Employees’ State Insurance (ESI) is one of the most important social security and health insurance schemes in India. It provides financial help to employees in various sectors in India, and it is particularly important for those who work in the organized sector. Employees’ State Insurance (ESI) is governed by the Employees’ State Insurance Act of 1948 and is administered by the Employees’ State Insurance Corporation (ESIC). It provides several benefits, such as medical care, sickness benefits, maternity benefits, and more.

In this blog, we will look at what is an ESI number, the ESI registration process, the benefits of ESI, and why it is important for employers and employees in India. 

What is ESI?

Employees’ State Insurance (ESI) is a social security scheme launched by the Government of India to protect employees against financial hardships arising from sickness, maternity, and employment injuries. The scheme provides social security benefits in all social aspects to the organized sector employees, which includes healthcare facilities and financial help whenever required. The scheme came into force after the enactment of the Employees’ State Insurance Act of 1948.

The scheme covers employees drawing a gross monthly wage of up to INR 21,000 (up to INR 25,000 for employees with disabilities). Both employers and employees make contributions to the ESI fund. The employers contribute 4.75 percent of their employee’s wages, while the employees contribute 1.75 percent. The contributions are pooled into the ESI fund, which is used to provide various benefits of ESI to registered persons and their dependents.

Understanding the Structure and Functioning of ESIC

The Employees’ State Insurance Corporation (ESIC) is a statutory body established under the Employees’ State Insurance Act of 1948. The corporation works under the administrative control of the Ministry of Labour and Employment and it is responsible for implementation and operation of the ESI scheme in the country. ESIC operates a large network of dispensaries, hospitals, and branch offices across the country to provide healthcare services to insured persons and their dependents.

The structure of ESIC is also meant to ensure that the ESI scheme is well-managed and governed. The corporation is run by a Board of Directors constituted by the representatives of the central and state governments, employers, employees, medical practitioners, and parliamentarians.

ESIC collects contributions from the employers and employees towards the ESI fund, manages the ESI fund, and imparts benefits of ESI to the insured persons. It establishes and maintains ESI hospitals and dispensaries so that insured persons can receive medical care. ESIC also undertakes the supervision and inspection of the employers, to see that they comply with the provisions of the ESI Act.

Why is ESI Important: Benefits of ESI

ESI works like a security net for employees who can’t afford hefty medical treatments. For employees who earn minimum wages to make ends meet, there are numerous benefits of ESI. Medical treatment in India can cost a fortune. Having ESI as health security can help all those employees who are facing challenges at the medical forefront.

Social Security Through Health Insurance

Employees’ State Insurance (ESI) program is essentially a health insurance scheme through which the insured persons and dependents of insured persons are entitled to receive medical care. It ensures that employees are neither deprived of medical care on account of financial constraints nor burdened financially due to medical treatment. The beneficiaries of the scheme can avail these health services through ESI hospitals and dispensaries across the country at a nominal cost or even free of cost.

The ESI scheme is of great significance in ensuring health security. Under ESI, health care services such as outpatient consultation, inpatient care, specialist consultation and diagnosis, etc., are covered. The insured person is entitled to receive proper medical treatment promptly. This can decrease the possibility of disease complications and improve health outcomes.

In addition, within the ESI scheme dependants – namely spouses, children, and parents – of an insured person are entitled to medical care. 

Financial Protection for Workers

An ESI scheme provides health services and monetary protection to the workers in case of a medical need. Cash benefits of ESI are provided to compensate for the loss of income during such periods so that the financial needs of the workers can be met even when they cannot work. 

For example, the sickness benefits of ESI pay a cash benefit equal to 70 per cent of the average daily wages to an insured person for up to 91 days in a year, which can help workers cover their living expenses when they are unable to work due to sickness. 

Similarly, the maternity benefit gives female employees a cash benefit of 100 per cent of their average daily wages for up to 26 weeks of maternity leave. This benefit allows women to take adequate leave from work after childbirth.

The disability benefits of ESI include a special allowance for workers who have become temporarily or permanently disabled due to work-related injury and cannot work. The allowance is calculated based on the degree of disability and can be used to cover living or medical costs during the recovery period.

Promoting Workplace Safety and Compliance

The ESI scheme incentivizes employers to maintain a safe working environment and observe the required occupational health and safety standards. This is achieved through the supply of disability compensation and benefits to dependents.

As per the law, employers who fall under the ESI scheme have to contribute to the ESI fund, and therefore, they have a stake in the well-being of their employees. This contribution also encourages them to take a safety-first approach by taking steps to minimize the risk of any mishap occurring to their employees at the workplace.

Besides promoting occupational safety and health, the ESI scheme monitors employers’ compliance with labor laws and regulations. Under the ESI Act, employers who violate the Act are liable for penalties, fines, and civil or criminal actions. This legislative framework ensures that employers take their responsibilities seriously and protect the health and safety of their workforce.

Supporting the Health and Well-being of Families

Besides protecting workers, it also plays an important role in the health and well-being of their families. Dependents of an insured person are entitled to medical care and monetary benefits of ESI provided by the scheme.

