Under the Employees’ State Insurance (ESI) Act, employers who fail to pay contributions on time are liable to pay simple interest at 12% per annum, and potentially damages of 25% for delays exceeding six months.
Interest:
If an employer fails to pay ESI contributions on the due date, they are liable to pay simple interest at a rate of 12% per annum (or a higher rate as specified in regulations, but not exceeding the lending rate of scheduled banks).
This interest is calculated from the date the contribution became due until the date of actual payment.
Damages:
For delays exceeding six months from the due date, the ESI Corporation can recover damages, which are calculated at 25% of the amount payable.
Consequences of Non-Payment/Late Payment:
Non-payment, late payment, or falsifying payments can lead to imprisonment (up to three years, but not less than one year) and a fine of Rs. 10,000 under the ESI Act.
Employers are also liable for prosecution under Sections 85(a) and 85A of the Act.
Recovering Interest and Damages:
Any interest or damages recoverable can be recovered as an arrear of land revenue or under sections 45C to 45I of the Act.
