THE EMPLOYEE’S STATE INSURANCE ACT 1948

ESI Scheme …

• ESI Scheme for India is an integrated social security scheme tailored to provide Social Protection to workers and their dependents, in the organised sector, in contingencies, such as Sickness, Maternity and Death or Disablement due to an employment injury or Occupational hazard

History

• In March 1923 before Indian independence B. N. Adarkar economist and later Governor of the Reserve Bank of India, was appointed by the Government of India to create a health insurance scheme for industrial workers.

• A year later the report he submitted became the basis for the Employment State Insurance (ESI) Act of 1948.

• The ESI Act was enacted in India in 1948, but come into reality from 25 February 1952, established in Kanpur and Delhi.

• Initially intended for workers working in factories and companies only. It is now applicable to all establishments having 10 or more workers including educational institutions, hospitals, etc.,

Background

• PIONEERING MEASURE IN SOCIAL INSURANCE IN INDIA.

• HEALTH INSURANCE FIRST DISCUSSED IN 1927 BY INDIAN LEGISLATURE.

• ORIGINALLY CALLED “WORKMEN’S STATE INSURANCE BILL” 1946.

• CAME INTO FORCE ON 19TH APRIL 1948.

• PROVIDES FOR CASH BENEFITS AND MEDICAL FACILITIES TO EMPLOYEES IN SICKNESS, MATERNITY AND EMPLOYMENT INJURY.

APPLICABILITY• ACT APPLIES TO FACTORIES WITH 10 PEOPLE

USING POWER AND EMPLOYING 20 OR MORE PERSONS WITHOUT USE OF POWER.

• SHOPS• HOTELS AND RESTAURANTS• CINEMAS INCLUDING PREVIEW THEATERS• NEWSPAPER ESTABLISHMENTS• ROAD MOTOR TRANSPORT UNDERTAKINGS

EMPLOYING 20 OR MORE PERSONS

STATE GOVT MAY COVER OTHER ESTABLISHMENTS IN CONSULTATION WITH THE ESI CORPORATION AND WITH APPROVAL OF THE CENTRAL GOVT.

Present status

• Coverage(As on 31st March, 2011)

• No. of Insured Person family units - 1.

• No. of Employees - 1.63 Crores

• Total No. of Beneficiaries - 6.63 Crores

• No. of Insured women - 0.24 Crores

• No. of Employers, etc - 5.80 Lacs

DEFINITIONS

EMPLOYEE: EMPLOYEE REFERS TO ANY PERSON EMPLOYED ON WAGES IN CONNECTION WITH THE WORK OF A FACTORY OR ESTABLISHMENT TO WHICH THIS ACT APPLIES.

•INCLUDES TECHNICAL, MANUAL, CLERICAL AND SUPERVISORY FUNCTIONS

•PERSONS WITH REMUNERATION UPTO RS.15000 ARE COVERED UNDER THE ACT.

•NO DISTINCTION BETWEEN CASUAL AND TEMPORARY EMPLOYEES OR TECHNICAL AND NON-TECHNICAL, OR TIME-RATE OR PIECE-RATE

•DOES NOT INCLUDE NAVAL, MILITARY OR AIR FORCE PERSONNEL OR AN APPRENTICE AS PAER APPRENTICE ACT

Contd..• Wages means all remuneration paid or payable in cash

to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock out, strike which is not illegal or layoff and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include :-

a). Any contribution paid by the employer to any pension fund or Provident fund, or under this act;

b). Any traveling allowance or the value of any traveling concession;

c). Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment ; or

d). Any gratuity payable on discharge.

WAGES Defined …

The above definition has three parts 1. All remuneration paid or payable in cash to an

employee following from the term of employment (including agreement) express or implied. The periodicity of payment is not relevant in this case.

2. Any additional remuneration even if not flowing from any agreement or settlement but paid at intervals not exceeding two months.

3. The exceptions as provided in Clause (a) to (d) above. Any remuneration paid or payable under para 1 and 2 is wages and chargeable to contribution whereas any amount paid towards items mentioned in clause (a) to (d) are not wages and therefore no contribution is chargeable on the amount.

