Understand What is ESIC(Employees State Insurance Corporation)– The ESI Act,1948 applies to premises or precincts where 10 or more people are employed. Employees drawing monthly wages up to Rs 21000 are eligible to take various benefits covered under the act in force.
The Act applies to approximately 1.21 million factories and establishments across India, giving benefits to about 34.9 million family units of workers, with total beneficiaries of the ESI scheme numbering more than 135.6 million.
The ESI Scheme is mainly financed by contributions made by employers and employees. The rate of the employer’s contribution is 4.75%, whereas the rate of employee contribution is 1.75%. The ESI scheme is governed by the rules formed by ESIC( Employees State Insurance Corporation).
The ESIC is an organization that provides comprehensive social security benefits like reasonable medical care and a variety of cash benefits in times of emergencies such as employment injury, maternity, sickness, and death.
EMPLOYEES PROVIDENT FUND
Employees’ Provident Fund and Miscellaneous Act, 1952 introduced a saving scheme known as Employees Provident Fund. The Central Board of Trustees administers and manages the scheme that consists of representatives from three parties, namely, the government, the employers, and the employees. The Employees’ Provident Fund Organization (EPFO) assists The Central Board of Trustees in performing various activities. EPFO works under the jurisdiction of the Central government and is managed by the Ministry of Labour and Employment.
The EPF scheme mainly aims at the promotion of savings to be used after retirement by various employees all over India. Employees’ Provident Fund or EPF is a collection of funds that is contributed by both employer and his employee on a monthly basis. The employer as well as his employee both contributes 12% each of the employee’s salary i.e. Basic salary plus DA to the Employee’s Provident Fund. Contributions made by both employer and employee earn a fixed rate of interest set by the EPFO.
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VRS (VOLUNTARY RETIREMENT SCHEME)
VRS stands for voluntary retirement scheme, in which an employee is given an offer to voluntarily retire from services before his retirement date. VRS is the scheme which allows companies to reduce the strength of their employees. It is allowed to be implemented by both the private sector and public sector companies. The other name is also given to VRS i.e. Golden Handshake.
It is applicable to all those employees who have completed 10 years of service or are above 40 years of age.
EFFECTS OF VRS
- Reduction in the strength of employees.
- The vacancy caused due to VRS can not be filled.
- The retiring employees can not be employed by the same management persons of the company from which the employee took voluntary retirement.
Gratuity is a lump sum amount that a company pays to the employee when he leaves an organization, or is terminated and is one of the many and most important benefits offered by a company to an employee.
In India, the Payment of Gratuity Act, 1972, sets out the rules and limits relating to gratuity to be paid to an employee. An employer also has an option to pay the gratuity beyond the limits specified in the Act.
Every employee, except apprentice, irrespective of the wages, he is entitled to receive gratuity after he has provided continuous service for five years or more. Gratuity is payable at the time of termination of his service in 3 cases i.e.
- On superannuation or
- On retirement or resignation or
- On the death of the employee or disablement due to accident or disease.
Termination of services also includes retrenchment. However, five years’ continuous service is not necessary to be rendered if services are terminated due to death or disablement. In case of death of the employee, the gratuity payable to him will be paid to his nominee, and if no nominee is there then to his legal heirs.
Central Government through Notification dated 29th March 2018, has increased the ceiling limit from ₹10 Lakhs to ₹20 Lakhs.
ELIGIBILITY CONDITIONS TO RECEIVE GRATUITY
Here is the list of eligibility conditions to be fulfilled by an employee in order to become eligible for entitlement of gratuity from the employer-
- He should meet the eligibility criteria for superannuation.
- He resigns after working for five years under a single employer.
- He retires from his work.
- He suffers a disability or passes away due to an accident or illness.
So this is all about ESIC, Provident Fund, VRS and Gratuity that one should know.