Section 18: Registration, Compliance and Penalties

Overview

Section 18 of the Code on Social Security, 2020, deals with the Employees’ State Insurance (ESI) Scheme, a self-financing social security and health insurance scheme for Indian workers. This section outlines the procedures for registering establishments and employees under the ESI scheme, ensuring they receive benefits like medical care, sickness benefit, maternity benefit, disablement benefit, and dependent’s benefit in times of need. It also details the responsibilities of employers in maintaining accurate records and contributing to the scheme.

Who is Covered?

• Classes of employees and establishments covered: The ESI scheme generally covers employees working in factories and other establishments employing 10 or more persons (this threshold may be revised by the government). It extends to workers earning wages up to a specified wage ceiling (currently ₹21,000 per month, but subject to change).
• Any eligibility conditions such as length of service or wage limits: Employees must be covered under the scheme if their wages do not exceed the wage ceiling. There is no minimum length of service requirement for eligibility once the wage criteria are met. The scheme applies to both direct and indirect employees.

Benefits and Contributions

• What benefit the employee gets: Employees covered under the ESI scheme are entitled to a range of benefits, including medical benefits for themselves and their families, sickness benefit during periods of certified sickness, maternity benefit for female employees, disablement benefit in case of employment injury, dependent’s benefit to dependents of deceased or permanently disabled insured persons, unemployment allowance (subject to certain conditions), and funeral expenses.
• Contribution responsibilities of employer, employee and government: Contributions are made by both the employer and the employee. The employee’s contribution is a fixed percentage of their wages, deducted at source. The employer contributes a significantly larger percentage of the employee’s wages. The Government of India also contributes a portion to fund medical benefits and administrative expenses. The exact contribution rates are subject to change and are notified by the ESI Corporation.

Procedure and Compliance

Compliance with Section 18 involves several key steps:

1. Registration: Employers of covered establishments must register with the ESI Corporation.
2. Employee Registration: Employers must register eligible employees under the scheme.
3. Record Keeping: Employers are required to maintain accurate and up-to-date records of employee wages, attendance, and contributions.
4. Contribution Payment: Employers must deduct employee contributions from wages and remit both employee and employer contributions to the ESI Corporation regularly (typically through online portals).
5. Return Filing: Employers must file periodic returns (e.g., half-yearly returns) providing details of contributions and employee information.
6. Inspection: Employers must allow authorized ESI officers to inspect their premises and records.

The Code emphasizes the use of digital compliance tools and self-certification mechanisms to simplify the process for employers.

Practical Examples

• Example 1: Employee Becoming Eligible: Ramesh works in a factory earning ₹18,000 per month. The factory employs more than 10 people. Ramesh automatically becomes eligible for ESI benefits as his wage is below the prescribed limit and the factory meets the employee count criteria. His employer must register him with the ESI scheme and deduct the employee’s share of the contribution from his salary.
• Example 2: Non-Compliance by an Employer: A textile mill owner fails to remit the ESI contributions deducted from his employees’ wages for three months. This constitutes a violation of Section 18 and can lead to penalties, including interest on the delayed amount and potential prosecution.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. For specific legal guidance, please consult with a qualified legal professional.