.

In short, employer’s obligations regarding contributions are as follows:

  • To get his factory or establishment registered with ESI Corporation and obtain Employer’s Code Number.
  • To insure all his employees and obtain declarations from the employees covered. The employer has to submit the same to ESIC’s appropriate Regional Office and obtain employee’s Insurance Number and Identity Cards.
  • To maintain records and registers as may be prescribed.
  • To deposit employees’ as well as his own contributions in the Account of Employees’ State Insurance Fund.
  • To furnish returns of contributions.

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