Q. Explain the contribution under ESI Act, 1948.

Ans. According to Section 2(iv) of this act the term “Contribution” defined as:

"Contribution" means the

sum of money payable to the Corporation by the principal employer in respect of an employee
and includes any amount payable by or on behalf of the employee in accordance with the
provisions of this Act. The scheme is primarily funded by contribution raised from insured
employees and their employers in the implemented areas as a small but specified percentage of
wages payable to such employees.

The rate of contribution as of now is:-

Employees’ contribution-1.75 percent of the wages
Employers’ contribution-4.75 percent of the wages
Total-6.50 percent of the wages

It is obligatory on the part of the employer to calculate and remit ESI Contribution comprising of
employers' share 4.75% plus employees' share of 1.75% which is payable on or before 21st of
the following month, to the month to which the salary relates. If the employee is drawing upto
Rs.50/- as daily average wage, he is exempt from the payment of his share of contribution. The
employer is however to pay employer's share of 4.75% of the salary received/receivable by the
employee. The state government bears one-eighth share of expenditure on medical benefits
within per capita ceiling of Rs.1000/- per I.P. family per annum.

Contribution period and benefit period

There are two contribution periods each of six months duration and two corresponding benefit
periods also of six months duration as in under.

Contribution period Corresponding Cash Benefit period

1st April to 30th Sept. 1st January to 30th June of the following year.
1st Oct. to 31st March 1st July to 31st December of the year following

Method of payment of contributions (section 43)

The manner for payments which the Act provides regulations for, has been elaborated in the
following conditions:

 The nature and time of contribution being paid.

 Payment which involves the usage of stamps or other adhesives fixed upon the books of
accounts, or any other documents.
 The evidence of the contributions, which reaches the Corporation, is to be dated.
 The different entries in the books of accounts along with the details of the insured
persons.
 The replacement of documents which have been lost, destroyed or defaced.