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Center Government Reduces ESI Contribution Rate to 4% - June 2019 Update | Corpseed

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Centre Government Reduces ESI Contribution Rate to 4%

Employee state insurance corporation which is an autonomous body created by the law under the ministry of labour and employment, government of India. For workers benefit this scheme was started, under this workers are provided with a huge variety of medical, monetary and other benefits from the employer

Applicability Of ESIC

This scheme is applicable to non-seasonal factories employing ten or more person, as well as shops, hotels, restaurants, private medical and educational institutions, cinemas and newspaper establishments employing 20 or more persons (10 or more persons in some states) who have a maximum salary of Rs. 15000/- has to mandatorily register itself with the ESIC.. This is not applicable for the States of Manipur, Sikkim, Arunachal Pradesh and Mizoram are excluded from the scheme.

According to government notification, following entities are covered under ESI act under section 1(5)

  1. Shops
  2. Hotels is only engaged in sales and restaurant
  3. Movie theatre or cinema hall
  4. Transport Establishments (road transportation)
  5. Newspaper company or establishment (which is not covered under the factory act)
  6.  Private Educational Institutions

Register for Monthly ESIC Payments And ESIC Return Here 

ESIC contribution Rate :

The current rate of contribution as per ESI act:

  • 4.75% of the wages paid/payable to the employees’ in every wage period – for employers
  • 1.75% of the wages – for employees

ESIC Revised rate of contribution (applicable w.e.f. 1 July 2019)

The proposed revised rate of contribution has been reduced to:

  • 4% – for employers
  • 1% – for employees

The draft notification of the same has been highlighted here for your reference

Benefits of ESI registration:

  1. Sickness benefits to employee at the rate of 70% (In form of salary)
  2. Medical benefits to an employee and his family members
  3. Maternity Benefits to women who is pregnant (Paid leaves)
  4. 90% of the salary is given to his dependents every month after the death of the employee, If the death of the employee happens while on work
  5. 90% of the salary is given to his dependents every month after the death of the employee,  in case of disability of the employee happens while on work
  6. Funeral expenses
  7.  Old age care medical expenses

Documents required for ESIC registration:

The documents required for the registration are –

1. A registration certificate obtained either under the:

          a. Factories Act

          b. Shops and Establishment Act

2. Registration Certificate in case of Company, and Partnership deed in case of a Partnership

3. MOA/AOA in case of company and Partnership deed in case of partnership.

4. Employees List working in the Establishment

5. PAN Card of both establishment and employees

6. Salary or compensation details of all the employees

7. A cancelled cheque of the Bank Account of the Company

8. List of Directors of the Company

9. List of the Shareholders of the Company

10. Register containing the attendance of the employees

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Author
Vinay Singh
Vinay Thakur is Managing Partner in Corpseed. He focused on payments, digital transformation, and financial technology for over 15 years and holds strong expertise on fintech startups, banking innovation, and investors with a keen understanding of the trends and activities of startups, banks, and investors in the space.