Applicability of Employees’ State Insurance Scheme (ESIS) to NGOs

The ESI Scheme is a
comprehensive Social Security Scheme designed to accomplish the task of
socially protecting the ’employees’ in the organized sector against the events
of sickness, maternity, disablement and death due to employment injury and to
provide medical care to the insured employees and their families. 

The scheme provides full
medical care to the employee registered under the scheme during the period
of his/her incapacity for restoration of his health and working capacity.

It provides financial
assistance to compensate the loss of his/her wages during the period of his
abstention from work due to sickness, maternity and employment injury.

The scheme provides medical
care to his/her family members also.

The ESI Scheme is
administered by a body called the ‘Employees’ State Insurance Corporation’
(ESIC), which has members representing Employers, Employees, the Central
Government, State Government, Medical Profession and the Parliament. The
Director General is the Chief Executive Officer of the Corporation and is also
an ex-officio member of the Corporation.

The scheme
is a self-financing scheme. The ESI funds
are primarily built out of contribution from employers and employees payable
monthly at a fixed percentage of wages paid. The State Governments also
contributes 1/8th share of the cost of Medical Benefit.

Applicability
& Contribution

The ESI Act 1948
aims at ensuring that employees drawing wages which are less than or equivalent
to Rs. 21,000/- (w.e.f. 1st January 2017), are provided with certain
basic benefits at low and accessible rates. For employees with disabilities,
the wage ceiling for eligibility for benefits under the Act is Rs. 25,000. 

The
Act provides for employers and employees to each contribute specified amounts,
as a percentage of the basic wage of an eligible employee each month into the
corpus maintained by the ESIC.

Currently,
the employer’s contribution is equivalent to 4.75% and the employee’s contribution
is equivalent to 1.75% of the basic wage. 

The
employees’ contribution is made by deducting the specific amount from his basic
wage each month and the employer may now make his contribution via online
payment through State Bank of India.

Employees
who draw wages of less than Rs.100 per day will not be required to make any
contribution to ESIC.

If the wages of an
employee (excluding remuneration for overtime work) exceeds the wage limit
(currently Rs. 21,000/- p.m.) prescribed by the Central Government after start
of contribution period, he continues to be an employee till the end of that
contribution period and hence contribution is to be deducted and paid on the
total wages earned by him.

Are Charitable Institutions/NGOs covered under ESI?

According to the
notifications issued from time to time by the appropriate Government
(Central/State) under Section 1(5) of the Act, the following establishments
employing 10 or more persons attracts ESI coverage.

      
i.  Shops;

     ii.Hotels or restaurants not having any
manufacturing activity, but only engaged in ‘sales’;

   
iii. Cinemas including preview theatres;

   
iv. Road Motor Transport Establishments;

     v. News paper establishments.(that is not covered as
factory under Sec.2(12));

   
vi.Private
Educational Institutions (those run by individuals, trustees, societies or
other organizations and Medical Institutions (including Corporate, Joint
Sector, trust, charitable, and private ownership hospitals, nursing homes,
diagnostic centers, pathological labs).

Thus, if your organization whether registered as a trust or
society, is an educational or medical institution and employs more than ten
employees, ESIS will be applicable

It is the statutory
responsibility of the employer to register the establishment under the ESI Act
within 15 days from the date of its applicability to the establishment.

Registration under ESIS

The establishment to
which the Act applies is to be registered by logging into ESIC Portal i.e. www.esic.in

The employer is required
to sign up, providing the establishment’s name, principle employer’s name,
State and region as well as e mail address. The employer trying to register
would get a password in his email id. The employer can log in to www.esic.in and his email ID can be
used as user ID and the password received has to be accessed from the mail box
to be used to register the establishment by providing information in the
Portal. Automatically a 17 digit code number is generated after successful registration
which will be the unique identification number allotted to the establishment.

Please note that once an
Establishment is covered under the Act, it continues to be covered
notwithstanding the fact that the number of persons/ coverable employees employed
therein at any time falls below the required limit or there is a change in
activity.