CONSTITUTION OF ESIC• CHAIRMAN AND VICE CHAIRMAN• FIVE MEMBERS • ONE PERSON EACH FROM THE STATES WHERE THE

ACT IS IN FORCE• ONE MEMBER TO REPREST UNION TERRITORIES• 10 PERSONS REPRESENTING EMPLOYERS

ORGANIZATIONS• 10 PERSONS REPRESENTING EMPLOYEES

ORGANIZATIONS• TWO PERSONS FROM MEDICAL PROFESSION• 3 MPS ( 2 FROM LS, 1 FROM RS)• DIRO. GEN. EX-OFFICIO

CONSTITUTION OF STANDING COMMITTEE

• CHAIRMAN• 3 MEMBERS OF THE CORPORATION• 3 MEMBERS REPRESETING THE STATES• 3 MEMBERS FROM THE EMPLOYERS• 3 MEMBERS FROM EMPLOYEES• 1 FROM MEDICAL PROFESSION• 1 FROM MPS• DIRECTOR GENERAL EX-OFFICIO

MEDICAL BENEFIT COUNCIL

• DIRECTOR GENERAL-ESIC, CHAIRMAN• DIRECTOR GENERAL HEALTH SERVICES CO-

CHAIRMAN• MEDICAL COMMISSIONER OF THE CORPORATION• 1 MEMBER FROM EACH STATE• 3 MEMBERS FROM EMPLOYERS• 3 MEMBERS FROM EMPLOYEES• 3 FROM MEDICAL PROFESSION (OE HAS TO BE A

FEMALE)

Finance and fundCh-III

• Employee State Insurance Fund- accountable for managing the contributions and all other receivables by the corporation

• Account to be maintained in RBI or such other bank as approved by central govt

Expenses permitted• Payments of benefits and provisions for medical

treatment to the insured person and family• Payment of fees and allowances to members of the

corporation and other bodies formed under the act• Salary and other emoluments to the employees of

the corporation• Establishment and maintenance of hospitals,

dispensaries and other institutions• Payments under any decree or order or award• Such other headings authorised by corporation with

approval of central govt

ContributionsCh-IV

• The Scheme is primarily funded by contribution raised from Insured Employees and their employers

• Payable such as 1. Employees’ Contribution – 1.75% of the Wages 2. Employers’ Contribution – 4.75% of the Wages TOTAL - 6.5 % of the Wages

Employees in receipt of an average daily wage of Rs.100/- or Less, are exempted from Payment of their share of contribution but are entitled to all social security benefits under the Scheme.

Contribution & Benefit Period

• Employees covered under the ESI Act, are required to pay contribution towards the scheme on a monthly basis. A contribution period means a six month time span from 1st April to 30th September and 1st October to 31st March.

• Cash benefits under the scheme are generally linked with contributions paid. The benefit period starts three months after the closure of a contribution period. The two type of periods are elucidated below.

Contribution Period Benefit Period 1st April to 30th September 1st January to 30th June of the following year 1st October to 31st March 1st July to 31st Dec.

ADVANTAGES OF EMPLOYERS

1. Employers are absolved of their liabilities of providing medical facilities to employees and their dependents in kind or in the form of fixed cash allowance, reimbursement of actual expenses, lump sum grant or opting for any other medical insurance policy of limited scope unless it is a contractual obligation of the employer

2). Employers are exempted from the applicability of the : -

(a). Maternity Benefit Act

(b). Workmen's’ Compensation Act

in respect of employee covered under the ESI Scheme

3). Employers have their disposal, a productivity , well secured workforce, an essential ingredient for better productivity

ADVANTAGES OF EMPLOYERS

4). Employers are absolved of any responsibility in times of Physical distress of workers such as sickness, employment injury or Physical disablement resulting in loss of wages, as the responsibility of Paying cash benefits shits to the corporation in respect of insured employees

5). Any sum paid by way of contribution under the ESI Act is deducted in computing ‘income’ under the Income Tax Act

ADVANTAGES OF EMPLOYERS

Benefits to Employees

• Free medical treatment is offered to insured employees at hospital and dispensaries run by the E.S.I. Corporation.

• Periodical payments to the insured employee for the period of sickness at specified standard benefit rate.

• Periodical payments to woman employee in case of confinement, or miscarriage or sickness from pregnancy etc leave for 12 weeks, of which not more than 6 weeks should be preceding confinement.

