Among increasing industrialization and economic development, the Government of India realized the need to secure the interests of the employees working in business corporations and enterprises so as to avoid their reckless exploitation and to maintain harmony in the relationship of employer-employee in a working environment the Government of India introduced the legislation Employee State Insurance Act 1948 guarantees reasonable medical care and other health benefits such as maternity benefits, sickness, disability funeral expenses, rehabilitation allowance etc. and many more for the employee as well as his/her dependents. The Employee State Insurance Act 1948, is a state-level Act and is undertaken through the Employee State Insurance Corporation under the direct administration of the concerned State Governments of each State.

As per the provisions of the Act, every eligible employer needs to get itself registered under the Employee State Insurance Corporation available in each state and thereafter submit a certain percentage by himself as well as from the employee’s salary or wages as a contribution to the fund, so that such contributed sum could be used in times of contingency in accordance with the rules and regulations provided under the Act.

As regards its applicability, it is applicable to every business establishment employing either equal to or more than 10 employees at once and (20 employees in exceptional cases) and receiving wages/salaries up to Rs. Twenty-one thousand rupees (Rs. 21000/-) per month which is Rs. Twenty-five Thousand (25000/-) per month in case of persons with disability are required to register themselves under the Act under the jurisdiction of the applicable ESIC. Similarly, on registration, the employer-employee contribution towards the ESI fund shall be 4.75 per cent and 1.75 per cent towards ESI respectively with the help of a unique identification number issued on obtaining registration on the ESIC portal.

Apart from obtaining registration under the Act, it is necessary for every employer or responsible person in each business enterprise to fulfil other compliances such as filing ESI returns. An ESI return is nothing but a document prescribing details of employees and any changes made during the period eligible for the benefit of the ESI scheme as well as details related payment deduction and submission towards the fund is reported by the employer. It is a half-yearly return and is required to be filed twice in a year within the following due dates-

Applicable PeriodDue Date for filing
1. April to September11th of November
2. October to March11th of May

Though the ESI returns are to be filed half-yearly, the ESI contribution needs to be submitted monthly by the 21st of the succeeding month following the month in which the payment becomes due after making employer and employee ESI deductions and depositing the amount of contribution in the authorized bank account.

Besides, the ESI Act also prescribes penalties and manner of prosecution of the responsibility for fulfiling ESI compliances in the event to fulfil the same in the manner as provided below-

Failure to make payment of Contribution or payment after the due date

The employer has been made responsible under the Act to make deductions from the wages/salaries of employees and deposit it to the ESI corpus. Therefore, any amount deducted from the employee wages for ESI shall be deemed to be entrusted to the employer. If the employer fails to deposit contribution deliberately, he shall be liable to be prosecuted under section s. 406 & 409 of the Indian Penal Code 1860 for ‘Criminal Breach of trust’ is punishable under IPC Section(s) 406, 409 and also an offence punishable under Section 85 of ESI Act 1948 and may result in a penalty of Rs. 5000 and/or imprisonment for a period up to 2 years.

Similarly, the ESI Corporation may charge and recover a certain amount at a penal interest depending upon the period of delay in submission of the amount of contribution as provided below-

Period of Delay Penal Rate of interest % p.a.

Period of DelayPenal Rate of interest % p.a.
0- 2 months5%
2- 4 months10%
4 – 6 months15%
Above 6 months25%

The above–mentioned penalties and manner of prosecution are relevant where the employer of the concerned business entity commits default for the first time. However, in cases where he repeats the offence for the second time, he shall be subject to further enhanced punishment every time he repeats the same.

File ESI Return with Legalmart

The process of filing ESI returns is a simple & hassle-free process that is facilitated through the unique ESI identification number provided on the ESI portal. However, it is necessary to file returns with precision and due care to save your time and money. Therefore, it is always advised to get assistance for ESI registration and managing ESI related compliances for any business establishment refer to Legalmart, an expert website to resolve all your ESI compliance-related worries in one go.

Benefits Of ESI Returns

  • Medical Care for Employees and Dependents – Employees that are covered under the ESI At and have duly received registration are offered reasonable medical care such as sickness benefits, medical insurance, maternity benefits etc. for them as well as for their spouse and dependents within such hospitals registered with ESI.
  • Illness Benefits – Those employees covered under the ESI scheme are allowed to avail of sickness benefits in events of illness and can avail up to 70% of the total salary in case of serious illnesses which makes them take care of their health rather than worrying about their employment. Further, in cases of chronic illnesses, the employees are allowed to avail sickness benefits for up to two years of the time period.
  • Maternity Benefits – Women employees who are registered under the Act are granted maternity benefits in case of pregnancy including paid leaves in full for a period of three months. However, the women employees need to meet the eligibility criteria for availing maternity benefits i.e. such woman employee shall have made contribution up to a period of 70 days in the previous two contribution period/s.
  • Post-Death Benefits For the spouse and dependents, the employees registered under the ESI Act are allowed post-death benefits that are up to 90% of the salary amount post-death every month, where the employee meets death in the course of his employment.
  • Old age Care expenses – For the purpose of ensuring that there is the medical care benefits offered under the ESI Act to the employees after retirement from services till death, a total sum of Rs. 120 annually is contributed for old-age benefits for employees completing their years of services completely and/or for those getting voluntarily retired.
  • Rehabilitation Benefits Employees who have met with any permanent disability in pursuance of the employees have been offered vocational training facilities for rehabilitation purposes.