For instance, the ESI scheme provides medical care to dependents of insured persons, including spouses, children, and parents. The scheme covers outpatient consultations, inpatient treatment, diagnostic services, medicines and medical appliances, and transport to and from the workplace for treatment. It also grants cash benefits to dependent persons in the event of the insured person’s death due to an employment injury or occupational disease.

With its wide coverage of families, the ESI scheme helps reduce the financial pressure arising from healthcare expenditures. This, in turn, contributes to improving the well-being of families and their ability to lead healthy and decent lives.

ESI Registration Process

All eligible employers need to register for ESI. Employers must provide access to ESI facilities to their employees and for the same, they need to know the end-to-end ESI registration process.

Step-by-Step Guide to ESI Registration

Every employer with eligible employees in India must undergo the ESI registration process as per The ESI Act 1948. This process will certify that both employer and employee are covered under the ESI scheme and can avail of the benefits of ESI. 

Here is a detailed guide on how employers can complete the ESI registration process.

Determine Eligibility for ESI Registration

The first step in the ESI registration process is to check if your establishment is ESI-eligible. Under the Employees’ State Insurance Act of 1948, any establishment employing 10 or more employees (20 in some states) must register under the ESI scheme. The employees earning a gross monthly wage up to INR 21,000 (INR 25,000 for employees with disability) are eligible to be covered.

Employers have a responsibility to ensure that their establishments meet the eligibility criteria. They must be aware of the requirements and the importance of registering under the ESI schemes when eligible. Failure to register for ESI when eligible can result in penalties, fines, and legal action.

Gather Required Documents for ESI Registration

To complete the ESI registration process, employers need to collect the following documents:

• Certificate of Registration or License taken under the Shops and Establishment Act or Factories Act (It is proof that the establishment is legally registered and in operation).
• Proof of Address of the employer, such as an Aadhaar Card, PAN Card of the employer, or a Passport.
• Bank Account Details of the Business Entity, such as Bank statement, canceled cheque, or any other documents containing information regarding the bank account for the deduction of ESI contributions.
• List of Employees along with Details, such as the Date of Joining, Salary, Designation, and Identity Proof of all employees who are eligible for the scheme of ESI.

Online Registration through the ESIC Portal

ESI registration is completed online through the official ESIC portal. All establishments must register with ESIC at least one month before commencement of employment or as soon as possible. For this, the employer must register on the official ESIC portal and provide the details of the establishment along with supporting documents. 

The online ESI registration process has a series of steps, such as filling out the employer registration form, uploading the required documents into the system, and submitting the application for verification. Employers should ensure that all information provided is accurate and up-to-date to avoid any delays in the registration process.

Generation of ESI Code Number

Once the form is submitted and verified by ESIC authorities, the employer will be provided a unique 17-digit code stating what is an ESI number. This code number is important as it is to be used for all future communication and transactions pertaining to the ESI scheme. It also acts as proof of registration under the ESI Act.

The ESI code number plays a crucial role in the ESI system, as it is used to track the employer’s ESI contributions and ensure that the employees are enrolled under the scheme. Employers should keep their ESI code number secure and use it correctly in all ESI activities.

Employee Registration and ESI Number Generation

Upon receipt of the ESI code number, the employer has to enroll the eligible employee on the ESIC portal. Each employee shall be allotted an ESI number unique to them. This ESI number is used by the employee for availing the benefits of ESI. The ESI number is an important part of the ESI scheme as it tracks the employee’s contribution and benefit throughout their employment.

The ESI registration process involves providing all necessary information about every new employee, including detailed information, salary details, and date of joining. The employer must ensure that the information provided is correct, and the employees should be informed regarding their ESI number and how to use it to avail themselves of the benefits.

Also Read: HR Compliance Checklist 

Issuance of ESI Cards

Once the employees are registered, they will be issued with an ESI card which is proof of their insurance under the ESI scheme. The ESI card will have the ESI number of the employee, and this has to be produced whenever they avail any medical benefits of ESI.

The ESI card is a very important document for every insured person. It gives the insured individual access to the benefits under the ESI scheme. Every employer should ensure that employees are getting their ESI cards timely and also train them on how to use it for availing medical service and other benefits.

Eligibility Criteria for ESI Registration

The following are the eligibility criteria for ESI registration:

Establishment Size

An establishment having 10 or more employees (20 in some states) is required to register for ESI. The threshold varies for different types of establishments and states.

Employee Income

ESI coverage is available for employees whose gross monthly salary is up to INR 21,000 (INR 25,000 for employees with disabilities). An employer has to ensure that all eligible employees are registered under the ESI scheme.

Contribution Rates

The Employer contributes 4.75% of every employee’s wage to the ESI fund, and the employee contributes 1.75% of their wage.

Challenges and Solutions in ESI Registration

Here are some common challenges and solutions:

Understanding Eligibility Criteria

Many employers don’t know if their workplace is considered large enough to require ESI registration because different states have different employee thresholds. A worker must consult the ESI Act and the state-specific regulations to know whether he is eligible for medical benefits and compensation. Eligibility is also dependent on the changes in law that may affect the employee’s eligibility. Therefore, employers need to keep themselves updated with the new laws.

