Section 15: Contributions to the ESI Fund

Overview

Section 15 of the Code on Social Security, 2020, deals with the Employees’ State Insurance (ESI) Scheme. This scheme provides financial and medical benefits to employees in case of sickness, maternity, disablement, or death due to employment injury. It’s a self-financing social security scheme funded through contributions from employers and employees.

Who is Covered?

• Classes of employees and establishments covered: Generally, the ESI scheme applies to factories and other establishments employing 10 or more persons (this threshold may vary based on state-level notifications). It covers workers earning wages up to a specified wage ceiling.
• Any eligibility conditions such as length of service or wage limits: Eligibility is primarily determined by the wage limit and the number of employees in the establishment. Employees must be covered under the scheme to be eligible for benefits. The specific wage ceiling is subject to periodic revision by the government.

Benefits and Contributions

• What benefit the employee gets: Employees covered under the ESI scheme are entitled to a range of benefits including medical care, sickness benefit, maternity benefit, disablement benefit (temporary and permanent), dependent’s benefit, unemployment allowance (under specific conditions), and funeral expenses.
• Contribution responsibilities of employer, employee and government: The Code outlines a contribution structure. While the exact percentages are subject to government notification, generally, the employer contributes a significantly larger share than the employee. The employee’s contribution is deducted from their wages. The government may also contribute in certain cases, such as for specific categories of employees or to support the scheme financially.

Procedure and Compliance

Contributions are to be deposited with the Employees’ State Insurance Corporation (ESIC) regularly. The Code emphasizes digital compliance, encouraging the use of online challans and automated calculation tools to ensure accurate and timely deposits. Employers are required to register with the ESIC and obtain an employer code. Regular reporting and filing of returns are also mandatory. Failure to comply can result in penalties and legal action.

Practical Examples

• Example 1 showing an employee becoming eligible for benefit: Ramesh works in a factory covered under the ESI scheme and earns a wage below the prescribed limit. He suffers a work-related injury. Because his employer has been regularly depositing ESI contributions, Ramesh is eligible to receive medical benefits, disablement benefit, and potentially dependent’s benefit if the injury results in permanent disability.
• Example 2 involving non-compliance by an employer: A factory owner, Suresh, fails to deposit the ESI contributions deducted from his employees’ wages for several months. The ESIC conducts an inspection and discovers the non-compliance. Suresh is liable to pay penalties, interest on the outstanding contributions, and may face prosecution under the Code.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. Laws and regulations are subject to change, and it is recommended to consult with a qualified legal professional for specific guidance.