ESI Act

ESI refers to Employees State Insurance. This is a self-financing social security and health insurance scheme for the working class and is run by ESI Corporation.

In this scheme, an employee contributes part of salary as an insurance premium. The employer also contributes to the scheme. ESI Corporation collects this money and runs ESI Hospitals. An employee can avail of the hospital service for free.

ESI contribution is mandatory for all employees who draw a gross of less than 21000/-

The Employees’ State Insurance Corporation (ESIC) is a state-run organisation which was the result of the 1948 Employee State Insurance Act. The organisation provides social security to the majority labor force in India, by ensuring benefits to not only the insuree but also to the insuree’s family.

ESI Working

The ESIC will be an agent providing benefit schemes to the employee. Similar to the Provident Fund (PF), the ESI gathers premium by deducting 1.75 percent of the employee’s salary and employers contribute 4.75 percent to ensure the security of their employees. Rates have been reduced to 1% and 4% as from 15-feb., 2019.

But with a PF, one cannot avail it until retirement and/or resignation from the company. It acts more like the employee’s pool of savings where the employer also pools a fraction, totally being called the provident fund. An interest rate is also added to the pool of savings which acts as a cushion to employees after the employee claims it.

The ESIC, on the other hand, works like an insurance company. They take the pooled funds as premium and allow the insured parties to avail many benefits, not only for themselves but also for their families.

ESI Benefits

Along with the employed, the ESIC provides insurance to those who are unemployed as well. The Rajiv Gandhi Shramik Kalyan Yojana offers unemployment allowance with effect from 01 April 2005. The beneficiary who was unemployed after being insured three or more years, due to the loss, closure of the company or retrenchment or permanent invalidity will get an allowance equal to 50 percent of wage up to two years. The medical benefits will also apply and the benefit will give a chance to the unemployed by upgrading their skills.

ESI Act Applicability

The ESI Act, 1948 in the first instance, applies to:

• Factories using power in the manufacturing process and employing 10 or more persons
• Non-power using factories or establishments employing 20 or more persons for wages.

The Act contains an enabling provision under which Appropriate Government is empowered to extend the provision of the ESI Act, 1948 to other classes of establishments.

• Industrial
• Commercial
• Agricultural or otherwise

Under these provisions the State Governments have extended the provisions of the ESI Act to the following classes of establishments.

• Shops
• Hotels & Restaurants
• Cinemas including preview Theaters
• Road Motor Transport Undertaking
• News Paper Establishments

Wage Ceiling

Employees of covered units and establishments drawing wages up to Rs. 21,000 per month ( effective from 01 Sep., 2016), come under the purview of the ESI Act 1948 for multi dimensional social security benefits.

ESI Contribution

ESI scheme is financed by contribution raised from employees covered under this scheme and their employers as a fixed percentage of wages. Rates of contribution are as follows:

• Employees contribution 1.75% of wages (Employees earning up to Rs. 100 per day are exempted from payment of their contribu­tion)
• Employer’s contribution 4.75% of wages.
• Rates have been reduced to 1% and 4% as from 15-feb., 2019

Social Security Benefits

Various benefits that the insured employees and their dependents are entitled to are as follows

• Medical Benefits
• Sickness Benefits
• Maternity Benefits
• Disablement Benefits
• Dependent Benefits
• Other Benefits (like funeral expenses, vocational rehabilitations, free supply of physical aids etc).

Safeguard for Insured Employees

• Right to receive payment of any benefit under the Act are not transferable.
• Employer shall not dismiss, discharge or reduce the wages or otherwise punish a covered employee during the period he/she is in receipt of Sickness Benefit or Maternity Benefit etc.
• By reason of his liability to pay his share of contribution under the ESI Act, no employer shall directly or indirectly reduce the wages of a covered employee.
• Right to register their grievances / complaints at any level for immediate redressal.
• Right to approach ESI Court against any action/decision of the Medical Board etc
• Cash Benefits payable under the Act are not liable to attachment or sale in execution of any decree or order of any court

Duties of Employer

• An employer shall apply in Form-01 for coverage under the ESI Act, within 15 days after the Act becomes applicable to a fac­tory or establishment.
• The employer shall submit Declaration Form in respect of all coverable employees in the unit.
• The employer shall deposit both employees’ and employers’ contribution as per specified rates within 21 days of the following month.
• The Employer shall maintain all such records and registers as are required under the Act and produce them for verification / inspection before the authorised officers of the Corporation.
• The employer shall submit half-yearly Return of Contributions (RC) by 12th May/11th November every year with all columns prop­erly filled.
• The employer will report any change in business activity, address, ownership or the management to ESIC authorities forthwith.
• An employer will also ascertain the liability towards ESI dues, while taking over the ownership of a factory/establishment through purchase, gift, lease, license or otherwise as the new owner is liable to discharge past liabilities.
• An employer will also ascertain the liability towards ESI dues, while taking over the ownership of a factory / establishment through purchase, gift, lease, license or otherwise as the new owner is liable to discharge past liabilities.

