Navigating ESIC: Is It Mandatory for Contractors and Can You Claim External Medical Bills?

We are a contractor firm doing major Mechanical & Electrical projects at IOCL and BPCL in various outskirt places of India. The maximum number of employees are paid PF as well as ESI. PF is possible to claim in the future, so we are not bothered about it, but we are unable to benefit from the ESI due to employees being engaged from various states to various project locations.

ESIC Applicability and Benefits

For this type of business, please guide us on whether ESIC is mandatory or not. If it is mandatory, is it applicable at all private hospitals? Also, are medical bills from outside hospitals claimable through ESIC?

The ESI is mandatory as per the act, and it is more helpful if employees need treatment costing lakhs. Nowadays, you know how expensive hospitalization expenses are. It is a benefit; never agree that ESI is not useful. You can claim the bill in the ESI, and you will get the reimbursement amount. This facility is also available. Those covered under ESI are within the limit of ESI.

Regards

If your employee count exceeds 20 (and based on your business scale, it seems you indeed have more than 20 employees), certain regulations apply. In your scenario, where employees are spread across multiple locations, you need to assign a main code for the registered office and sub-codes for each region. This process is quite straightforward now.

Understanding ESIC

ESIC, which stands for Employee State Insurance Corporation, is a social security insurance scheme that benefits your organization in various ways, including maternity benefits, the Industrial Dispute Act, the Payment of Wages Act, and the Employee Compensation Act (formerly known as the Workmen's Compensation Act).

Importance of Compliance

Non-compliance with ESIC regulations can lead to penalties and scrutiny from both labor and ESIC inspectors. It is advisable to ensure compliance promptly to avoid any issues. One critical point to note is that delaying compliance can result in significant costs, including bribe amounts and retrospective coverage with interest. Therefore, it is essential to comply as soon as possible.

Please let me know if you need any further assistance or clarification.

Thank you.

It has been mentioned that the employees are working at various outskirt places. It has not been confirmed whether such employees are working in areas implemented as notified under section 1(3) of the ESI Act, 1948. In such cases, compliance should only be made after confirmation that the area where employees are working is, in fact, an implemented area. This can be confirmed at the nearest Branch Office of ESIC or the nearest Sub/Regional Office of ESIC.

Private Hospitals and ESI Act Compliance

Secondly, as per your above comments, it appears that some of your employees are also deployed in private hospitals. In this connection, before ensuring compliance, it must be confirmed whether the State Government has extended the provisions of the ESI Act, 1948 under section 1(5) to private hospitals or not. To my knowledge, a few State Governments have not yet extended the provisions of the said Act to private hospitals.

Regards

ESIC Applicability for Employees in Different Locations

In general, ESIC is applicable only for employees working at places covered under ESIC. If you are placing employees in a project outside the ESIC zone, you do not have to pay ESIC for them. However, if you need to move people from site to site, you may have to issue them new ESIC codes each time they come to a factory covered by ESIC. The Principal Employer (PE) will require you to pay ESIC even if the person is there for a day.

Considerations for Serious Illness Coverage

You also need to consider the aspect of serious illness coverage, which the employee can avail of at the nearest ESIC hospital. The question then arises: how far is that?

The prospect of receiving treatment at a local private hospital and then seeking reimbursement from ESIC is unlikely. Therefore, it is better to provide Mediclaim cover for your staff.

Understanding ESIC Coverage and Benefits

ESIC is a beneficial legislation. Any employee for whom the gross wages are below Rs. 15,000/- shall be covered under ESIC.

Gone are the days when ESI facilities were not appreciated by workmen. These days, there are instances wherein ESIC is extending super specialty treatment to the needy. Being a Central Act, the coverage is throughout India. I would recommend that you meet the concerned officials in the regional office with a prior appointment and seek all clarifications you need from them.

Principles of ESIC and Health Insurance

ESIC follows the principles of health insurance. For example, in Mediclaim, you are required to pay a premium. You are reimbursed for expenses incurred by you for hospitalization to the extent you have taken cover. If you are healthy, the premium paid is not repaid in any manner. While in Mediclaim, the reimbursement is restricted to hospitalization alone, ESIC offers a host of other benefits such as Sickness Benefit, Death Benefit, Dependent Benefit, Disablement Benefit, etc.

