In our company ESIC appilcable just now. So we need to apply those salaries are below 15000/-. The problme is that our MD has instructed to deduct all the contribution of ESIC like 1.75% and 4.75% from salaries of Employees. People are not intereted for deduction of 4.75%. So what we need to do. Currently I am taking invoice from them for providing services to our company and giving payment. Is it right?
Deducting Employers share of contribution (4.75%) from the wage is a criminal offence, punishable with one years imprisonment under Section 85 (b) of ESI Act. There are also civil liability Please see following section.
85. Punishment for failure to pay contributions, etc. — If any person —
(a) fails to pay any contribution which under this Act he is liable to pay, or
(b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer’s ccontribution, or
(c) in contravention of section 72 reduces the wages or any privileges or benefits admissible to an employee, or
(d) in contravention of section 73 or any regulation dis¬misses, discharges, reduces or otherwise punishes an employee, or
(e) fails or refuses to submit any return required by the regulations or makes a false return, or
(f) obstructs any Inspector or other official of the corporation in the discharge of his duties, or
(g) is guilty of any contravention of or non-compli¬ance with any of the requirements of this Act or the rules or the regulations in respect of which no special penalty is provided,
1[he shall be punishable —
2[(i) where he commits an offence under clause (a), with imprisonment for a term which may extend to three years but —
(a) which shall not be less than one year, in case of failure to pay the employee’s contribution which has been deducted by him from the employee’s wages and shall also be liable to fine of ten thousand rupees ;
(b) which shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees :
Provided that the Court may, for any adequate and special rea¬sons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term ;
(ii) where he commits an offense under any of the clauses (b) to (g) (both inclusive), with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both].]
It is also a criminal offense under Payment of Wages Act and in some circumstances, under Minimum Wages Act.
Whether you pay wage through Voucher, invoice, acquittance roll, through bank or wage register, it will remain wage. Maintenance of wage register is compulsory under Factory Act/rules, Payment of wages Act, Minimum Wages act etc.
So tell your MD that compliance under law can not be dictated by individual owners but is stipulated under law. If necessary, you should prepare a self-explaining note on this subject and place before him
O. Abdul Hameed
Formerly Additional Commissioner
ESI Corporation, New Delhi
We at Fulcrum - Chennai conduct frequent seminars on such topics to help respective individuals understand the responsibilities and discharge duties the right way.
Should you or your company need any specific topic to be addressed we can arrange for the same for the benefit of your group. Presently we have a seminar on 23-06-2012 on service tax compliance under negative regime at our office in royapettah chennai.
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Hope this may help you.....
Employee State Insurance Act, 1948 – An overview
The Employee State Insurance Act, [ESIC] 1948, is a piece of social welfare legislation enacted primarily with the object of providing certain benefits to employees in case of sickness, maternity and employment injury and also to make provision for certain others matters incidental thereto. The Act in fact tries to attain the goal of socio-economic justice enshrined in the Directive principles of state policy under part 4 of our constitution, in particular, articles 41, 42 and 43 which enjoin the state to make effective provision for securing, the right to work, to education and public assistance in cases of unemployment, old age, sickness and disablement. The act strives to materialize these avowed objects through only to a limited extent. This act becomes a wider spectrum than factory act, in the sense that the factory act is concerned with the health, safety, welfare, leave etc of the workers employed in the factory premises only. But the benefits of this act extend to employees whether working inside the factory or establishment or elsewhere or they are directly employed by the principal employee or through an intermediate agency, if the employment is incidental or in connection with the factory or establishment.
Related Legislations: ESI (Central) Rules, 1950 and ESI (General) Regulations, 1950
The Employee State Insurance act was promulgated by the Parliament of India in the year 1948. To begin with the ESIC scheme was initially launched on 2nd February 1952 at just two industrial centers in the country namely Kanpur and Delhi with a total coverage of about 1.20 lakh workers. There after the scheme was implemented in a phased manner across the country with the active involvement of the state governments.
The ESI Act is a social welfare legislation enacted with the object of providing certain benefits to employees in case of sickness, maternity and employment injury. Under the Act, employees will receive medical relief, cash benefits, maternity benefits, pension to dependents of deceased workers and compensation for fatal or other injuries and diseases.
