The Employees’ State Insurance (ESI) Scheme is a comprehensive social security initiative designed to provide financial protection to employees in the organized sector. Administered by the Employees’ State Insurance Corporation (ESIC) under the Ministry of Labour and Employment, Government of India, this scheme offers benefits such as medical care, sickness allowance, maternity benefits, disability compensation, and death benefits due to workplace injuries. Additionally, ESI extends medical coverage to the insured employees and their families, ensuring holistic social security.
Businesses operating in Hyderabad with 10 or more employees are required to register under the ESI Act and provide statutory benefits to their employees earning up to ₹21,000 per month. At VPS & Associates, Hyderabad, we specialize in new ESI registrations, amendments, compliance filings, and return submissions. Our team is proficient in handling all ESI-related matters, ensuring smooth compliance for your business.
Mandatory ESI Registration for Businesses in Hyderabad
Any establishment in Hyderabad that employs 10 or more workers at any point during the year must compulsorily register under the ESI Act. The coverage extends to all employees earning up to ₹21,000 per month, ensuring they receive medical and financial support in times of need.
Once an establishment registers under the ESI Act, it remains under the coverage, even if the employee count falls below the minimum threshold later. This ensures continuous benefits and legal compliance.
Contribution Structure Under ESI
Both employers and employees are required to contribute to the ESI scheme. The current rate of contribution is as follows:
| Contribution Type | Percentage of Wages |
|---|---|
| Employer’s Contribution | 4.75% |
| Employee’s Contribution | 1.75% |
| Total Contribution | 6.50% |
The contributions are rounded off to the nearest rupee and must be deposited within the prescribed due date every month.
If an employee’s salary exceeds ₹21,000 during an ongoing contribution period, they will continue to be covered until the end of that period. However, the coverage may be discontinued in the next contribution cycle.
Consequences of Non-Payment or Delayed ESI Contributions
Employers must pay ESI contributions on time, failing which they are subject to penalties, interest, and legal action.
- Interest on Late Payments
- Employers who fail to deposit contributions within the due date must pay a simple interest of 12% per annum for each day of delay.
- Penalties for Non-Payment
- Non-payment or delayed payment of employees’ deducted contributions is considered a “Breach of Trust” and is punishable under Section 406 and 409 of the Indian Penal Code (IPC).
- Employers may also face prosecution under Section 85 of the ESI Act.
- Penalty Rates for Delayed Payments
| Period of Delay | Penalty Rate (Per Annum) |
|---|---|
| Less than 2 months | 5% |
| 2 to 4 months | 10% |
| 4 to 6 months | 15% |
| More than 6 months | 25% |
Repeated offenses may result in enhanced punishments under Section 85A of the ESI Act.
ESI Compliance and Required Records
To ensure compliance, employers must maintain proper records and submit necessary reports as per ESI regulations.
Mandatory Records to be Maintained
- Muster Roll, Wage Register, and Account Books as per labor laws.
- Accident Register (Form-11) to record workplace injuries.
- Inspection Book for verification by ESI authorities.
- Employee Register for workers engaged under contractors.
Reports and Returns to be Submitted by Employers
- Accident Report (Form-12): Must be submitted online within 24 hours of the incident.
- Abstention Verification Report: Required when requested by the ESI Branch Manager.
- Employee Records: Attendance, wage details, and other relevant documents for audit purposes.
ESI Compliance Timeline
To remain compliant, businesses must adhere to the following ESI deadlines:
| Particulars | Compliance Deadline |
|---|---|
| ESI Registration | Within 15 days of applicability |
| Amendments (if applicable) | Within 15 days of any changes |
| Monthly Contribution Payment | By the 15th of the following month |
Failure to comply with these deadlines can result in interest penalties, fines, and legal action.
Other Essential Business Registrations in Hyderabad
In addition to ESI registration, businesses operating in Hyderabad may also require the following statutory registrations:
- GST Registration
- Telangana Shops & Establishments Act Registration
- Professional Tax Registration
- Micro, Small & Medium Enterprises (MSME) Registration
- Employees’ Provident Fund (EPF) Registration
- Import Export Code (IEC)
- Trade License from GHMC (Greater Hyderabad Municipal Corporation)
