THE EMPLOYEES’ STATE INSURANCE ACT, 1948

Introduction:

The Employee State Insurance Act, 1948, is a piece of social welfare legislation
enacted primarily with the object of providing certain benefits to employees in
case of sickness, maternity and employment injury and also to make provision for
certain others matters incidental thereto. The Act in fact tries to attain the goal of
socio-economic justice enshrined in the Directive principles of state policy under
part 4 of our constitution, in particular articles 41, 42 and 43
which enjoin the state to make effective provision for securing, the right to work,
to education and public assistance in cases of unemployment, old age, sickness
and disablement.

APPLICABILITY
Under sec 1(4) of the act, the Act applies to non-seasonal, power using factories
or manufacturing units employing twenty or more persons on wages.
Now, the provision of the act has also been extended the under sec 1(5) of act to
cover:
Like shops, hotels, restaurants, cinemas, employing 20 or more persons
Act does not apply to:
 Mines
 Railway running sheds
 Govt. factories or establishments and Indian naval, military, or air force
 Other Govt. notified exempted establishments
 Seasonal factories engaged exclusively in any of the activities like: cotton
ginning, cotton or jute pressing, decoration of ground nuts, manufacturing
coffee, rubber, sugar, or tea or any manufacturing process incidental to or
connected with any of the afore said activities, and including factories
engaged for a period not exceeding seven months in a year in blending,
packing or repackaging tea or coffee, or in such other processes as may be
specified by the central govt.
  The factories exempted as seasonal from the provisions of the act.

Definitions:
 Employee: The term “employee” as defined under sec 2(9) of the act, refers
to any person employed on wages, in or in connection with, the work of a
factory or establishment to which this act applies.
 Persons whose remuneration (excluding the remuneration for over-time
work) doesn’t exceed Rs.6500 per month are covered under the act.
 Wages: It means all remuneration paid in cash , if the terms of contract are
fulfilled , & includes any payment in any period of authorized leave ,
lockouts or strike which is not illegal or lay-off & include other
remuneration paid at intervals not exceeding two months, but doesn’t
include:
 Contribution paid to provident fund, gratuity payable on discharge.

Contribution under ESI Act,1948

 Employees : 1.75% on total monthly wages

 Employer : 4.75% on total monthly wages
(Employees whose average daily wage is below Rs. 15 are exempted from
payment of their contribution, only the employer’s contribution will be payable at
4.75% in respect of such employee.)

Time & Method for payment of Contribution

 Both the employer’s and the Employees’ contribution are to paid in cash or
by cheque , into the State Bank of India or any other bank authorized by the
ESI Corporation, by filling in a prescribed Challan in quadruplicate within 21
days following the end of the calendar month (like contribution period from
1st April to 30th sep. & the corresponding benefit period shall be from 1 st Jan
to 30th June) in which the contribution falls due. Because these periods are
fixed. An employer who fails to pay his contribution within the periods
 specified shall be liable to pay interest & damages for late payment under
sec 85 (B) of the act.
 The Bank will retain two copies of the Challan and return other two to the
employer, one for submitting to the Regional Office of the Corporation and
the other for the record of the employer.

Registration

 The employer should get his factory or establishments registered with the
E.S.I. Corporation within 15 days after the Act becoming applicable to it,
and obtain the employer’s Code Number. The regional officer will allot a
code number to the employer, which must be quoted in all documents and
correspondence

Benefits under the Act

 Six kinds of benefits are provided under the Act:

 Sickness benefit
 Maternity benefit
 Disablement benefit
 Dependents’ benefit
 Medical benefit and
 Funeral expenses.

