Interest on delayed payments

• If an employer fails to deposit ESIC contributions on time, interest at 12% per annum is levied.
  
• The interest is calculated from the due date till the actual date of payment.
  
• It applies to both employer and employee share of the contribution.
  
• This penalty is mandatory and non-waivable under the ESIC Act.
  
• Timely payment is essential to avoid accumulating interest liabilities.
  

Damages for default

• In addition to interest, ESIC may impose damages (penal charges) for non-payment or late payment.
  
• The rate of damages depends on the period of default, ranging from 5% to 25% of the amount due.
  
• These are imposed under Regulation 31C of the ESIC (General) Regulations.
  
• Damages are calculated separately and added to the total outstanding dues.
  
• They are non-refundable and treated as a punishment for default.
  

Prosecution for willful default

• In serious cases, prosecution can be initiated against employers for willful non-compliance.
  
• Offences under the ESIC Act are punishable with imprisonment up to 2 years and/or a fine up to ₹5,000.
  
• Repeat or continuous violations can lead to enhanced penalties and strict legal action.
  
• The court may also order recovery of dues through attachment of property or bank accounts.
  
• Criminal liability can apply to directors, managers, or persons-in-charge.
  

Disqualification from government contracts

• Non-compliant establishments may be barred from participating in public tenders or contracts.
  
• Proof of ESIC compliance is often required for government registrations.
  
• Delinquency can affect the business’s reputation, licensing, and vendor status.
  
• Regulatory inspections may become more frequent due to repeated defaults.
  
• Loss of credibility may also impact client relationships and labour welfare rankings.
  

Suspension of benefits to employees

• Failure to contribute may result in loss of ESIC benefits for insured employees.
  
• Medical, maternity, and sickness claims can be denied due to non-compliance.
  
• This can cause employee dissatisfaction and legal complaints.
  
• Employers may be held responsible for any resulting hardship to workers.
  
• Ensuring timely compliance is critical to protect both employer and employee interests.