Rules Regarding Contributions

The Employees’ State Insurance Act, 1948 is one of the most important social legislation in India. It enables workers to avail of benefits for injuries they suffer during employment. Rules regarding contributions are very important to understand how these benefits reach the employees. Employers can suffer serious punishments for violating these rules.

According to Section 2(4) of the Act, “contribution” means the amount payable by employers to the ESI Corporation.

The Corporation further uses this amount for the benefit of eligible employees. This amount also includes the employees’ contribution.

Section 39(1) says that the contribution amount is payable to the ESI Corporation only. The Central Government decides what the rates of contribution should be.

The Act contains some provisions relating to the wage periods of employees. Accordingly, the contributions payable to employees should relate to their wage periods only.

Another important rule is that it is always the principal employer who has to pay the contribution. He must pay his contribution as well as that of his employee to the Employees State Insurance Corporation

Method of Payment of Contributions

The ESI Corporation has powers under the Act to make provisions relating to the collection and payment of contributions. Specifically, these provisions relate to the manner and time of payment.

Generally, employers may have to make payments using stamps by affixing them upon books, cards, etc. Furthermore, the Corporation may specify a date on which employers have to produce evidence of them paying their contribution.

Returns and Records

Sometimes, employers may have to record details of payment in certain books or cards. In such cases, the Corporation can frame rules regarding production, custody, and inspection of these records.

Employers also have to file returns relating to their contribution in the format that the Corporation prescribes. In case an employer fails to do so, the Corporation can order a factory in charge to file the returns.

All principal or immediate employers have to maintain records and registers in specific formats. This rule is important because the Corporation can inspect such records any time.

Determination of Compensation

Generally, the Central Government is responsible for determining the specific amount of contribution payable. Section 45-A, however, contains some exceptions for this rule.

For example, if an employer does not maintain records or registers, the Corporation can determine his contribution.

Similarly, if an employer prevents an officer from discharging his duties, the Corporation will determine his contribution.

Rate of Contributions

Ever since rules regarding contributions came into existence, the central government has fixed contributions a few times. The latest contribution amount since 1997 has been 1.75% of wages for employees and 4.75% for employers.

Employers do not have to pay contributions if they pay less than Rs. 100 as average wages to their employees. They must, however, contribute their own share in such cases.

Recover of Contributions

Provisions relating to recovery are some of the most important rules regarding contributions. Any contribution that employers do not pay is liable for recovery from them as arrears of land revenue.

Sometimes, a principal employer may pay the contribution amount that the immediate employer has to pay. In such cases, the principal employer can recover his contribution from the immediate employer.

These deductions and recoveries must be in consonance with the general rules regarding contributions.

Question on Rules Regarding Contribution

Question: Define the missing word(s) in the following sentences.

(1) __________ can make rules regarding contributions under Section 39 of the Act.

(2) The amount of contribution depends on the __________ of employees.

(3) Employers receive an exemption from payment if they pay less than __________ to their employees.

(4) Contribution amounts not paid are recoverable as arrears of __________.

Answer: (1) ESI Corporation (2) wage periods (3) Rs. 100 (4) land revenue

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