According to Section 2 (m) of Factories Act, 1948, Factory means any premises including the precints thereof - (a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on. But does not include a mine subject to the operation of Mines Act, 1952 or a railway running shed;
According to Section 2 (k) of Factories Act, "manufacturing process" means any process for - (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substance; or; (iii) generating, transforming or transmitting power; or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; lra-6 ] [ lra-7 or lra-7 ] (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; (vi) preserving or storing any article in cold storage;
According to Section 2 (h) of The Minimum Wages Act, "wages"- means all remuneration capable of being expressed in terms of money which would if the terms of the contract of employment express or implied were fulfilled be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance but does not include -
(i) the value of - (a) any house accommodation supply of light water medical attendance or (b) any other amenity or any service excluded by general or special order of the appropriate government;
(ii) any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;
(iii) any traveling allowance or the value of any traveling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge
• The ESI Act extends to the whole of India.
• It applies to all the factories including Government factories (excluding seasonal factories), which employ 10 or more employees and carry on a manufacturing process with the aid of power and 20 employees where manufacturing process is carried out without the aid of power.
• The act also applies to shops and establishments. Generally, shops and establishments employing more than 20 employees are covered by the Act. “Shop” according to the Delhi Shops and Establishment Act, 1954 means any premises where goods are sold either by retail or wholesale or where services are rendered to customers, and includes an office, a store-room, godown, warehouse or workhouse or work place, whether in the same premises or otherwise, used in or in connection with such trade or business but does not include a factory or a commercial establishment. “Establishment” means a shop, a commercial establishment, residential hotel, restaurant, eating-house, theatre or other places of public amusement or entertainment to which this Act applies and includes such other establishment as Government may, by notification in the Official Gazette, declare to be an establishment for the purpose of this Act. According to the Delhi Shops and Establishment Act, 1954, “Commercial Establishment” means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto is carried on and includes a society registered under the Societies Registration Act, 1860, and charitable or other trust, whether registered or not, which carries on any business, trade or profession or work in connection with, or incidental or ancillary thereto, journalistic and printing establishments, contractors and auditors establishments, quarries and mines not governed by the Mines Act, 1952, educational or other institutions run for private gain, and premises in which business of banking, insurance, stocks and shares, brokerage or produce exchange is carried on, but does not include a shop or a factory registered under the Factories Act, 1948, or theatres, cinemas, restaurants, eating houses, residential hotels, clubs or other places of public amusements or entertainment. Form 01 – Employers’ Registration Form also requires a copy of the registration certificate or licence obtained under the Shops and Establishment Act to be attached along with this form. From this it is quite evident that ESI Act will be applicable to shops and establishments. Again the definition of shops and establishment will vary from state to state depending on the shops and establishment act of that particular state.
• The act does not apply to any member of Indian Naval, Military or Air Forces.
• All employees including casual, temporary or contract employees drawing wages less than Rs 10,000 per month are covered. The ceiling limit has been raised from Rs.7500 to Rs.10000 with effect from 01.10.06.(NOW 15000)
• Apprentices covered under the Apprenticeship Act are not covered under this Act. According to Apprenticeship Act 1961, “apprentice” means a person who is undergoing apprenticeship training in pursuance of a contract of apprenticeship.
o The apprentices under any scheme as the name suggests come to learn the tricks of the trade and may not count much so far as the output of the factory is concerned, with that end in view, the apprentices are exempted from the operation of laws relating to labour unless the State Government thought otherwise.-- Regional Director ESIC v. M/s Arudyog 1987 (1) LLJ 292.
• A factory or establishment, to which this Act applies, shall continue to be governed by its provisions even if the number of workers employed falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power subsequently.
• Where a workman is covered under the ESI scheme,
o Compensation under the Workmen's Compensation Act cannot be claimed in respect of employment injury.
o No benefits can be claimed under the Maternity Benefits Act.
The ESI Scheme is being implemented area-wise by stages. The Scheme is being implemented in almost all union territories and states except Nagaland, Manipur, Tripura, Sikkim, Arunachal Pradesh and Mizoram.