Hence, please take guidance from the ESIC officials, and I am sure that you will be convinced that this legislation is a boon to employers these days.

Regards

I think you have missed the point the Original Post was trying to make: He is not against ESIC. His problem is that employees are posted in remote places where ESIC facilities are not available. So, in such cases, ESIC payments (both deductions from employees and payments by the employer) are a waste. If only treatment for major illness is desired, then a mediclaim policy will be far cheaper.

Is ESIC Mandatory in Non-Coverage Areas?

So the question now is: Is it mandatory to pay ESIC where the employee is posted in a place where no ESIC facility is available (non-coverage area), even if the employee was originally recruited at a place where ESIC coverage was available?

ESIC is a very good facility provided to employees. However, as your sites are in different locations, first, check whether all the locations are covered by ESI. If ESI is not applicable, then you can opt for a workmen's compensation policy. Since you are working with BHEL & IOCL, both insist on some form of coverage for employees, either ESI or workmen's compensation policy.

Thank you.

ESIC Compliance for Construction Workers

Just for information, ESIC is not mandatory for construction workers. I recommend checking the ESIC circular for further details.

It is essential to have a sub-code to ensure compliance in different states. Maintaining a centralized portal for insured employees would be beneficial, considering the varying minimum wages from state to state.

For migrant workers who were previously covered under ESIC during migration, Form 105 should be issued. Medical benefits can be availed by showing the ESIC Card Med 10. In case of an emergency, ESIC card 86 should be issued.

Kindly review all the details before proceeding.

Regards

Your business activities fall under the construction sector. Unless the site where your activities are located is covered by ESIC, you don't have to include your establishment under the ESI Act. ESIC extends the benefits of the scheme to areas where they have established facilities like ESI Dispensaries/ESI Hospitals. Therefore, it is advisable to first check this with the ESIC Office in your town. If the area is covered by ESIC, it is recommended to provide coverage for all employees earning wages/salaries below Rs. 15,000 per month. Once an employee is covered under ESI, you are absolved of all compensation and liabilities in cases of accidents or sickness.

If the area/town/tahsil is not covered by ESIC, it is advisable to opt for accident insurance under the Workmen's Compensation Act for all employees. This policy provides benefits only when an employee has an accident at the site and not elsewhere.

Important Considerations for Construction Work

One important consideration is if the construction work is carried out at a height of 9 meters or more, you must inform the policy provider specifically about this. Failure to do so means that if an employee falls from a height of 9 meters and dies, the Insurance Company will not pay any compensation (for this 9-meter coverage, you may need to pay a slightly higher premium).

Moreover, since work is typically continuous around the clock and workers may be called back to work at odd hours, there is a high risk of accidents, not necessarily at the construction site but possibly on public roads or other premises. Therefore, it is advisable to obtain additional coverage under a Group accident policy which provides 24-hour coverage.

Insurance for Illnesses

As for illnesses, if you wish, you can consider taking out a policy; otherwise, it may not be necessary. If you view it as a motivational or retention tool for your permanent employees, you can opt for a mediclaim policy for them.

The Workmen's Compensation Policy and Group Accident policies are unnamed and are in the employer's name. Conversely, the Mediclaim policy will be in the employees' names, even though the premium is paid by the employer.

Regards.

Firstly, the Employee State Insurance (ESI) will be applicable to the notified area only. Therefore, you are requested to first check the area-based notification.

Hi Experts, Thanks for your valuable comments. However, as you said, approaching ESIC in person only gives a great solution for our issue. In the meantime, the new buzz is that the salary limit for ESIC is likely to be raised up to Rs. 25,000, I heard.

Globalized Registration in ESIC

Please guide me. Shall we get globalized registration in ESIC? Because our nature of business is such that if we get a project in a single state, temporarily we will make all tax-related registrations for that particular state. Upon project completion, we will wind up all of our activities within that state. So, in this case, how is it possible for us to have state-wise ESIC sub-code?

Regards,
D. Mohan