The Employee State Insurance Act,
[ESIC] 1948
Introduction
• The Employee State Insurance Act, [ESIC] 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.
• Under the Act, employees will receive medical relief,
cash benefits, maternity benefits, pension to
dependents of deceased workers and compensation
for fatal or other injuries and diseases
Applicability
• The ESI Act extends to the whole of India.
• It applies to all the factories including
Government factories (excluding seasonal
factories),which employ 10 or more employees
and carry on a manufacturing process with the
aid of power and 20 employees where
manufacturing process is carried out without the
aid of power. The act also applies to shops and
establishments.
• Generally, shops and establishments employing
more than 20 employees are covered by the Act.
• It may be noted that a factory or an
establishment to which the Act applies shall
continue to be governed by this Act even if
the number of persons employed therein at
any time falls below 20 or the manufacturing
process therein ceases to be carried on with
the aid of power.
Contribution [Section 2(4)]
• The sum of money payable to the Corporation
by the principal employer in respect of an
employee and includes any amount payable
by or on behalf of the employee in according
to the provisions of this Act.
Employee
Employee according to Section 2(9) means any person
employed for wages in connection with the work of a
factory or establishment to which this Act applies and:
• who is directly employed by the principal employer on any
work of factory or establishment, within or outside the
establishment, or
• who is employed by a immediate employer on the
premises of the factory or establishment or under the
supervision of the principal employer or his agent, on work
which is ordinarily part of the work of the factory or
establishment or which is preliminary to the work carried
on in or incidental to the purpose of the factory or
establishment;
Principal Employer
• Principal Employer means the following:
I. in a factory, owner or occupier of the factory;
II. in establishment under the control of any
Govt. department, the authority appointed by
such Government or where no authority is so
appointed the head of the Department.
III. In other establishment, any person
responsible for the supervision and control of
the establishment
• Immediate Employer
Immediate Employer means a person, who has
undertaken the execution on the premises of a factory
or an establishment or under the supervision of
principal employer or his agent, and includes a
contractor.
• Insured person [Section 2(14)]
It means a person who is or was an employee in
respect of whom contributions are, or were payable
under the Act and who is by reason thereof entitled to
any of the benefits provided under the Act.
• Permanent Partial Disablement [Section 2(15A)]
It means such disablement of a permanent
nature, as reduced the earning capacity of an
employee in every employment which he was
capable of undertaking at the time of the
accident:
• Permanent Total Disablement
It means such disablement of a permanent
nature as incapacitates an employee for all work
which he was capable of performing at the time
of the accident
• Sickness [Section 2(20)]
It means a condition which requires medical
treatment and attendance and necessitates
abstention from work on medical grounds.
• Temporary Disablement [Section 2(21)]
It means a condition resulting from an
employment injury which requires medical
treatment and renders an employee as a result of
such injury, temporarily incapable of doing the
work which he was doing prior to or at the time
of injury
• Wages [Section 2(22)]
“Wages” means all remuneration paid or payable in
cash to an employee in respect of any period of
authorised leave, lock-out, strike which is not illegal or
lay-off and other additional remuneration if any, paid
at intervals not exceeding 2 months but does not
include:
a. Employer s contribution to any pension fund or
provident fund, or under this Act;
b. any travelling allowance or the value of any travelling
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.
• Employees State Insurance
• Section 38 of the Act makes compulsory that
subject to the provisions of the Act all the
employees in factories or establishments to
which this Act applies shall be insured in the
manner provided by this Act.
• Such insured persons shall pay contributions
towards Insurance Fund through their employers
who will also pay their own contribution. Such
insured persons are entitled to get certain
benefits from that fund which shall be
administered by the Corporation. Any dispute
will be settled by the Employees Insurance Court
• ESI Corporation
Section 3 of this Act provides for the
establishment of ESI Corporation by the C.G.
for administration of the ESI Scheme in
accordance with the provisions of Act. Such
Corporation shall be body corporate having
perpetual succession and a common seal and
shall sue and be sued by the said name.
• ESI Fund Creation of Fund Section
26 of the Act provides that all contributions
paid under this Act and all other moneys
received on behalf of the Corporation shall be
paid into a Fund called the ESI Fund which
shall be held and administered by the
Corporation for the purposes of this Act
• Purposes for which the Fund may be expended
• Section 28 provides that Fund shall be expended only for
the following purposes:
• for providing medical treatment employees or their
families, according to the provisions of this Act and
defraying the charge, and costs in connection therewith;
• Fees and allowances to members of the Corporation,
Committees and Councils.
• Salaries, leave and travelling allowances or other
allowances/benefit fund of officers/servants of the
Corporation;
• Establishment and maintenance of hospitals, dispensaries
and other institutions for benefit of insured persons and
their families;
• Contribution to any State Government, local authority or
any private body or individual towards the cost of medical
treatment of insured person & their families;
• Defraying the cost of auditing the accounts of the
Corporation and of the valuation of the assets and
liabilities;
• Defraying the cost (including all expenses) of Employees
Insurance Courts set up under this Act;
• Payment of sums under any decree, order or award, of any
court or tribunal;
• defraying the cost and other charges of instituting or
defending any civil or criminal proceedings arising out of
any action taken under this Act;
• such other purposes as may be authorised by the
Corporation with the previous approval of the Central
Government.