Administration of the Act
The provisions of the Act are administered by the Employees State Insurance Corporation. It comprises members representing employees, employers, the central and state government, besides, representatives of parliament and medical profession. A standing committee constituted from amongst the members of the corporation, acts as an executive body. The medical benefit council, constituted by the central government, is another statutory body that advises the corporation on matters regarding administration of medical benefit, the certification for purposes of the grant of benefits and other connected matters.
The employer should get his factory or establishment registered with the ESI Corporation within 15 days after the Act becomes applicable to it and also obtain the employer’s code number. Application should be made in Form 01 and after having being satisfied with the application form, the regional office will allot a code number to the employer, which must be quoted in all documents and correspondence.
An employee is required to file a declaration form upon employment in factory or establishment to show that he is covered under the Act.
On registration every insured person is provided with a ‘temporary identification certificate’ which is valid ordinarily for a period of three months but may be extended, if necessary, for a further period of 3 months. Within this period, the insured person is given a permanent ‘family photo identity card’ in exchange for the certificate. The identity card serves as a means of identification and has to be produced at the time of claiming medical care at the dispensary / clinic and cash benefit at the local office of the corporation. In the event of change of employment, it should be produced before the new employer as evidence of registration under the scheme to prevent any duplicate registration. The identity card bears the signature/thumb impression of the insured person. Since medical benefit is also available to the families of Insured persons, the particulars of family members entitled to medical benefit are also given in the identity card affixed with a postcard size family photo. If the identity card is lost, a duplicate card is issued on payment as prescribed.
Employers’ / Employees’ Contribution
Like most of the social security schemes, the world over, ESI scheme is a self-financing health insurance scheme. Contributions are raised from covered employees and their employers as a fixed percentage of wages. Presently covered employees contribute 1.75% of the wages, whereas as the employers contribute 4.75% of the wages, payable to the insured persons. Employees earning less than and up to Rs. 50 per day are exempted from payment of contribution.
The contribution is deposited by the employer in cash or by cheque at the designated branches of some nationalized banks. The responsibility for payment of all contributions is that of the employer with a right to deduct the employees share of contribution from employees’ wages relating to the period in respect of which the contribution is payable.
There are two contribution periods each of six months duration and two corresponding benefit periods. Cash benefits under the scheme are generally linked with contribution paid.
Contribution period - 1st April to 30th September, its corresponding Cash Benefit period is 1st January to 30th June of the following year.
Contribution period - 1st October to 31st March, its corresponding Cash Benefit period is 1st July to 31st December of the following year.
Certification of Return of Contribution by Auditor
Regulation 26 of Employees’ State Insurance (General) Regulations, 1950 was amended by Notification No.N-12/13/1/2008-P&D to include certain details to be mentioned in the Return of Contribution to be submitted by employers. The salient features of amendments made in the Returns of Contribution are as under:-
1. Self-declaration by Employers regarding maintenance of records and registers, submission of Declaration Forms, employees engaged directly or through immediate employers and wages paid to the workers.
2. All the Employers employing 40 and more employees shall have to append a certificate duty certified by a Chartered Accountant, in the revised format of Returns of Contribution.
3. The Employers employing less than 40 employees will have to provide self- certification without any certification from the Chartered Accountants in Return of Contribution.
The Chartered Accountant should certify that he has verified the return from the records and registers of the company.
This notification has come into force with effect from 01-04-2008.
Benefits under the Scheme
Employees covered under the scheme are entitled to medical facilities for self and dependants. They are also entitled to cash benefits in the event of specified contingencies resulting in loss of wages or earning capacity. The insured women are entitled to maternity benefit for confinement. Where death of an insured employee occurs due to employment injury or occupational disease, the dependants are entitled to family pension. Various benefits that the insured employees and their dependants are entitled to, the duration of benefits and contributory conditions thereof are as under:
• Medical benefits
• Sickness benefits
• Extended sickness benefit
• Enhanced sickness benefit
• Maternity benefit
• Disablement benefit
• Dependants benefit
• Other benefits like funeral expenses, vocational rehabilitation, free supply of physical aids and appliances, preventive health care and medical bonus.
