An Act to provide for certain benefits to employees in case of sickness, maternity and ‘ employment injury ’ and to make provision for certain other matters in relation thereto.
The ESI Act 1948, encompasses certain health related eventualities that the workers are generally exposed to; such as sickness, maternity, temporary or permanent disablement, Occupational disease or death due to employment injury, resulting in loss of wages or earning capacity-total or partial. Social security provision made in the Act to counterbalance or negate the resulting physical or financial distress in such contingencies, are thus, aimed at upholding human dignity in times of crises through protection from deprivation, destitution and social degradation while enabling the society the retention and continuity of a socially useful and productive manpower.
Employees’ State Insurance Corporation (ESIC) of India is an integrated social security system tailored to provide social protection to workers,immediate dependent or family, in the organised sector, in contingencies, such as, sickness, maternity and death or disablement due to an employment injury or occupational hazard. Employees’ state Insurance Corporation of India (ESIC), is a multidimensional social system tailored to provide socio-economic protection to worker population and immediate dependent or family covered under the scheme. Besides full medical care for self and dependents, that is admissible from day one of insurable employment, the insured persons are also entitled to a variety of case benefits in times of physical distress due to sickness, temporary or permanent disablement etc. resulting in loss of earning capacity, the confinement in respect of insured women, dependents of insured persons who die in industrial accidents or because of employment injury or occupational hazard are entitled to a monthly pension called the dependents benefit.
Who should register for ESIC ? / Applicability of ESI ?
The ESI Act, (1948) applies to following categories of factories and establishments in the implemented areas:
- Non-seasonal factories using power and employing ten(10) or more persons
- Non-seasonal and non power using factories and establishments employing twenty (20) or more persons.
The “appropriate Government” State or Central is empowered to extend the provisions of the ESI Act to various classes of establishments, industrial, commercial or agricultural or otherwise. Under these enabling provisions most of the State Govts have extended the ESI Act to certain specific class of establishments, such as, shops, hotels, restaurants, cinemas, preview theatres, motors transport undertakings and newspaper establishments etc., employing 20 or more persons.The ESI Scheme is mainly financed by contributions raised from employees covered under the scheme and their employers, as a fixed percentage of wages. Employees of covered units and establishments drawing wages upto Rs.10,000/- per month come under the purview of the scheme for social security benefits. However, employee’s earning upto Rs.50/- a day as wages are exempted from payment of their part of contribution.The State Govts bear one-eighth share of expenditure on Medical Benefit within the per capita ceiling of Rs.900/- per annum and all additional expenditure beyond the ceiling.
Employees covered under the scheme are entitled to medical facilities for self and dependants. They are also entitled to cash benefits in the event of specified contingencies resulting in loss of wages or earning capacity. The insured women are entitled to maternity benefit for confinement. Where death of an insured employee occurs due to employment injury, the dependants are entitled to family pension.
The existing wage limit for coverage under the Act effective from 01/01/2017 is Rs.21,000/- per month [Rs. 25,000/- per month in the case of persons with disability].
*Note: However the threshold for Coverage of establishments is still 20 Employees in Maharashtra and Chandigarh.
What are the benefits of ESIC Registration ?
- Medical benefits : Full medical care is provided to an Insured person and his family members from the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an Insured Person or his family member. Medical care is also provided to retired and permanently disabled insured persons and their spouses on payment of a token annual premium of Rs.120/-
- Disablement Benefit (Employment Injury)
- Dependents Benefits : 90% of the daily average wages to be divided amongst the dependants in the prescribed ratio.
- Maternity Benefits : Maternity Benefit for confinement/pregnancy is payable for Twenty Six (26) weeks, which is extendable by further one month on medical advice at the rate of full wage subject to contribution for 70 days in the preceding Two Contribution Periods.
- Funeral Expenses : An amount of Rs.15,000/- is payable to the dependents or to the person who performs last rites from day one of entering insurable employment.
