Is ESIC Deduction Needed for Daily Wage Workers Earning Above Rs 15,000 Monthly?

Clarification on ESIC Deduction and Applicability

I need a small clarification on ESIC deduction and its applicability. Below are the queries:

1. Is ESIC applicable to daily wages? If yes, please let me know the section of the act that has provisions for the same.

2. Suppose a daily wage worker is earning Rs 650 per day and above Rs 15,000 per month; is ESIC applicable to him?

3. Is ESIC applicable to employees if the management has taken out accident and workmen's compensation policies?

We have a large group working for us, and they are paid daily wages. According to them, ESIC is not applicable since every worker withdraws wages above Rs 15,000 in a month.

Please advise.

Regards,
Ranjeet

ESI Applicability for Different Worker Categories

Law has not made any distinction between daily-rated workers and monthly-rated workers. ESI, being a social security measure, is to be paid irrespective of the nature of employment. Therefore, all employees, whether permanently employed, employed through another employer (contractor), or engaged for a day or a few days (casual workers), should be given ESI, subject to one condition: they should not receive more than Rs 15,000 per month.

Notional Wages Policy for ESI

In respect of workers who work for fewer days than the normal working days in a month, the ESI has decided to implement the notional wages policy. Notional wages mean the total wages the worker would have earned if he had worked for all the 26/30 days in a month. Therefore, if for a part of a month, one employee gets Rs 650 per day, that could be notionally computed as Rs 16,900 (i.e., 650 X 26) and exclude such an employee from the coverage of ESI. Please find the circular regarding this.

Comparison of ESI with Other Policies

Medical Claim policies, Accident policies, or Workmen Compensation Policies will not be at par with ESI for various reasons. No medical claim policy in India provides coverage for all diseases, whereas with ESI, there is no distinction between existing, pre-existing, or the age of parents connected with it. You cannot get a mediclaim with your 85-year-old parents included, or cover for your existing diseases without paying a very high premium. Under ESI, age is not a factor, pre-existing diseases are not considered, and the employee will receive benefits.

Accident policies cover accidents, but who will bear the expenses of hospitalization for other sicknesses?

The purpose of the workmen's compensation policy is different; it is mandatory for those not covered under ESI, not for workers under ESI.

Regards.

You are always there to help us. Thanks for explaining in such a wonderful manner. Just want to know if suppose one worker is working one month for 26 days and getting wages above 15k, and the next month onwards if he had worked for 15 days and drawing wages less than 15k in that particular month, will ESIC be deducted in that month? How will he get the benefit of the scheme?

Regards,
Ranjeet

Query on ESIC Contribution

One more query: Would it be objectionable to the ESIC if the contribution is deducted for one person in one month and then there is zero contribution in another month?

Documents Required for ESIC Audits

What documents need to be kept ready for ESIC audits?

Regards,
Ranjeet

Coverage and Contribution Period for ESIC

Normally, once covered, an employee will continue to be covered for the entire contribution period irrespective of salary. Therefore, if in April he was covered, he will have to contribute until September even if his salary exceeds Rs 15,000 in May or June. If in any month he has not worked and subsequently his salary was zero, no contribution can be paid, and you can mark the cell as absent. There will not be any objection.

Exclusion Criteria for ESIC

If an excluded employee's salary becomes less than Rs 15,000 due to not working for the entire month, you need not cover him because his notional salary is still more than Rs 15,000.

Documents Required for ESI Audit

For an ESI audit, you have to submit the attendance register, wages register (if paid directly to the bank, payroll sheet), accident report, accident register, financial statements (P&L Account and balance sheet), vouchers in support of payments made to labor involved payments (they will verify particularly the Repairs and Maintenance A/C), contract labor agreement, payment mode to contract labor, contract labor attendance register, visit book, etc.

Regards,
Madhu.T.K