Employees’ State Insurance Act, 1948

- Dr. Mitali Srivastava

 OBJECT
“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”

• A self-financed comprehensive social security scheme

• Social security provisions protect the employees against financial distress arising
out of events of disablement, sickness, or death due to employment injury
 APPLICABILITY – S. 1

• S. 1(4) - to all factories (including factories belonging to the government) other than
seasonal factories
• S. 1(5) - to any other establishment or class of establishments, industrial, commercial,
agricultural or otherwise

Thus, The Employees State Insurance applies to the factories and other establishments
institutions where 10 or more persons are employed. However some states, the limit is 20.
Under section 1(5) of the Employees State Insurance Act 1948, the ESI scheme has been
extended to hotels, shops, cinemas, and restaurants, including road-motor transport,
preview theaters, and newspaper establishments where employees are 10 or more.
Again under section 1(5) of the Employees State Insurance Act 1948, the ESI scheme has
been extended to educational institutions and private medical employing more than 10 or
more persons
 DEFINITIONS – S. 2
• S. 2(1) - Appropriate government means, in respect of establishments under the control of the Central
Government or a railway administration or a major port or a mine or oilfield, the Central Government, and
in all other cases, the State Government.

• S. 2(4) - Contribution means 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 accordance
with the provisions of this Act.

• S. 2(8) - Employment injury means a personal injury to an employee caused by accident or an

occupational disease arising out of and in the course of his employment, being an insurable employment,
whether the accident occurs or the occupational disease is contracted within or outside the territorial limits
of India

• S. 2(14) – Insured Person - a person who is or was an employee in respect of whom contributions are or
were payable under this Act and who is, by reason thereof, entitled to any of the benefits provided by this
Act
 DEPENDANT - S. 2(6A)
Dependant means any of the following relatives of a deceased insured person, namely,-
• a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted daughter
• a widowed mother
• if wholly dependent on the earnings of the insured person at the time of his death, a
legitimate or adopted son or daughter who has attained the age of eighteen years and is
infirm;
• if wholly or in part dependent on the earnings of the insured person at the time of his
death –
(a) a parent other than a widowed mother,
(b) a minor illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or adopted
or illegitimate if married and a minor or if widowed and a minor,
(c) a minor brother or an unmarried sister or a widowed sister if a minor,
(d) a widowed daughter-in-law,
(e) a minor child of a pre-deceased son,
(f) a minor child of a pre-deceased daughter where no parent of the child is alive, or a paternal
grand-parent if no parent of the insured person is alive
 EMPLOYEE – S. 2(9)
Any person employed for wages in or in connection with the work of a factory or establishment –
• directly employed by the principal employer, or incidental or preliminary to or connected with the
work

• employed by or through an immediate employer on the premises of the factory or establishment or

under the supervision of the principal employer or his agent

• whose services are temporarily lent or let on hire (has entered into a contract of service)

includes any person employed for wages on any work connected with the administration, or with
the purchase of raw materials for, or the distribution or sale of the products of, the factory or
establishment
 KINDS OF DISABLEMENT
• Permanent partial disablement, S. 2(15A) - Such disablement of a permanent nature, as
reduces the earning capacity of an employee in every employment which he was capable of
undertaking at the time of the accident resulting in the disablement (refer to Part II of
second Schedule)

• Permanent total disablement, S. 2(15B) - 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 resulting in such disablement (refer to Part I of second schedule or
combination of injuries in Part II)

• Temporary disablement, S. 2(21) – A condition resulting from an employment injury which

requires medical treatment and renders an employee, as a result of such injury.
 EMPLOYEES STATE INSURANCE CORPORATION
• Established u/s 3 of the Act
• CONSTITUTION (S. 4) & Term of office (S. 5)
Chairman and Vice-Chairman Appointed by Central Govt. Hold office during the pleasure of the
government appointing them
Not more than five persons Appointed by Central Govt. Pleasure of the appointing government
One person each representing each of Appointed by respective State Govt. Pleasure of the appointing government
the states
One person representing all Union Appointed by Central Govt. Pleasure of the appointing government
Territories
10 persons representing employers Appointed by Central Govt. in 4 years
consultation with such organisations of
employers
10 persons representing employees Appointed by Central Govt. in 4 years
consultation with such organisations of
employees
2 persons representing medical Appointed by Central Govt. in 4 years
profession consultation with such organisation of
medical practitioners
3 members of Parliament (2 Lok Sabha + 1 Rajya Sabha) 4 years
Director General of the Corporation ex-officio Pleasure of the appointing government
 STANDING COMMITTEE – S. 8, Term of Office – S. 9

