HR Terminology

Employee State Insurance Scheme

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Employee State Insurance (ESI) is a self-financing social security and health insurance scheme designed to provide medical and cash benefits to employees. The Employees’ State Insurance Act, 1948, governs the ESI scheme, and the implementation is overseen by the Employees’ State Insurance Corporation (ESIC).

The calculation of Employee State Insurance (ESI) contributions involves both the employer and the employee making contributions to the ESI fund. The key components in ESI calculation are the employee’s gross salary and the applicable contribution rates specified under the Employees’ State Insurance Act, 1948. The calculation involves a percentage of the employee’s gross salary as the contribution, which is then divided between the employer and the employee. The employer’s contribution rate is 3.25% of the employee’s gross salary. The employee’s contribution rate is 0.75% of their gross salary.

Employers are typically responsible for deducting the employee’s contribution from their salary and remitting both the employer’s and employee’s contributions to the ESI fund within a specified time frame. The contributions are paid on a monthly basis.

FAQ

The ESI Scheme offers a range of benefits including medical benefits for the treatment of insured persons and their families, sickness benefits, maternity benefits, disablement benefits, dependent benefits, and funeral expenses.

Contributions to the ESI Scheme are calculated as a percentage of the employee's wages, with the employer and employee each contributing their share. The current contribution rates are fixed by the government and are subject to periodic revision.

No, employees covered under the ESI Act are mandated to be a part of the scheme and cannot opt out of it. However, certain categories of employees, such as those with higher wages or those covered under other similar schemes, may be exempted from coverage.

Employees can avail of benefits under the ESI Scheme by registering themselves and their family members with the nearest Employees' State Insurance Corporation (ESIC) dispensary or hospital. They need to present their ESI card to access medical services and claim other benefits.

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