Applicability of Employees’ State Insurance Scheme (ESIS) to NGOs

The ESI Scheme is a comprehensive Social Security Scheme designed to accomplish the task of socially protecting the 'employees' in the organized sector against the events of sickness, maternity, disablement and death due to employment injury and to provide medical care to the insured employees and their families. 

The scheme provides full medical care to the employee registered under the scheme during the period of his/her incapacity for restoration of his health and working capacity.

It provides financial assistance to compensate the loss of his/her wages during the period of his abstention from work due to sickness, maternity and employment injury.

The scheme provides medical care to his/her family members also.

The ESI Scheme is administered by a body called the 'Employees' State Insurance Corporation' (ESIC), which has members representing Employers, Employees, the Central Government, State Government, Medical Profession and the Parliament. The Director General is the Chief Executive Officer of the Corporation and is also an ex-officio member of the Corporation.

The scheme is a self-financing scheme. The ESI funds are primarily built out of contribution from employers and employees payable monthly at a fixed percentage of wages paid. The State Governments also contributes 1/8th share of the cost of Medical Benefit.

Applicability & Contribution

The ESI Act 1948 aims at ensuring that employees drawing wages which are less than or equivalent to Rs. 21,000/- (w.e.f. 1^st January 2017), are provided with certain basic benefits at low and accessible rates. For employees with disabilities, the wage ceiling for eligibility for benefits under the Act is Rs. 25,000. 

The Act provides for employers and employees to each contribute specified amounts, as a percentage of the basic wage of an eligible employee each month into the corpus maintained by the ESIC.

Currently, the employer’s contribution is equivalent to 4.75% and the employee’s contribution is equivalent to 1.75% of the basic wage. 

The employees’ contribution is made by deducting the specific amount from his basic wage each month and the employer may now make his contribution via online payment through State Bank of India.

Employees who draw wages of less than Rs.100 per day will not be required to make any contribution to ESIC.

If the wages of an employee (excluding remuneration for overtime work) exceeds the wage limit (currently Rs. 21,000/- p.m.) prescribed by the Central Government after start of contribution period, he continues to be an employee till the end of that contribution period and hence contribution is to be deducted and paid on the total wages earned by him.

Are Charitable Institutions/NGOs covered under ESI?

According to the notifications issued from time to time by the appropriate Government (Central/State) under Section 1(5) of the Act, the following establishments employing 10 or more persons attracts ESI coverage.

       i.  Shops;

     ii.Hotels or restaurants not having any manufacturing activity, but only engaged in 'sales';

    iii. Cinemas including preview theatres;

    iv. Road Motor Transport Establishments;

     v. News paper establishments.(that is not covered as factory under Sec.2(12));

    vi.Private Educational Institutions (those run by individuals, trustees, societies or other organizations and Medical Institutions (including Corporate, Joint Sector, trust, charitable, and private ownership hospitals, nursing homes, diagnostic centers, pathological labs).

Thus, if your organization whether registered as a trust or society, is an educational or medical institution and employs more than ten employees, ESIS will be applicable

It is the statutory responsibility of the employer to register the establishment under the ESI Act within 15 days from the date of its applicability to the establishment.

Registration under ESIS

The establishment to which the Act applies is to be registered by logging into ESIC Portal i.e. www.esic.in

The employer is required to sign up, providing the establishment’s name, principle employer’s name, State and region as well as e mail address. The employer trying to register would get a password in his email id. The employer can log in to www.esic.in and his email ID can be used as user ID and the password received has to be accessed from the mail box to be used to register the establishment by providing information in the Portal. Automatically a 17 digit code number is generated after successful registration which will be the unique identification number allotted to the establishment.

Please note that once an Establishment is covered under the Act, it continues to be covered notwithstanding the fact that the number of persons/ coverable employees employed therein at any time falls below the required limit or there is a change in activity.

An employer, who fails to pay the contribution within the limit prescribed under Regulation 31, shall be liable to pay simple interest at the rate of 12% per annum in respect of each day ofthe default or delay in payment of contribution. 

Any legal queries should be directed to advisory@capindia.in