Checklist & Step-by-Step Audit Process Under the Employees’ State Insurance (ESI) Act, 1948

Ensuring compliance with the Employees’ State Insurance (ESI) Act, 1948, is crucial for businesses to avoid penalties and provide necessary benefits to employees. An audit under the ESI Act verifies that employers have registered, contributed, and maintained records as per the legal requirements. Below is a detailed checklist and step-by-step audit process to ensure compliance with the ESI Act.

Checklist for ESI Audit Compliance

1. Establishment Registration & Coverage

✅ Verify if the establishment is registered under the ESI Act.

✅ Ensure the correct number of employees are covered (minimum 10 employees in most states, 20 in some).

✅ Check if all employees earning ₹21,000 or less per month are included in ESI.

✅ Ensure the establishment’s ESIC registration number is correctly recorded.

2. Employee Records & Contribution Compliance

✅ Maintain a list of covered employees with ESI-insured numbers.

✅ Verify correct salary calculation for contribution purposes.

✅ Ensure employee (0.75%) and employer (3.25%) contributions are deducted and deposited on time.

✅ Cross-check the challans and receipts of ESI contribution payments.

✅ Confirm that contributions are deposited within the 15th of the following month.

3. ESI Returns & Reporting Compliance

✅ Ensure that monthly and half-yearly ESI returns (Form 5) are filed timely.

✅ Maintain accident records and submit accident reports (Form 12) if applicable.

✅ Verify compliance with maternity benefits and medical leave provisions.

✅ Ensure proper documentation of dependents’ benefits and disability claims.

4. Medical Benefits & Employee Awareness

✅ Confirm that employees are aware of their ESI benefits and medical facilities.

✅ Ensure ESI identity cards and temporary certificates are issued to all employees.

✅ Maintain records of employees availing maternity, disability, and medical benefits.

✅ Ensure that ESI dispensaries and hospitals are accessible to insured employees.

5. Record Keeping & Inspection Compliance

✅ Maintain updated records of wage registers, attendance registers, and employment details.

✅ Keep all ESI-related correspondence with the ESIC department documented.

✅ Verify if contract workers and outsourced employees are covered under ESI.

✅ Be prepared for surprise inspections by ESIC officers to verify compliance.

Step-by-Step ESI Audit Process

Step 1: Preliminary Audit Preparation

📌 Review the establishment’s registration status under the ESI Act.

📌 Collect all necessary records, including employee registers, payroll reports, and contribution challans.

📌 Identify any gaps in employee coverage or missing contributions.

Step 2: Verification of Employee Coverage

📌 Cross-check the list of eligible employees with ESI registration records.

📌 Ensure all employees earning below ₹21,000 are registered and covered.

📌 Verify that contractual and outsourced employees are also included, if applicable.

Step 3: Contribution & Payment Verification

📌 Review salary registers to confirm accurate calculation of ESI deductions.

📌 Check monthly ESI payment challans and online payment receipts.

📌 Verify that contributions are deposited within due dates (by the 15th of every month).

Step 4: Filing & Compliance Verification

📌 Ensure monthly ESI returns are filed accurately and on time.

📌 Cross-check Form 5 (Half-Yearly Return) submission details.

📌 Review compliance with accident reporting (Form 12) and maternity benefits.

Step 5: Employee Benefits & Claims Review

📌 Verify records of employees availing medical, maternity, and disability benefits.

📌 Check if accident benefits and dependents’ benefits are properly documented.

📌 Ensure employees are issued their ESI identity cards.

Step 6: Record-Keeping & Inspection Readiness

📌 Maintain updated wage registers, attendance sheets, and employment details.

📌 Ensure records are easily accessible for ESI audits or inspections.

📌 Be prepared to respond to ESIC officer queries during inspections.

Step 7: Compliance Report & Action Plan

📌 Document all audit findings and non-compliance issues.

📌 Rectify discrepancies such as missed payments, incorrect salary calculations, or unregistered employees.

📌 Submit an ESI compliance report with corrective actions taken.

CA Kush Tapas Aditya Sawant CA Manish Kumar Krutika Kulkarni Muskan Taunk Hemant Raibole

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