Chairman Appointed by Central Govt. Pleasure of the Central Government

3 members of Corporation Appointed by Central Govt. pleasure of the Central Government

3 members of corporation Appointed by Central Govt. pleasure of the Central Government

representing 3 State govt. (specified time to time)
8 members elected by corporation including 2 years

• 3 representing employers
• 3 representing employees
• 1 representing Medical profession
• 1 member elected by Parliament

Director General of the Corporation, ex officio 2 years

 MEDICAL BENEFIT COUNCIL – S. 10
Chairman Director General, Heath Services, ex officio

Deputy Director General, Health Appointed by Central Govt. Pleasure of appointing govt.
Services
Medical Commissioner of the Ex-officio
Corporation
1 member representing each state Appointed by respective State Govt. Pleasure of appointing govt.

3 members representing employers Appointed by Central Govt. in 4 years

consultation with resp. organisations
3 members representing employees Appointed by Central Govt. in 4 years
consultation with resp. organisations
3 members (at least one woman) Appointed by Central Govt. in 4 years
representing medical profession consultation with resp. organisations
POWERS OF STANDING COMMITTEE - S. 18
• Administer the affairs of the Corporation and may exercise any of the powers and
perform any of the functions of the Corporation, while authorized and under the
jurisdiction of the corporation.

• Submit for the consideration and decision of the Corporation all such cases and
matters as may be specified in the regulations

• May submit any other case or matter for the decision of the Corporation
 DUTIES OF MEDICAL BENEFIT COUNCIL – S. 22

• Advise the Corporation and the Standing Committee on matters relating to the
administration of medical benefit, the certification for purposes of the grant of
benefits and other connected matters;
• Have such powers and duties of investigation as may be prescribed in relation to
complaints against medical practitioners in connection with medical treatment and
attendance; and
• Perform such other duties in connection with medical treatment and attendance as
may be specified in the regulations
 EMPLOYEES’ STATE INSURANCE FUND – S. 26
• Administered by the Corporation
• All contributions paid under this Act and all other moneys received on behalf of the Corporation shall be paid into
the fund
• The Corporation may accept grants, donations and gifts from the Central or any State Government, local authority,
or any individual or body whether incorporated or not
• Expended for
i. payment of benefits and provision of medical treatment and attendance to insured persons, or their families;
ii. payment of fees and allowances to members of the Corporation, the Standing Committee and the Medical Benefit
Council, the regional boards, local committees and regional and local Medical Benefit Councils;
iii. payment of salaries, leave and joining time allowances, travelling and compensatory allowances, gratuities and
compassionate allowances, pensions, contributions to provident or other benefit fund of officers and servants of the
Corporation;
iv. establishment and maintenance of hospitals, dispensaries and other institutions
v. payment of contributions to any State Government, local authority or any private body or individual, towards the cost of
medical treatment and attendance provided to insured persons
vi. payment of any sums under any contract entered into for the purposes of this Act by the Corporation or the Standing
Committee or by any officer duly authorised by the Corporation
vii. defraying expenditure, within the limits prescribed, on measures for the improvement of the health and welfare of insured
persons and for the rehabilitation and re-employment of insured persons who have been disabled or injured
 CONTRIBUTIONS – S. 39
All employees employed in the factories which meet ESIC prescribed rules (under
Section 2) are insured for all the benefits offered by it.

• The contribution is a determinable amount of money payable by both the employer

and the employee, as per the situation, to the corporation.
• The rates, while usually prescribed by the government, are not set in stone, and are
subject to change. Rates defined by the government are mostly set as the unit standard
for the contribution payable by the employer.
• In the case of the employee’s contribution, the wage period in relation to the
respective employee shall be held as a unit to determine the compensation payable,
and are normally due on the last day of the wage period.
• Failure to pay contributions by the employer will make him liable to pay an interest
rate of 12%
Principal employer to pay contributions in the first Recovery of contributions from immediate
employer - S. 41
instance – S. 40

• The primary employer has to collectively pay the In the case of an employee who is indirectly employed
under the principal employer, via an immediate
contribution, both his own and that of his
employer, the principal employer shall be entitled to
employees, regardless of whether they are directly recover the payment made on behalf of an indirect
employee, from the immediate employer, as a debt
employed under him or are working through an
payable to him.
immediate employer.
The immediate employer also has to prepare a list of
• If a directly employed employee fails to pay his
all the employees under him and submit the same to
contributions, then the employer can recover that the principal employer, before paying his dues.
contribution only by deducting the wages of said
General provisions as to payment of contribution. In
employee. case an employee’s wage falls below the prescribed
wage range prescribed by the Central Government, the
• The employer bears all the transfer costs of the
employee shall not be liable for his contribution and it
payment to the Corporation shall not be payable.
 INSPECTORS – SECTION 45
• Appointed by the Corporation for the purposes of enquiring into the correctness of any of
the particulars stated in any return referred to in section 44