Document Preparation

The process of collecting and preparing all the necessary documents for ESI registration is sometimes tedious and intricate. Keep the records organized for easy reference, and have a checklist of relevant documents ready to aid in the preparation. Employers can also nominate a team or individual to manage the ESI registration process.

Technical Difficulties

Companies may have problems registering on the ESIC portal due to technical issues. To prevent any technical problems, employers must ensure that their internet connection is stable, their browsers are compatible, and they register during off-peak hours when the servers are not so busy. If they still have persistent problems, they can contact ESIC’s technical support.

Employee Data Management

Accurate data entry of beneficiary details is crucial for seamless registration of ESI scheme members, as any entry error could lead to delay or hassle in availing themselves of the benefits of ESI. Employers should adopt robust data management processes, check and double-check figures before submission, and automate payroll processes. 

How to Maintain Compliance with ESI

To avoid penalties, each employer must maintain compliance with the ESI scheme so that their employees can benefit from the same. Here’s how employers can do so:

1. Timely Contributions: Employers should pay their contributions into the ESI fund on time, which otherwise comes with a late charge and interest. Employers can implement an automated payment or reminder system to make sure that payments are made by the 15th of the month. 
2. Accurate Record Keeping: Wages, contributions, and other benefits paid to employees must be accurately recorded. This is important to ensure compliance with regulations and for internal and external auditing purposes. Employers ought to maintain current records and perform periodic compliance audits using payroll software.
3. Regular Updates: Any change in the employment status of ESIC-eligible employees, such as joining, resigning, or changing wages, must be updated to the ESIC portal immediately. Employers can adopt a systematic process for updating the ESIC portal every year. 
4. Employee Awareness: It is important to ensure that employees are aware of their ESI rights and how to claim them. To ensure this, employers should run regular training sessions, provide informational materials, and help people access the benefits of ESI. Good communication about the benefits and the ESI registration process can, in turn, positively affect employee satisfaction and trust.

Also Read: Payroll Processing 

How to Check ESI Number

Below is a guide for employees looking to verify their ESI number.

1. Log in to the Online Portal

Here is the step-by-step guide on how to log in to the ESI online portal:

Step 1: Employees can log in to the ESI portal by using their credentials.

Step 2: After login, employees can visit the dashboard.

Step 3: Employees must go to the Employees tab and click on the “View Members” section.

Step 4: You can check the ESI number under your profile or personal info under the tab there.

2. Through Employer

Employees can also get their ESI number directly from their employer or personnel department. Employers usually maintain a record of all ESI numbers issued to their personnel.

3. ESI Card

Your ESI number is written on your ESI card. This card is issued to employees and should be kept for future benefits of ESI.

Conclusion

Employees’ State Insurance (ESI) is one of the major components of the social security system in India, which provides comprehensive health coverage and financial assistance to employees and their dependents. It is mandatory to register under the Employees’ State Insurance Act. The benefits of getting registered under ESI are immense, but it comes with some penalties if an employer violates the rules. It is important to make sure that employees are covered under the ESI scheme, as it not only provides assistance to the employees but also leads to a healthier and, therefore, more productive work environment.

FAQs

What is the process to get an ESI number?

The ESI number is issued during the employee registration process once employees are registered on the ESIC portal. As the employers register the eligible employees, the system generates a unique ESI number for each employee.

Who is eligible to avail of the benefits of ESI?

Employees who earn up to INR 21,000 (INR 25,000 for disabled workers) gross monthly wages in establishments that have 10 or more workers are covered under the ESI scheme.

How to check the ESI number of employees?

All employees can check their ESI number by logging onto the ESIC portal, requesting it from their employer, or referring to their ESI card.

What documents are required for ESI registration?

Documents needed for ESI registration include a Registration Certificate under the Shops and Establishment Acts or Factories Act, employer’s identity proof, PAN card, and a list of employees with details.

What happens if an employer doesn’t register for ESI?

The consequences of not registering for ESI include penalties, fines, and even legal action. An employer is liable to pay the employee’s share of the ESI contributions, with interest.

How can employees claim ESI benefits?

If an employee wants to avail of the benefits of ESI at an ESI hospital, dispensary, or clinic, they have to present the ESI card to the doctor/authority. For cash benefits, employees are required to submit the prescribed forms through their employer.

Can employees opt out of ESI?

No, the eligible employees are mandatorily covered under the scheme of ESI and they cannot opt out.

How is the ESI contribution calculated?

The employer pays 4.75% of the employee’s gross monthly wages. The employee pays 1.75% of their gross monthly wages into the fund.

What are the penalties for ESI non-compliance?

ESI non-compliance penalties include fines, compound interest on late payments, and possible legal action. Employers may also be made to make backdated contributions.

How does ESI benefit employers?

ESI enables employers to provide social security cover for their employees, which in turn can help improve employee satisfaction and reduce absenteeism due to illness or injury.