Employees State Insurance Act (ESI) Benefits and Features

 

Applicability	Contribution	Benefit Period	Benefits
Sickness Benefit	Contribution for at least 78 days in the relevant contribution period.	91 days in any two consecutive periods.	70% of Daily Average Wage/Salary.
Extended Sickness Benefit (34 Specified Long Term Diseases)	Continuous Employment for a period of 2 years and contribution for 156 days in 4 consecutive contribution periods.	2 years.	80% of Daily Average Wage/Salary.
Enhanced Sickness Benefit (Sterilization for Family Welfare)	Contribution for at least 78 days in the relevant contribution period.	1 Week for vasectomy and 2 weeks for tubectomy; extendable in cases in post operative complication etc.	100% of daily average wages
Temporary Disablement Benefit	He/She should be an employee on the date of Employment Injury.	Till the Time person remains incapable of discharging his/her duties.	90% of the Daily Average Wages/Salary.
Permanent Disablement Benefit	He/She should be an employee on the date of Employment Injury.	Lifetime	As determined by the Medical Board setup for the same.
Dependent’s Benefit	The deceased should be an employee on the date of fatal accident.	To Widow till Life or until remarriage. To Legitimate or adopted Children  dependent on the deceased till they attain 25 years of age, or in case of daughter till she gets married, in  case of infirmity till such infirmity lasts. To other dependents depending on the clause set for the same.	90% of the daily average Wages distributed among the dependants in prescribed ratio.
Maternity Benefit	Payment of Contribution for at least 70 days immediately preceding one or two contribution periods.	Maximum of 12 weeks of which not more than six weeks should precede the expected date of delivery. 6 weeks for miscarriage and additional 1 month for sickness arising out of pregnancy, premature birth of child or miscarriage.	Full Wages.
Confinement Expenses	To an Insured Woman or an Insured Person in respect of his wife incase facilities for confinement are not available in ESI Institutions.	Up to two confinements only.	Rs. 2,500/- in each case.
Funeral Expenses	He/She should be covered under ESI Act.		Expenditure should not exceed Rs 10,000/-.
Rehabilitation Allowance	Medical Benefits in case of disablement due to injury at time of employment.	Each day on which insured person remains admitted in Artificial Limb- Centre for fixation/repair or replacement of artificial limb.	100% of Average Daily Wages.
Medical Benefit	Any Insured Person and his Family.	Till the illness/disease/disability lasts.	Full Medical Care and Treatment.
Medical Benefits to Retired & Disabled Insured Person and Spouse	On payment of Rs.120/- p.a. for one year in advance by any insured, persons who retire from insurable employment on attaining the age of superannuation or under VRS or prematurely after being in insurable employment for not less than five years, by insured persons who cease to be in insurable employment on account of permanent disablement due to an employment injury.	Period for which contribution is paid.     Insured Persons are entitled for full medical care for self and spouse only, Period for which contribution is paid, till attaining the age of superannuation.	Full Medical Care and Treatment.
Unemployment Allowance	An Insured Person who has lost employment due to closure of factory, retrenchment or permanent disablement of at least 40% arising out of non-employment injury and the contribution in respect of him have been paid for a  minimum of three years prior to the loss of employment.	Maximum period of one year during life time	50% of average daily wage.
Vocational Rehabilitation Skill Development Scheme (under Rajiv Gandhi Shramik Kalyan Yojana)	Insured Person should be in receipt of Unemployment Allowance under Rajiv Gandhi Shramik Kalyan Yojana	Short duration of 10 weeks or other longer duration courses of upto six months at Advance Vocational Training Institutions.	Entire fee charged by the Institutions is to be paid by the Corporation. To and fro Rail/Bus fare For travelling to attend the training program , is reimbursed.
Conveyance Allowance to Permanent Disablement Beneficiaries (PDB)	Insured under the ESI Act and in receipt on benefit under Permanent Disablement Scheme.	Conveyance Allowance on their personal visit to Branch Office for submission of Life Certificate Annually.	Rs 100/- to be a paid for each annual visit.

Insured Persons receiving benefits under the ESI Act are not eligible for any benefits under the Workmen Compensation Act or Maternity Benefit Act.

Definitions

According to Section 2 (m) of Factories Act, 1948, Factory means any premises including the precints thereof – (a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without  the aid of power or is ordinarily so carried on. But does not include a mine subject to the operation of Mines Act, 1952 or a railway running shed;

According to Section 2 (k) of Factories Act, “manufacturing process” means any process for – (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substance; or; (iii) generating, transforming or transmitting power; or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; lra-6 ] [ lra-7 or lra-7 ] (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; (vi) preserving or storing any article in cold storage;

According to Section 2 (h) of The Minimum Wages Act, “wages”- means all remuneration capable of being expressed in terms of money which would if the terms of the contract of employment express or implied were fulfilled be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance but does not include –

(i) the value of – (a) any house accommodation supply of light water medical attendance or (b) any other amenity or any service excluded by general or special order of the appropriate government;

(ii) any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;

(iii) any traveling allowance or the value of any traveling concession;

(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or

(v) any gratuity payable on discharge

Identity Card

An employee is required to file a declaration form upon employment in factory or establishment to show that he is covered under the Act.