• Duties
i. Require any principal or immediate employer to furnish to him such information as
he may consider necessary
ii. At any reasonable time enter any office, establishment, factory or other premises to
examine such accounts, books and other documents relating to the employment of
persons and payment of wages or to furnish to him such information as he may
consider necessary
iii. Examine the principal or immediate employer, his agent or servant, or any person
found in such factory, establishment, office or other premises
iv. make copies of, or take extracts from, any register, account book or other document
maintained in such factory, establishment, office or other premises
v. exercise such other powers as may be prescribed
 BENEFITS – S. 46

Section 46 of the ESI Act grants benefits to employees as social security in case of injury,
which can be availed during the course of employment. There are 6 types of benefits that
can be availed:
1. Medical benefit, S. 56
2. Sickness benefit, S. 49
3. Maternity benefit, S. 50
4. Dependants’ benefits, S. 52
5. Disablement benefits, S. 51
6. Other benefits
 Medical Benefits Sickness Benefits
These benefits are guaranteed to the The employees covered by the ESI Act
can avail periodical payments in case of
employee as soon as he/she is hired,
sickness as per Section 46(1)(a), as long
with the benefits extending to their as the medical condition is verified by
the appointed medical practitioner. The
family members as well. This benefit
compensation is approximately 70% of
covers the payment of all treatment their wages, with the upper limit for
availing compensation being 91 days in
expenses in lieu of medical issues faced
a year. In a period of 6 months of
by the employee employment, the employee must have
been working for a minimum of 78 days,
else the benefit cannot be claimed.
 Maternity Benefits Dependants’ Benefits
As per Section 46(1)(b) of the ESI Act, an Section 46(1)(d) prescribes periodical
insured woman can claim periodical payments (often made monthly) to the
payments in case of occurrence of any of
the following situations: dependants/family members of the
person who dies during the course of
1. confinement (labour leading to birth or
birth after 26 weeks) employment, with the cause of death
being an employment injury or an
2. Miscarriage
occupational hazard.
3. sickness arising out of pregnancy
Compensation is generally 90% of the
4. premature birth of child
employee’s wages.
The benefit is payable for three months,
with an extension of one month, if required.
The minimum work duration must be 70
days in the year preceding the year of
pregnancy.
 Disablement Benefits Other Benefits
In case an employee suffers an injury ‘Other benefits’ refer to the miscellaneous
during the course of employment which benefits apart from the five major benefits that
results in their disablement. The nature of can be availed by the employees. These are as
the disablement may be temporary or follows:
permanent. 1. Funeral Expenses: Compensation of Rs.
15,000 is granted to the eldest surviving
Unlike the other benefits, there is no
member of an employee’s family to
minimum work contribution required to perform his last rites.
avail the disablement benefit, although
eligibility for the same will be determined 2. Vocational Rehabilitation: The benefit is
payable to disabled employees undergoing
by the Medical Board.
rehabilitation.
This determination also affects the amount
3. Old age medical care: This benefit is
of compensation granted, if any, with the available for retired employees, or those
general percentage of wages granted being who left employment after suffering an
around 90%. injury, with general compensation being
Rs. 120 p/m.
Source: esic.gov.in/benefits
 ADJUDICATION OF DISPUTE AND CLAIMS

Constitution of Employees' Insurance Court, S. 74 –

• Via a notification in the Official Gazette, an Employees’ Insurance

Court will be constituted by the State Government, with a set amount
of judges as per the decision of the State Government.

• The same court may be appointed for two or more local areas, or two
courts or more courts may be appointed for the same local area.
 Power of Employees’ Insurance Court – S. 78
The Employees’ Insurance Court will function with the same powers as that of a Civil
Court, in which, to enforce the provisions of the ESI Act, it can enforce witness attendance,
compel document and material evidence to be presented, it can administer an oath and can
record evidence. All expenses incurred before a proceeding are subject to the discretion and
liability of the court itself.

Reference to High Court - An Employees’ Insurance Court, according to Section 81 may

submit any question of law for the decision of the High Court and if it does so, the answer
to the question shall hold precedence before any judgment.

Appeal, Section 82 defines that no appeal can be laid down as against an order from the
Employees’ Insurance Court. However, appeals from the High Court can stand if they
involve a substantial question of law.