Obligations Of Employers
1. The employer should get his factory or establishments registered with the E.S.I. Corporation within 15 days after the Act becomes applicable to it, and obtain the employers Code Number.
2. The employer should obtain the declaration form from the employees covered under the Act and submit the same along with the return of declaration forms, to the E.S.I. office. He should arrange for the allotment of Insurance Numbers to the employees and their Identity Cards.
3. The employer should deposit the employees’ and his own contributions to the E.S.I. Account in the prescribed manner, whether he has sufficient resources or not, his liability under the Act cannot be disputed. He cannot justify non-payment of E.S.I. contribution due to non-availability of finance.
4. The employer should furnish a Return of Contribution along with the challans of monthly payment, within 30 days of the end of each contribution period.
5. The employer should not reduce the wages of an employee on account of the contribution payable by him (employer).
6. The employer should cause to be maintained the prescribed records/registers namely the register of employees, the inspection book and the accident book.
7. The employer should report to the E.S.I. authorities of any accident in the place of employment, within 24 hours or immediately in case of serious or fatal accidents. He should make arrangements for first aid and transportation of the employee to the hospital. He should also furnish to the authorities such further information and particulars of an accident as may be required.
8. The employer should inform the local office and the nearest E.S.I. dispensary/hospital, in case of death of any employee, immediately.
9. The employer must not put to work any sick employee and allow him leave, if he has been issued the prescribed certificate.
10. The employer should not dismiss or discharge any employee during the period he/she is in receipt of sickness/maternity/temporary disablement benefit, or is under medical treatment, or is absent from work as a result of illness duly certified or due to pregnancy or confinement.
Records To Be Maintained For Inspection By ESI authorities
1. Attendance Register / Muster Roll
2. Salary / Wage Register / Payroll
3. EC (Employee’s & Employer’s Contribution) Statement
4. Employees’ Register
5. Accident Book
6. Return of Contribution
7. Return of Declaration Forms
8. Receipted Copies of Challans
9. Books of Account viz. Cash/Bank, Expense Register, Sales/Purchase Register, Petty Cash Book, Ledger, Supporting Bills and Vouchers, Delivery Challans (if any).
10. Form of annual information on company
Employees Insurance Court
Any dispute arising under the ESI Act will be decided by the Employees Insurance Court and not by a Civil Court. It is constituted by the State Government for such local areas as may be specified and consists of such number of judges, as the Government may think fit.
Important Forms to be submitted under the Act
Form 01 : Employers' Registration Form
Form 01(A) : Form of Annual Information on Factory/Establishment
Form 1 : Declaration Form
Form 1A : Family Declaration Form
Form 1B : Changes in Family Declaration Form
Form 3 : Return of Declaration Forms
Form 4 : Identity Card
Form 4(A) Family Identity Card
Form 5 Return of Contributions
Form 7 First/Intermediate/Final Certificate
Form 8 Special Intermediate Certificate
Form 10 Abstention verification in r/o Sickness Benefit/Temporary Disablement Benefit/MB
Form 12 Sickness of Temporary Disablement Benefit
Form 12A Maternity Benefit for Sickness
Form 13 Sickness or Temporary disablement or maternity benefit for sickness
Form 13A Maternity benefit for sickness
Form 14 Sickness or temporary disablement or maternity benefit for sickness
Form 14A Maternity Benefit for Sickness
Form 16 Accident report from employer
Form 17 Dependant's or funeral benefit (Death Certificate)
Form 18 Dependant's Benefit (Claim Form)
Form 18A Dependant's Benefit (Claim for periodical payments)
Form 19 Maternity Benefit (Notice of Pregnancy)
Form 20 Maternity Benefit (Certificate of Pregnancy)
Form 21 Maternity Benefit (Certificate of expected confinement)
Form 22 Claim for Maternity Benefit
Form 23 Maternity Benefit (Certificate of confinement or miscarriage)
Form 24 Maternity Benefit (Notice of work)
Form 25 Claim for Permanent Disablement Benefit
Form 26 Certificate for permanent disablement benefit
Form 27 Declaration and certificate for dependant’s benefit
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