Sickness & Extended Sickness benefit:

 Sickness benefit is payable to an insured person in cash, in the event of

sickness resulting in absence from work and duly certified by an authorised
insurable medical officer/ practitioner.
 The benefit becomes admissible only after an insured has paid contribution
for at least 78 days in a contribution period of 6 months.
 Sickness benefit is payable for a maximum of 91 days in two consecutive
contribution period.
  An insured person suffering from any special long-term diseases (like
tuberculosis, mental diseases) is eligible for extended sickness benefit at a
rate which is 40% higher than the standard benefit rate , round to the next
higher multiple of 5 paisa, for a period of 124\309 days.
 ESI is payable for a maximum period of 2 years on the basis of proper
medical certification and authentication by the designated authority
. Enhanced sickness benefit
 This cash benefit is payable to insured persons in the productive age group
for undergoing sterilisation operation, viz., vasectomy/ tubectomy.
 The contribution is the same as for the normal sickness benefit.
 Enhanced sickness benefit is payable to the Insured Persons for 14 days for
tubectomy and for seven days in case of vasectomy.

. Maternity benefit

• Confinement, miscarriage or medical termination of pregnancy.

• Sickness arising out of pregnancy, confinement, premature birth of child or
miscarriage or medical termination of pregnancy.
• Minimum 80 days in the immediately preceding two consecutive
contribution periods is must.
• Maximum period for benefit is 91 days in one year.

Disablement benefit:

 Disablement benefit is payable to insured employees suffering from

physical disablement due to employment injury or occupation disease.
 Temporary disablement benefit at 70% of the wages is payable till
temporary disablement lasts and is duly certified by authorised insurance
medical officer.
 In case of permanent disablement, the cash benefit is payable is payable
for life. Amount payable is worked out on the basis of earning capacity
determined by a medical board.
Dependants benefit:
 Dependants benefit [family pension] is payable to dependants of a
deceased insured person where death occurs due to employment or
occupational disease.
 A widow can receive this benefit on a monthly basis for life or till
remarriage. A son or daughter can receive this benefit till 18 years of age.
Other dependants like parents including a widowed mother can also
receive the benefit under certain condition.
 The rate of payment is about 70% of the wages shareable among
dependants in a fixed ratio.
 The first instalment is payable within a maximum of 3 months following the
death of an insured person and thereafter, on a regular monthly basis

Medical benefit:

 An insured person or a member of his family whose condition requires

medical treatment and attendance entitled to receive medical benefit.
 Rs.250 on account of confinement expenses shall be paid to an insured
person or his wife if confinement occurs at a place where necessary
medical facilities under these schemes are not available.
 Employer not to dismiss or punish employee during period of sickness-
section73.

Funeral Expenses come in 1968:

 If an insured employee dies, the eldest serving member of his family is

entitled to reimbursement of such expenditure subject to maximum of
Rs.2500 (W.E.F. December,2000)
 The claim for the funeral expenses should be submitted with prescribed
document and form within three months of the death of the insured
employee.

Benefits cannot be combined:

  An employee is not entitled to receive two benefits at the same time. That
means he cannot receive for the same period.
(a) Both sickness benefit and maternity benefit; or
(b) Both sickness benefit and disablement benefit for temporary disablement;
or
(c) Both maternity benefit and disablement benefit for temporary
disablement.

Offences and penalties:

 Punishment for false statement :- In this case any false statement or false
representation, shall be punishable with imprisonment up to Rs.2000 or
with both
 Punishment for failure to pay contributions:- if any person fails to pay any
contribution which under to this act he is liable to pay, he shall be
punishable with imprisonment up to three years.
 Punishment for other contravention :- in contraventions like dismisses,
discharges, reduces or otherwise punishes an employee, shall be
punishable with imprisonment up to one year or with fine up to Rs.4000 or
with both
Revision:
 Employees State Insurance (ESI) Corporation, a statutory body headed by
the Union Labor minister, has revised its benefit rates of those insured and
employers coming under the sub-regional office, ESI Corporation P
une. The rates are revised as follows w.e.f. December 1, 2007:
1. The daily rates of sickness benefit as given under rules 55 has been
increased by 20 per cent.
2. Daily rates of disability benefits have been increased to 50 per cent form 40
per cent.
3. Daily rates of dependent’s benefit have been increased to 50 per cent from
40 per cent.
4. Funeral expenses given under rule 59 has been increased to Rs. 3,000/-
from Rs. 2,500/-