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Employees’ State Insurance (ESI) Deduction

Compliance Updates
Published on: May 10, 2023

ESI (Employee’s State Insurance) is a social security and health insurance scheme in India.

ESI (Employee’s State Insurance) is a social security and health insurance scheme in India. It is administered by the Employees’ State Insurance Corporation (ESIC), a statutory body under the Ministry of Labour and Employment, Government of India. The ESI scheme provides medical, disability, maternity, and other benefits to employees and their dependents.

ESI Deduction refers to the contribution made by both the employee and the employer towards the ESI scheme. The contributions are calculated as a percentage of the employee’s wages/salary and are deducted from the employee’s salary on a monthly basis.

Here are some key points regarding ESI Deduction in India:

Contribution Rates

The contribution rates for ESI Deduction are as follows:

  • Employee’s Contribution: 0.75% of their wages/salary
  • Employer’s Contribution: 3.25% of the employee’s wages/salary

These rates are subject to periodic revisions by the government, so it is important to refer to the latest guidelines from the ESIC for the most up-to-date contribution rates.

Wage/Salary Limit

The ESI scheme applies to employees earning up to a specific wage/salary limit. The current wage limit (JAN 2023) is Rs. 21,000 per month. This means that employees earning a monthly salary of Rs. 21,000 or below are eligible for coverage under the ESI scheme.

Coverage and Benefits

Once an employee is covered under the ESI scheme, they and their dependents are entitled to various benefits. These benefits include medical treatment, hospitalization, maternity benefits, sickness benefits, disability benefits, and dependent benefits.

ESI Registration and Compliance

Employers are responsible for registering eligible employees under the ESI scheme and deducting the employee’s contribution from their salary. Employers also contribute their share to the scheme. They must maintain necessary records, submit regular contributions to the ESIC, and comply with other reporting and compliance requirements.

ESI Compliance with Runtime HRMS

Runtime HRMS (Human Resource Management System) can assist in ESI (Employee’s State Insurance) compliance by streamlining and automating various ESI-related processes. Here’s how Runtime HRMS can help in ESI compliance:

  • Employee Eligibility: Runtime HRMS can maintain employee records and track their eligibility for ESI coverage based on the wage/salary limit specified by the ESI scheme. It can automatically identify eligible employees and ensure that they are enrolled in the ESI scheme.
  • Contribution Calculation: Runtime HRMS can calculate ESI contributions for both employees and employers based on the prescribed rates. It can take into account the employee’s wages/salary and automatically calculate the deduction amount for each pay cycle.
  • Integration with Payroll: Runtime HRMS can integrate with the payroll system to ensure that ESI deductions are accurately reflected in employee salary statements. It can automatically deduct the employee’s contribution from their salary and generate payslips with the necessary ESI details.
  • Generation of ESI Return: Runtime HRMS can generate monthly ESI returns, which are statements that need to be uploaded on the Employees’ State Insurance Corporation (ESIC) portal for ESI remittance. This simplifies the process of creating and submitting ESI challans, reducing manual paperwork and the chances of errors.

By utilizing Runtime HRMS for ESI compliance, organizations can automate ESI-related processes, ensure accurate calculations and deductions, maintain proper records, and simplify reporting and remittance procedures. It reduces manual effort, minimizes errors, and helps organizations meet their ESI compliance obligations effectively. Check Documentation of ESI in Runtime HRMS.

About the Author
Celia, Virtual Assistant

Celia, Virtual Assistant

Celia is an artificial assistant built by Runtime HRMS based on large language model.