On registration every insured person is provided with a temporary identification certificate which is valid ordinarily for a period of three months but may be extended, if necessary, for a further period of 3 months. Within this period, the insured person is given a permanent family photo identity card in exchange for the certificate. The identity card serves as a means of identification and has to be produced at the time of claiming medical care at the dispensary / clinic and cash benefit at the local office of the corporation. In the event of change of employment, it should be produced before the new employer as evidence of registration under the scheme to prevent any duplicate registration. The identity card bears the signature/thumb impression of the insured person. Since medical benefit is also available to the families of Insured persons, the particulars of family members entitled to medical benefit are also given in the identity card affixed with a postcard size family photo. If the identity card is lost, a duplicate card is issued on payment as prescribed.

Employers’ / Employees’ Contribution

Like most of the social security schemes, the world over, ESI scheme is a self-financing health insurance scheme. Contributions are raised from covered employees and their employers as a fixed percentage of wages. Presently covered employees contribute 1.75% of the wages, whereas as the employers contribute 4.75% of the wages, payable to the insured persons. Employees earning less than and up to Rs. 50 per day are exempted from payment of contribution.

The contribution is deposited by the employer in cash or by cheque at the designated branches of some nationalized banks. The responsibility for payment of all contributions is that of the employer with a right to deduct the employees share of contribution from employees’ wages relating to the period in respect of which the contribution is payable.

There are two contribution periods each of six months duration and two corresponding benefit periods. Cash benefits under the scheme are generally linked with contribution paid.

Contribution period – 1st April to 30th September, its corresponding Cash Benefit period is 1st January to 30th June of the following year.

Contribution period – 1st October to 31st March, its corresponding Cash Benefit period is 1st July to 31st December of the following year.

Certification of Return of Contribution by Auditor

Regulation 26 of Employees’ State Insurance (General) Regulations, 1950 was amended by Notification No.N-12/13/1/2008-P&D to include certain details to be mentioned in the Return of Contribution to be submitted by employers. The salient features of amendments made in the Returns of Contribution are as under:-

• Self-declaration by Employers regarding maintenance of records and registers, submission of Declaration Forms, employees engaged directly or through immediate employers and wages paid to the workers.
• All the Employers employing 40 and more employees shall have to append a certificate duty certified by a Chartered Accountant, in the revised format of Returns of Contribution.
• The Employers employing less than 40 employees will have to provide self- certification without any certification from the Chartered Accountants in Return of Contribution.

The Chartered Accountant should certify that he has verified the return from the records and registers of the company.

This notification has come into force with effect from 01-04-2008.

ESI Act  Compliances

Records to be maintained for inspection by ESI authorities

• Attendance Register / Muster Roll
• Salary / Wage Register / Payroll
• EC (Employee’s & Employer’s Contribution) Statement
• Employees’ Register
• Accident Book in new Form-11
• Return of Contribution
• Return of Declaration Forms
• Receipted Copies of Challans
• Books of Account viz. Cash/Bank, Expense Register, Sales/Purchase Register, Petty Cash Book, Ledger, Supporting Bills and Vouchers, Delivery Challans (if any).
• Form of annual information on company

Employees Insurance Court – Any dispute arising under the ESI Act will be decided by the Employees Insurance Court and not by a Civil Court. It is constituted by the State Government for such local areas as may be specified and consists of such number of judges, as the Government may think fit.

Important Forms to be submitted under the Act

Form	Details
Form 01	Employers’ Registration Form
Form 01(A)	Form of Annual Information on Factory/Establishment
Form 1	Declaration Form
Form 1A	Family Declaration Form
Form 1B	Changes in Family Declaration Form
Form 3	Return of Declaration Forms
Form 4	Identity Card
Form 4(A)	Family Identity Card
Form 5	Return of Contributions
Form 7	First/Intermediate/Final Certificate
Form 8	Special Intermediate Certificate
Form 10	Abstention verification in r/o Sickness Benefit/Temporary Disablement Benefit/MB
Form 12	Sickness of Temporary Disablement Benefit
Form 12A	Maternity Benefit for Sickness
Form 13	Sickness or Temporary disablement or maternity benefit for sickness
Form 13A	Maternity benefit for sickness
Form 14	Sickness or temporary disablement or maternity benefit for sickness
Form 14A	Maternity Benefit for Sickness
Form 16	Accident report from employer
Form 17	Dependant’s or funeral benefit (Death Certificate)
Form 18	Dependant’s Benefit (Claim Form)
Form 18A	Dependant’s Benefit (Claim for periodical payments)
Form 19	Maternity Benefit (Notice of Pregnancy)
Form 20	Maternity Benefit (Certificate of Pregnancy)
Form 21	Maternity Benefit (Certificate of expected confinement)
Form 22	Claim for Maternity Benefit
Form 23	Maternity Benefit (Certificate of confinement or miscarriage)
Form 24	Maternity Benefit (Notice of work)
Form 25	Claim for Permanent Disablement Benefit
Form 26	Certificate for permanent disablement benefit
Form 27	Declaration and certificate for dependant’s benefit

ESI Amendments

Any amendment in charges or rates, will be listed in online e-learning LMS.