Mandatory for companies with over 10 employees, ESI offers medical and monetary benefits. ESI covers various establishments like hotels, cinemas, and educational institutes. True Auditor facilitates hassle-free ESI registration, ensuring compliance and swift processing. Stay focused on your business while we handle your ESI registration journey efficiently.
Overview
Employee State Insurance or ESI is a scheme commenced by the Government of India to offer medical, monetary, and other advantages to workers. ESI is managed by an autonomous authority – Employee State Insurance Corporation – which lies under the jurisdiction of the Ministry of Labour and Employment.
By law, any company that has more than 10 employees mandatorily needs to have ESI. In some states, the number of employees is 20. For employees earning more than ₹21,000 per month, including basic salaries and dearness allowance, the insurance is deducted from their pay.
Also, taxpayers with a turnover of less than ₹1.5 crore can opt for the composition scheme to get rid of tedious GST formalities and pay GST at a fixed rate of turnover.
Definition Of Establishment Under The ESI Act
The Employees’ State Insurance Act, 1948 (ESI Act) defines an establishment as any premises (or its precincts) wherein ten or more employees are employed for wages.
This includes factories but also other types of establishments, such as:
- Hotels, restaurants, and boarding houses
- Cinemas, theatres, and other places of public amusement
- Shops, commercial establishments, and places of business
- Educational institutions
- Medical institutions
- Transport undertakings
- Warehousing establishments
Here are some of the important things to keep in mind about the definition of establishment under the ESI Act:
- The premises must be used to carry on some economic activity.
- There must be ten or more employees working on the premises for wages.
- The employees must work on the premises for at least 240 days in the preceding 12 months.
Premises meeting all these criteria will be considered an establishment under the ESI Act. The ESI Act also provides for the extension of the coverage of the Act to establishments with less than ten employees. This extension is done by the Central Government or the State Government, as the case may be, by notification in the Official Gazette.
Entities Covered Under ESI Registration In India
As per the ESI Act of 1948, all establishments are eligible for ESI registration online provided they fulfil the criteria of having the required number of employees in that state. The entities covered are:
- Shops
- Cinemas
- Movie theatres
- Medical institutions
- Hotels or restaurants
- Newspaper establishments
- Private educational institutions
- Roadside motor transport establishments
Note: For hotels and restaurants, it is mandatory to only offer the service and not have any manufacturing functions. In some states, medical and educational institutes are not included. For newspaper establishments, there is no coverage under the Factory Act.
Eligibility For ESI Registration In India
The general rule to be eligible for (Employees’ State Insurance) ESI registration is to have 10 or more workers. But in some regions, ESI is applicable only if there are more than 20 employees.
Other eligibility criteria that need to be fulfilled are:
Any employee whose gross salary is up to ₹21,000 per month can avail of this with the help of the employer
Establishment registered with EPFO
The Contribution To ESI Is 6.5% Of The Gross Salary. It Is Divided As:
- 4.75% by the employer
- 1.75% by the employee
For industrial units, where there are chances of occurrence of injury or health issues at the business premise, all employees with a salary less than ₹21,000 compulsorily need to have ESI.
Rate Of Contribution Under ESI
Under the Employees’ State Insurance (ESI) Act 1948, the contribution rate is 3.25% of the wages paid to employees. The contribution is shared equally by the employer and the employee. The contribution rate was reduced from 4% to 3.25% in June 2019. The reduction was made to provide relief to employers and employees. The wages for ESI contribution are defined as the basic wages plus dearness allowance (DA). The DA is the amount paid to employees to compensate for the rising cost of living.
The ESI Act provides for several benefits to insured employees, such as:
- Medical care
- Cash benefits for sickness, maternity, and disablement
- Pension for old age and death
- Disablement benefit
- Funeral expenses
The ESI Act is a social security scheme that provides financial assistance to needy employees. The contributions of employers and employees fund the scheme.
Documents Required For Online ESI Registration
To register for ESI the employer has to submit the following documents along with the application:
- The registration certificate or license issued by – Shops and Establishments/Factories Act(Required for ESI online registration)
- Address proof
- Rent receipt of the occupied premises, mentioning its capacity
- Copy of PAN card
- Copy of bank statement
- Photocopy of the last building tax/property tax receipt
- Memorandum and Articles of Association or Partnership Deed registration or Trust Deed registration – depending on the applying entity
- Photocopy of registration
- Certificate of commencement of production
- Registration No. of CST/ST/GST
Note: For ESI filings, a monthly pay sheet is required for computing the contribution amount for each employee.
Period Of Contribution
The contribution period under the Employees’ State Insurance (ESI) Act of 1948 is six months, also known as a contribution period.
The contribution period runs from 1 April to 30 September and from 1 October to 31 March of the following year. | The contribution is payable for six months, even if the employee does not work for the entire period.
For example, suppose an employee joins an establishment on 1 July. In that case, the contribution for the first contribution period will be payable for the entire six-month period, i.e., from 1 April to 30 September.
The ESI Act provides for a number of exemptions from the payment of contributions, such as:
- Employees who are paid less than Rs. 176 per day
- Employees who are employed in establishments with less than ten employees
- Employees who are employed in seasonal establishments
- Employees who are employed in establishments located in rural areas
Suppose an employee is exempted from the payment of contribution. In that case, the employer is still required to contribute on behalf of the employee.
Returns To Be Filed After Esi Registration
ESI returns need to be submitted biannually after ESI registration. To file these returns, the following documents are necessary:
- Employee attendance register
- Form 6 register
- Wages register
- Accidents register (for any incidents that may have occurred on the business premises)
- Monthly returns and challans.
Why True Auditor?
If the processing time taken by authorities is not factored in, True Auditor can get your (Employees’ State Insurance) ESI registration in as little as 12 days. When you consult with us on ESI online registration you get:
- Complete application preparation that includes gathering the necessary documents to be submitted with the ESI form
- A thorough processing of the application at every stage starting from submission and ending with all follow-ups
- Final registration steps are taken by our expert who is appointed to respond to any question that may arise during the processing
- We ensure our affiliates take care A-Z of the ESI New Registration process without any hassles
- We take all the effort while you can stay focused on your business.
Easy Payment Options Available
No Spam. No Sharing. 100% Confidentiality