• Injury in the course of employment resulting in temporary/permanent disablement entitles the covered employee to a regular payment to substitute his lost wages.

Contd..

• Death in the course of employment entitles specified dependent of the deceased employee to a cash benefit payable up to the day of his death.

• Death due to injury sustained in the course of employment or due to an occupational disease entitles the employee’s dependents to a benefit in the form of pension.

• One time payment of Rs.10000 to help meet funeral expenses of the covered employee.

Benefits to Employees

• ESI Scheme Major Social Security Benefits in Cash and Kind include …

1. Medical Benefit – for self & Family 2. Sickness Benefit – for self 3. Maternity Benefit - for self 4. Disablement Benefit a). Temporary Disablement Benefit – for self b). Permanent Disablement Benefit – for self 5. Dependents’ Benefit – for dependents in case of death

due to employment injury

• In addition, the Scheme also provides some other need based benefits to insured workers. These are:

i). Funeral Expenses – to a person who

performs the last rites of IP

ii). Rehabilitation allowances – for self

iii). Vocational Rehabilitation - for self

iv). Old age Medicare – for self and spouse

v). Medical Bonus – for insured women and

IP’s wife

Benefits to Employees …

Medical Benefit

• Medical Benefit means free, full and comprehensive medical care to IPs and their families.

• Insured worker and members of his family are eligible for medical care from the very first day of the worker coming under ESI Scheme.

• A worker who is covered under the scheme and contributes at least for 78 days in a contribution period the eligibility is there up to the end of the corresponding benefit period.

• EXTENDED UPTO TWO YEARS FOR CHRONIC AND LONG-TERM DISEASES. TREATMENT CONTINUES EVEN IF PERSON GOES OUT OF COVERAGE, TILL SICKNESS ENDS.

Medical Benefits1. Out patient treatment

2. Domiciliary treatment 

3. Super specialty treatment

4. Specialist consultation and diagnostic facilities

5. In-Patient treatment

6. Free supply of drugs and dressings.

7. X-ray and laboratory investigations

8. Vaccination and preventive inoculations

9. Ante-natal care, confinement and post natal care

10. Ambulance Service or conv. charges

11. Free diet during admission

12. Free supply of artificial limbs, and appliances for physical rehabilitation

13. Family welfare services and other national health programmed services

14. Medical certification

Sickness Benefit

• Sickness signifies a state of health necessitating Medical treatment and attendance and abstention from work on Medical grounds. Financial support extended by the corporation in such a contingency is called sickness Benefit

Sickness Benefit

General Sickness

Extended Sickness

Enhanced Sickness

GENERAL SICKNESS

General Sickness represents periodical cash payments made to an IP during the period of certified sickness

And when IP requires medical treatment and attendance with abstention from work on medical grounds.

Sickness benefit is roughly 50% of the average daily wages and is payable for 91 days during 2 consecutive benefit periods.

ELIGIBILITY CONDITIONS

An IP should have paid contribution for not less than 78 days during the corresponding contribution period.

A person who has entered into insurable employment for the first time has to wait for nearly 9 months for becoming eligible to sickness benefit.

Extended Sickness Benefit

• Extended Sickness Benefit is a Cash Benefit paid for prolonged illness due to any of the 34 Specified diseases

EXTENDED SICKNESS BENEFIT (ESB)

An IP suffering from certain long term diseases is entitled to ESB

ESB includes 34 diseases which are grouped in 11 groups as per International Classification of diseases

To be entitled to the Extended Sickness Benefit an Insured Persons should have been in continuous employment for 2 years or more at the beginning of a spell of sickness.

ESB shall be payable for a period of 124 days initially and may be extended up to 309 days in chronic suitable cases.

• The daily rate of Extended Sickness Benefit is 40% more than the standard Sickness Benefit rate admissible

• After exhausting sickness Benefit Payable for 91 days the Extended Sickness Benefit is payable upto further period of 124/ 309 days that can be extended upto 2 years in special circumstances

Extended Sickness Benefit

Enhanced Sickness Benefit

IPs/IWs for undergoing operations for family welfare are paid of enhanced Sickness Benefits.