• Contributions
At rates as may be prescribed by the C.G. The present rates
of contribution are 4.75 % and 1.75 % of workers wages by
employers and employees respectively.
• Principal employer to pay contributions in the first
instance
According to Section 40 of the Act, the principal employer
has to pay to every employee whether directly employed
by him or by or through an immediate employer, both the
employer s contributions and the employee s contribution.
However, he can recover from the employee the
employee s contribution by deduction from his wages and
not otherwise.
Benefits
• The following benefits are available to insured person
and his dependent:
• periodical payment in case of sickness certified by
medical practitioner;
• in case of miscarriage or sickness arising out of
pregnancy,
• to an insured person suffering from disablement as a
result of employment injury;
• to dependants of insured person;
• medical treatment and attendance on insured person;
payment of funeral expenses on the death of insures
person at the prescribed rate of Rs.1500
• 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 or
occupational disease, the dependants are
entitled to family pension.
Maternity benefit
– Maternity benefit is payable to insured women in case of
confinement or miscarriage or sickness related thereto.
– For claiming this an insured woman should have paid for
at least 70 days in 2 consecutive contribution periods
– The benefit is normally payable for 12 weeks, which can be
further extended up to 16 weeks on medical grounds.
– The rate of payment of the benefit is equal to wage or
double the standard sickness benefit rate.
• The benefit is payable within 14 days of duly
authenticated claim papers.
• Disablement benefit.
– Disablement benefit is payable to insured
employees suffering from physical disablement
due to employment injury or occupation disease.
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 first installment is payable within a maximum of 3
months following the death of an insured person and
thereafter, on a regular monthly basis.
• Other benefits like funeral expenses, vocational
rehabilitation, free supply of physical aids and
appliances, preventive health care and medical bonus.
Obligations Of Employers
1. The employer should get his factory or establishments registered with the E.S.I.
Corporation within 15 days after the Act becomes applicable to it, and obtain the
employers Code Number.
2. The employer should obtain the declaration form from the employees covered
under the Act and submit the same along with the return of declaration forms, to
the E.S.I. office. He should arrange for the allotment of Insurance Numbers to the
employees and their Identity Cards.
3. The employer should deposit the employees and his own contributions to the E.S.I.
Account in the prescribed manner, whether he has sufficient resources or not, his
liability under the Act cannot be disputed. He cannot justify non-payment of E.S.I.
contribution due to non availability of finance.
4. The employer should furnish a Return of Contribution along with the challans of
monthly payment, within 30 days of the end of each contribution period.
5. The employer should not reduce the wages of an employee on account of the
contribution payable by him (employer).
6. The employer should cause to be maintained the prescribed
records/registers namely the register of employees, the inspection book
and the accident book.
7. The employer should report to the E.S.I. authorities of any accident in the
place of employment, within 24 hours or immediately in case of serious or
fatal accidents. He should make arrangements for first aid and
transportation of the employee to the hospital. He should also furnish to
the authorities such further information and particulars of an accident as
may be required.
8. The employer should inform the local office and the nearest E.S.I.
dispensary/hospital, in case of death of any employee, immediately.
9. The employer must not put to work any sick employee and allow him
leave, if he has been issued the prescribed certificate.
10. The employer should not dismiss or discharge any employee during the
period he/she is in receipt of sickness/maternity/temporary disablement
benefit, or is under medical treatment, or is absent from work as a result
of illness duly certified or due to pregnancy or confinement.
Records To Be Maintained For Inspection By ESI authorities
1. Attendance Register / Muster Roll
2. Salary / Wage Register / Payroll
3. EC (Employee s & Employer s Contribution) Statement
4. Employees Register
5. Accident Book
6. Return of Contribution
7. Return of Declaration Forms
8. Receipted Copies of Challans
9. Books of Account viz. Cash/Bank, Expense Register,
Sales/Purchase Register, Petty Cash Book, Ledger,
Supporting Bills and Vouchers, Delivery Challans (if any).
10. 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 shall
adjudicate on the following disputes and claims.
• Disputes as to:
• Whether an employee is covered by the Act or whether he
is liable to pay the contribution, or
• The rate of wages or average daily wages of an employee,
or
• The rate of contribution payable by the employer in respect
of any employee, or
• The person who is or was the principle employer in respect
of any employee, or
• The right to any benefit and the amount and duration
thereof, or
• Any other matter in respect of any contribution or benefit
or other due payable or recoverable under the Act.
• No dispute shall be admitted unless the
employer deposits with the Court 50% of the
amount due from him as claimed by the
Corporation.
• An appeal will lie to the High Court within 60
days against an order of the Employees
Insurance Court if it involves a substantial
question of law
