Generating ESI return with Runtime Payroll is as easy as clicking a couple of buttons. Read more to understand the process.
What is ESI?
ESI stands for Employee State Insurance. This is a statutory deduction governed by Employees Insurance Act, 1948. This act provides a medical insurance cover to it’s members (employees) via it’s large network of hospitals across the country.
The law require employers to deduct 0.75% from employee’s salary and contribute 3.75% on their own. The total of 4.5% (0.75% + 3.75%), is required to be deposited with ESI department every month.
The act requires employers to submit a monthly return. The return contains details of each employee’s deduction along-with employer’s contribution. The return is to be filed online on ESI website (https://www.esic.in). Once the return is filed, a challan is generated with total amount payable. The employer then need to pay the amount online or deposit the same at an authorized bank.
What is IP Number?
(Also known as Insured Person Number or ESI Number)
Every employee covered under ESI is issued and IP Number to identify the employee in ESI records. This IP number does not change when an employee change his or her job from one employer to another.
Configuration for ESI
Step 1 – Configure ESI settings
Go to Setup > Statutory > ESI Settings.
First Tab: Check the ‘Enable ESI’ option at top. This is a global setting for all employees. Select the date from which ESI is applicable. Enter the employee and employer contribution rates. As mentioned in this article before, the rates of contribution are 0.75% for employee and 3.75% for employer (effective from July 1st 2019). In case there is a change in the contribution rates in future, you can select the date from which the change is effective and enter new rates. Click ‘Save’ to save the changes.
Second Tab ‘Salary components’: Select the components on which ESI is applicable. Usually ESI is applicable on Basic, DA, HRA and all fixed allowances. Click ‘Save’ to save the settings.
Third Tab ‘Locations’: Select the locations on which ESI is applicable. Click ‘Save’ to save the setting.
Fourth Tab ‘ESI Numbers’: You can enter the ESI number or IP number of employees in front of their names. Click ‘Save’ to save all numbers.
Note: You can also specify ESI number while adding a new employee, on the ‘Personal Info’ tab as shown below:
Step 2 – Generate ESI return for a period
Once you have finalized the salary for a period, you can view ESI summary and generate ESI return with just a couple of clicks.
Go to Reports > Statutory > ESI Summary
Select the period (the currently active period is already selected), and click on ‘Generate’. The window will show the details of ESI deduction for each employee. To export full details in Excel, click on ‘Export to Excel’.
To generate ESI return, click on ‘Export ESI Return’ button. An excel file will open. This file is generated in the ESI format which can be uploaded on the ESI portal.
Additional options for ESI return
Zero Working Days
Zero Working Days
In case an employee’s paid days is zero during a period, ESI return require you to specify a reason for zero working days. This reason is to be specified in ‘Reason for zero working days’ column.
Here is the list of valid reasons:
0 – No reason
1 – On Leave
2 – Left Service
3 – Retired
4 – Out of Coverage
5 – Expired
6 – Non Implemented Area
7 – Compliance by Immediate Employer
8 – Suspension of Work
9 – Strike/Lockout
10 – Retrenchment
11 – No Work
12 – Doesn’t Belong to this Employer
Runtime Payroll automatically puts a ‘0’ in the last column for all employees where paid days is zero. You can change this manually if the reason is different, before uploading the return.
When an employee leaves service, his or her name needs to be removed from the return else the portal will not accept it. When you mark an employee’s exit in Runtime Payroll (Employee > Initiate Exit), the return will not create a line for that employee. However, if for any reason, you do not want to mark an employee exit, you can choose from following two options:
- Delete the employee line manually from the return file; or
- Deactivate the employee by opening it’s record and clicking on ‘Deactivate’ button.
Disable ESI for an employee
You can disable ESI deduction for one or more employees specifically. To do this, open the employee record and go to ‘Options’ tab. Here you have options to disable ESI, PF, Professional Tax and Income Tax Deductions for the selected employee only.
We hope this article will help you to easily configure ESI and generate ESI return. In case you need help with this feature, contact us and our team will be happy to assist you.