Leave up to 7 days in the case of IPs (Male) and up to 14 days in the case of the IW’s (Female) from the date of operation or from the date of admission in the hospital.

Insured Persons eligible to ordinary sickness benefit are paid enhanced sickness benefit at double the rate of sickness benefit i.e., about full average daily wages.

Maternity Benefit

• Maternity Benefit is cash payable to an Insured women for the specified period of abstention from work for confinement or mis-carriage or for sickness arising out of pregnancy, “confinement” “premature birth of child or miscarriage” “confinement” connotes labour after 26 weeks of pregnancy whether the result issue is alive or dead,

• Criminal abortion or miscarriage does not, however, entitle to benefit.

Maternity Benefit

For entitlement to maternity benefit, the insured woman should have compulsorily work for 55days with in 9month from the date of employment.

Maternity Benefit is payable for a period of 12 weeks (84 days) to an Insured Woman.

Miscarriage or Medical Termination of Pregnancy (MTP)-payable for 6 weeks (42 days) from the date following miscarriage.

Contd..

Sickness arising out of Pregnancy, Confinement, Premature birth-payable for a period not exceeding one month

In the event of the death of the Insured Woman during confinement leaving behind a child, Maternity Benefit is payable to her nominee

Maternity benefit rate is double the Standard Benefit Rate, or roughly equal to the average daily wage.

• Medical Bonus

Medical Bonus is lump sum payment made to an Insured woman or the wife of an insured person in case she does not avail medical facility from an ESI hospital at the time of delivery of a child. This bonus of Rs. 250/- has been increased to Rs. 1000/- from 1st April 2003

Maternity Benefit

Disablement Benefit

Disablement benefit is benefit provided to IP for any personal injury caused by an accident or by an occupational disease arising out of employment of the employee in a covered factory or establishment.

There are two types of disablement Benefit

Temporary Disablement Benefit (TDB)

Permanent Disablement Benefit (PDB)

Disablement benefits

• A person shall be qualified to claim disablement benefits for temporary disablement for not less than three days (excluding the day of accident) for the period of such disablement sustained as an employee under the Act.

• A person shall be qualified to claim periodical payment for permanent disablement sustained as an employee under the Act whether total or partial, for such disablement : Provided that where permanent disablement, whether total or partial, has been assessed provisionally for a limited period or finally, the benefit provided under this rule shall be payable for that limited period, or as the case may be, for life.

• The daily rate of disablement benefit shall be ninety per cent. of the standard benefit rate in the contribution period corresponding to the benefit period in which the employment injury occurs, rounded to the next higher rupee : Provided that where an employment injury occurs before the commencement of the first benefit period in respect of a person, the daily rate of disablement benefit shall be —

(i) where a person sustains employment injury after the expiry of the first wage period in the contribution period in which the injury occurs, ninety per cent. of his average daily wages in that wage period, rounded to the next higher rupee ;

(ii) where a person sustains employment injury before the expiry of the first wage period in the contribution period in which the injury occurs, ninety per cent. of his wages actually earned or which would have been earned, had he worked for a full day on the date of accident, rounded to the next higher rupee.

Explanation. — The disablement benefit calculated as aforesaid shall be called the “ full rate ”.

The disablement benefits shall be payable to the insured person as follows : —

(a)for temporary disablement, at the full rate ;

(b)for permanent total disablement, at the full rate ;

(c)for permanent partial disablement resulting from an injury specified, in Part II of the Second Schedule, at such percentage of the full rate which would have been payable in the case of permanent total disablement, as specified in the said schedule as being the percentage of the loss of earning capacity caused by the injury ;

(d)for permanent partial disablement resulting from an injury not specified in Part II of the Second Schedule, at such percentage of the full rate payable in the case of permanent total disablement

Disablement Benefita). Temporary disablement benefit :

• TDB is payable to an employee who suffers employment injury (EI) or Occupational Disease and is certified to be temporarily incapable to work.

• Disablement benefit is admissible to insured person for the entire period so certified by an Insurance Medical officer / Practitioner for which IP does not work for wages.

• From day one of entering insurable employment & irrespective of having paid any contribution in case of employment injury. Temporary Disablement Benefit at the rate of 90% of wage is payable so long as disability continues.