Disadvantages Of ESI Returns

Following are the disadvantages associated with ESI registration and ESI compliances-

  • Increase in costs for business operations- Though ESI scheme is statutory legislation for the benefit of social security & welfare of the employees working in a factory or business establishment. However, the compliances related to ESI are necessary to be met regardless of the size of the business or profitability of the business, which is especially burdensome for smaller businesses and businesses making losses. Further, the employer is expected to contribute to ESI and complete all compliances irrespective of any actual contingency for employees, finally resulting in payment more than that of the amount required to be paid actually.
  • Amendments in the rates of contribution- For the utmost benefit of the employees, the Government of India has the power to make changes and amendments in the rates of contribution required to be made under the Act. With inflation, the rates of contribution and the cost of insurances, the costs become difficult to bear for a business enterprise.
  • Higher costs of compliance & Penalties- For eligible business establishments, not only to obtain registrations under the Act but also to maintain other compliances such as maintain records & register, deductions and submission of monthly contribution, filing returns etc. and failure to get done the same within due period invites hefty penalties and prosecution for the employer.
  • Lack of Capital- Due to such statutory payment contributions and compliance management costs, businesses need to divert a part of their profits that could have been used for other business purposes such as meeting capital shortages or business expansion etc.
Documents Required for ESI Returns

Though, no specific document is required for filing ESI returns, following documents along with details must be maintained carefully for filing ESI returns

  • Attendance register maintained for attendance of the employees.
  • The register maintained by the employer in Form 6.
  • Register of monthly wages paid.
  • A register containing details regarding any accident that happened on the business premises.
  • Copy of Monthly challans.
  • Previous returns submitted to the ESIC with regard to ESI.
Online Process of ESI Returns

Following the step-by-step process of filing ESI returns for the ESI contributions through the Employee State Insurance Corporation (ESIC) website

  • Step 1- Every registered business entity is granted a 17 digit unique identification number that will be used for logging in purposes. Therefore, for the purpose of filing returns, the employer needs to log on to the ESIC portal and log in using the user id and password provided to him through the mail.
  • Step 2- After clicking “Continue”, the employer will be able to view the employer–employee paid contribution that will be displayed on the page. Now, the employer will be able to view a list of actions on the ESIC page with options such as updatation of the list of employees, report of an accident etc. The employer may choose any option and make changes any if required.
  • Step 3- Next, the employer must verify employee details and submit returns after filing in bank details. Later, the employee will be required to click ‘List of Actions’ on the portal and ‘Generate Challan’ for future reference and in case of any inspections.
  • Step 4- The employer also needs to take care of the fact that there may be certain unpaid contributions leftover period, which may be checked upon and paid by him at the time of filing returns. For which the employer shall be required to make payments for such left returns and then generate supplementary challans provided under the option “Monthly Contributions” for such left payments.
  • Step 5- After this, the employer may move to the next page and select the option “Self-Certification” as provided under the head ”Monthly Contribution”. After clicking on the same, the employer will be required to finally click “Submit” for the submission of returns.

Where there are more than forty or more employees employed in a business enterprise, it shall be mandatory for the employer to submit a certificate of accounts from a practising chartered accountant.

Note- Where the employer has not made payment of contribution for months in the previous two periods, it shall be obligatory on his part to submit ESI return physically to the/Employee state insurance regional commissioner by visiting the branch in person.

Why you Choose Legalmart?

Therefore, as per the provisions of the Employee State Insurance Act 1948, it is compulsory for the applicable factories and business enterprises to obtain ESI registration within 15 days from the date of commencement of business operations and to further maintain records and registers and file returns from time to time. Any failure to fulfil the same could invite hefty penalties as well as prosecution on the part of the employer or the responsible person of the enterprises.

Thus, at Legalmart we have our expert team of professionals who hold years of experience and knowledge to resolve all your ESI registration and compliance-related worries in one place. Our unique features include-

  • Large Team of Professionals to guide and assist you for end–to–end support from registration to fulfilment of compliances.
  • 24X7 availability to hear from you and resolve your queries.
  • Efficient Services at reasonable charges  within minimal time.
  • Smooth Completion of Services.