- Rehabilitation Expenses : At 100% of daily average wages.
- Sickness Benefit : Sickness Benefit in the form of cash compensation at the rate of 70 per cent of wages is payable to insured workers during the periods of certified sickness for a maximum of 91 days in a year. In order to qualify for sickness benefit the insured worker is required to contribute for 78 days in a contribution period of 6 months.
- Medical benefits to retired / disabled injured person and his spouse
- Confinement Expenses : An Insured Women or an I.P.in respect of his wife in case confinement occurs at a place where necessary medical facilities under ESI Scheme are not available.
- Vocational Rehabilitation Allowance Skill Development Scheme under R.G.S.K.Y. : Rs. 123/- per day or the actual amount charged by Vocational Rehabilitation Centre, whichever is higher.
- Unemployment Allowance : about 50% of average daily wage.
- Vocational Rehabilitation Skill Development Scheme (under Rajiv Gandhi Shramik Kalyan Yojana) : Entire fee charged by the Institutions is to be paid by the Corporation. To and from Rail/Bus fare to IP/IW who has to travel to attend the training programme at AVTIs as charged, is reimbursed.
- Conveyance Allowance : Under this Scheme, PDB beneficiaries are paid Rs. 100/- as conveyance allowance on their personal visit to Branch Office for submission of life certificate once in a year.
ESI Contribution Percentage / Rate
Employees State Insurance Scheme (ESIC) being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time. The Central Government reduced the ESI Contribution from 6.5 % to 4 %, and applicable from July 01, 2019. Currently, the employee’s contribution rate (w.e.f. July 01, 2019) is .75% ( 1.75% )of the wages and that of employer’s is 3.25% ( 4.75% ) of the wages paid/payable in respect of the employees in every wage period. For newly implemented areas, the contribution rate is 1% of wages of Employee and 3% payable by Employers for first 24 months(w.e.f. 06.10.2016) Employees in receipt of a daily average wage upto Rs.137/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.
Wages and allowances in ESIC
Washing Allowance : It is a sum paid to defray special expenses entailed by the nature of employment and as such this amount does not amount to wages.
Suspension Allowancce/Subsistence Allowance : During the suspension period the employee is not allowed to actually work and he is not given full remuneration but the permissible subsistence allowance is paid to the employee by way of remuneration for remaining attached to the services of the employer as per the relevant service regulations governing his contract of service, therefore, the subsistence allowance is part of wage as defined under Sec.2(22) of the ESI Act and consequently on the amount of subsistence allowance paid to the suspended employee, contribution is payable.
Supreme Court has also held in the case of RD, ESIC Vs.M/s.Popular Automobiles etc.in its judgement dt. 29.9.97 in Civil appeal no.3850 of 1993 that suspension/subsistence allowance is wage and contribution is payable under Sec.2(22) on the said amount. (In lieu of earlier instructions were issued vide Memo No.3(2)-1/67 dt. 3.6.67 & letter No.Ins.III(2)-2/71 dt. 10.8.1971).
Other allowances included in ESI Wages
Overtime Allowance, Annual Bonus, Incentive Bonus, Production Bonus, Inam/Ex-Gratia Payment, Wages Paid During Layoff, Annual Commission, House Rent Allowance, Night Sift/Heat/Gas & Dust Allowance, Conveyance Allowance, Service Charges, Medical Allowance, Newspaper Allowance, Education Allowance, Drivers Allowance, Food/Milk/Tiffin/Lunch Allowance, Gazetted Allowance, Wages and Dearness Allowance for Unsubstituted Holidays, Exgratia Payment During Strike for Travelling Expenses, Interim Relief, Saving Scheme, Attendance Bonus, Hamals/Coolies Employed at a Particular Time, Expenditure on Servicing of Machines, Expenditure on Annual/Periodical Services Contract, Commisssion to Dealers/Agents, Service Contract