• However, not payable if the incapacity lasts for less than 3 days excluding the date of accident.

Permanent disablement benefit

• In case an employment injury or occupational disease results in permanent, partial or total loss of earning capacity,

• Periodical payments are made to the IP for life at a rate depending on the actual loss of earning capacity as may be determined and certified by a duly-constituted Medical Board.

• The benefit is paid at the rate of 90% of wage in the form

of monthly payment depending upon the extent of loss of earning capacity as certified by a Medical Board

• In order to take care of real value of the periodical payments of Permanent Disablement benefits, against rise in the cost of living index, periodical increases are granted, based on actuarial calculation

Dependents’ Benefit

• Dependents Benefit is a monthly pension payable to the eligible dependents of an insured person who dies as a result of an Employment Injury or occupational disease

• There are no contributory conditions for qualifying to this benefit. Thus, if a person dies of employment injury even on the first day of his employment, his dependants are entitled to the benefit.

• Beneficiaries and Duration of benefit a). Widow / widows during life or until remarriage b). Legitimate or adopted son until age 18 or if legitimate

son is infirm, till infirmity lasts. c). Legitimate or adopted unmarried daughter until age

18 or until marriage, whichever is earlier, or if infirm, till infirmity lasts and she continues to be unmarried.

In the absence of any widow or legitimate child, the benefit is payable to a parent or grandparent for life, to any other male dependent until age 18 or to an unmarried or widowed female dependent until age 18.

• How much ???

• The total divisible benefit is equivalent to the temporary disablement benefit rate. The widow / widows share 3/5th of the benefit and the legitimate or adopted son and daughter 2/5th each of the benefit. If the total benefit so divided exceeds the full rate, there is a proportionate reduction in the respective shares of the beneficiaries.

• The amount of pension paid to the dependents of a deceased insured person is reviewed vis-à-vis the cost of living index and increases are granted from time to time to compensate for erosion in its real value.

Dependents’ Benefit

Other Benefit

(i). Funeral Expenses Funeral Expenses are in the nature of lump

sum payment up to a maximum of Rs.10000/- made to defray the expenditure on the funeral of deceased IP. The amount is paid either to the eldest surviving member of the family or, in his absence, to the person who actually incurs the expenditure on the funeral.

PHYSICAL REHABILITATION

Disabled insured persons who remain admitted in an

artificial limb centre for fixation or repair or replacement of

the artificial limb are entitled to rehabilitation allowance for

each day on which they remain admitted at Artificial limb

centre at double the standard sickness benefit rate. This is

not subject to any contributory condition.

Rehabilitation Allowance

VOCATIONAL REHABILITATION

This Scheme has been designed to provide financial assistance to the insured persons who are referred to vocational rehabilitation centre for training.

Insured person who satisfy following conditions are entitled to avail benefits of the vocational rehabilitation scheme. 

1. whose permanent loss of earning capacity has been determined as 40% or more.

2. who is in receipt of permanent disablement benefit under the ESI Act, 1948.

3. who is not in any gainful employment, and

4. who is not more than 45 years of age on the date of his application.

Obligation of the Employers

• To get his factory or establishment registered with E.S.I. Corporation and obtain employer’s Code Number.

• To obtain declaration from the employees covered and submit same to E.S.I. office and obtain employees’ Insurance Number and Identity Cards.

• To deposit employees’ and his own contributions.• To furnish Returns of Contributions.• Not to reduce the wages of an employee on account of

contribution made by him.• To maintain prescribed records/registers.

Contd..

• To report to the E.S.I. authorities of any accident, arrange for first-aid and transportation of employee to the hospital.

• To inform E.S.I. office, dispensary/hospital in case of death of an employee immediately.

• Not to put to work any sick employee and allow him leave if he has been issued the prescribed certificate.

Maintain the following records/ registers properly for the purpose of inspection

1. Attendance Registers / Muster Rolls (in respect of all employees including those employed through contractors)

2. Wage register 3. Cash Book / Bank Book 4. Account Books including Ledgers and Vouchers,

Balance Sheet. 5. Employees’ Register 6. Accident Book 7. Returns of Contribution 8. Return of Declaration Forms9. Copies of Challans10. Inspection Book

Obligation of the Employers