ESIC issues SOP for compounding first-time offences under section 138 of the Code on Social Security: pay within 15 days, composition certificate in 10 days
ESIC Headquarters has circulated a Standard Operating Procedure for compounding of offences under section 138 of the Code on Social Security, 2020 read with rule 54 of the Social Security (Central) Rules, 2026. An electronic compounding notice goes out in Form-XXIV; the employer pays and applies within 15 days; the composition certificate follows within 10 days. The amount is half the maximum fine for fine-only offences and three-fourths where imprisonment up to one year is also provided.
Key facts
- In force
- SOP circulated by ESIC Headquarters letter dated August 2026
- Who it affects
- Employers and establishments covered under Chapter IV (Employees’ State Insurance) of the Code on Social Security, 2020; ESIC Regional and Sub-Regional Offices
- What it is
- New facility
- Section
- Labour
- Published
- 1 September 2026
In 30 seconds
- Only a first offence can be compounded; a repeat within three years of a similar offence that was compounded, or for which the person was convicted, is excluded.
- Compounding amount under section 138(1): half of the maximum fine for an offence punishable with fine only; three-fourths where the offence is punishable with imprisonment of not more than one year and also fine.
- The compounding notice is issued electronically in Form-XXIV; the employer applies in Part III after paying, within 15 days of receipt.
- The Compounding Officer issues the composition certificate (Part IV) within 10 days of receiving the amount.
- Non-compliance attracts a further 20 per cent of the maximum fine under section 138(7); prosecution follows after one month from the last date specified.
- The SOP lists ten clauses of section 133 as compoundable, including failure to pay contribution and failure to submit returns.
हिंदी में सार
ESIC मुख्यालय ने सामाजिक सुरक्षा संहिता, 2020 की धारा 138 के तहत अपराधों के शमन (compounding) की मानक प्रक्रिया (SOP) जारी की है। पहली बार के अपराध पर Form-XXIV में इलेक्ट्रॉनिक नोटिस आएगा; नियोक्ता को 15 दिन में पूरी रकम जमा कर भाग III में आवेदन करना होगा और 10 दिन में composition certificate मिलेगा। रकम — केवल जुर्माने वाले अपराध में अधिकतम जुर्माने का आधा, और एक साल तक की कैद व जुर्माने वाले अपराध में तीन-चौथाई। समय पर न चुकाने पर 20% अतिरिक्त और अभियोजन।
What ESIC has issued
By a letter numbered P-11/12/Clarification on CoSS,2020/2025-Rev.I, dated August 2026 (the day is left blank), ESIC Headquarters has sent all Regional and Sub-Regional Offices a Standard Operating Procedure for compounding of offences under section 138 of the Code on Social Security, 2020, read with rule 54 of the Social Security (Central) Rules, 2026.
What can be compounded, and for how much
Section 138(1), reproduced in the SOP, covers an offence committed for the first time that is punishable with fine only, or with imprisonment of not more than one year and also fine. It can be compounded before or after prosecution is instituted.
| Offence punishable with | Compounding amount |
|---|---|
| Fine only | Half of the maximum fine provided for the offence |
| Imprisonment up to one year and also fine | Three-fourths of the maximum fine provided for the offence |
Compounding is not available for an offence committed a second time or later within three years of a similar offence that was earlier compounded or for which the person was convicted.
Offences the SOP lists as compoundable
| Section 133 clause | Offence |
|---|---|
| (a) | Fails to pay any contribution (excluding the offences under 133(i)(a), as printed) |
| (b) | Deducts or attempts to deduct the employer’s contribution from wages |
| (c) | Reduces the wages or any privilege or benefits admissible to an employee |
| (d) | Dismisses, discharges, reduces in rank or otherwise penalises in contravention of Chapter IV |
| (e) | Fails or refuses to submit any return, report, statement or other information |
| (f) | Obstructs any IcF or other officer or staff in the discharge of duties |
| (k) | Fails to produce on demand by the IcF any register or document |
| (m) | Contravention or non-compliance for which no special penalty is provided |
| (o) | Dishonestly makes a false return, report, statement or information |
| (p) | Fails to comply with a condition of an exemption granted under section 143 |
The procedure
- The flow chart begins with a system report or IcF report, followed by a show cause notice issued with the approval of the competent authority.
- If the offence is compoundable, the Compounding Officer issues the notice electronically in Form-XXIV, stating the offence, the legal provisions, the amount and the time limit.
- The employer pays the entire amount online and applies in Part III of Form-XXIV within 15 days of receipt of the notice.
- The composition certificate (Part IV) is issued within 10 days of receipt of the amount. The offence is then deemed compounded and no further proceedings are initiated for it.
If the amount is not paid in time, section 138(7) makes the person liable to a further sum equal to 20 per cent of the maximum fine. The flow chart allows payment of that 20 per cent with the notice amount within 30 days of the last date specified; otherwise prosecution is initiated after one month from that date.
Where prosecution is already pending
Section 138(6) applies. The composition certificate is forwarded to the Legal Branch, the compounding is brought to the notice of the court in writing, and the person is discharged. If there is no compliance within 15 days, the prosecution continues.
Who compounds
Notification S.O. 2362(E) dated 8 May 2026, annexed to the SOP, authorises the Director General, Insurance Commissioner, Additional Commissioner, Regional Director Grade ‘A’/Director, or Regional Director Grade ‘B’/Joint Director of ESIC as compounding officer for establishments covered under Chapter IV.
What employers should do
On receiving a Form-XXIV notice, pay the full amount online and file Part III within 15 days, attaching the electronically generated receipt, and keep the composition certificate on record.
Questions and answers
Which ESI offences can be compounded?
A first offence punishable with fine only, or with imprisonment of not more than one year and also fine. The SOP lists clauses (a), (b), (c), (d), (e), (f), (k), (m), (o) and (p) of section 133 as compoundable.
How much has to be paid?
Half of the maximum fine where the offence is punishable with fine only, and three-fourths of the maximum fine where it is punishable with imprisonment up to one year and also fine.
What is the time limit to pay?
The employer has to deposit the entire compounding amount and apply in Part III of Form-XXIV within 15 days of receipt of the compounding notice.
What if the amount is not paid in time?
Under section 138(7) the person becomes liable to pay a sum equal to 20 per cent of the maximum fine in addition, and prosecution is initiated before the competent court after one month from the last date of the specified time.
Can an offence be compounded after prosecution has started?
Yes. Section 138(6) applies: the compounding is brought to the notice of the court in writing and the person against whom the offence is compounded is discharged.
Published 1 September 2026. Updated 8 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.