Employee State

Insurance Act,1948
Applicability
 The Act is applicable to all factories including those under
government other than seasonal factories. The Act was intended to
provide certain benefits to employees in case of sickness, maternity
and ‘employment injury’ and to make provisions for certain other
matters in relevant thereto.

 It extends to whole of india

 Employees State Insurance Corporation (ESIC) is a corporation

body which would administer the ESI Act being implemented in all
the establishments
Constitution of Corporation
a) A Chairman and a vice chairman to be appointed by the Central
Government;

(b) one person each representing each of the States in which this Act is
in force to be appointed by the State Government concerned;

(c) one person to be appointed by the Central Government to represent

the Union territories;

(d) Persons representing employers to be appointed by the Central

Government in consultation with such organizations of employers
as may be recognized for the purpose by the Central
Government;
Continued

(e) Ten persons representing employees to be appointed by the

Central Government in consultation with such organisations of
employees as may be recognised for the purpose by the Central
Government;
(f) two persons representing the medical profession to be appointed by
the Central Government in consultation with such organisations of
medical practitioners as may be recognised for the purpose by the
Central Government;
(g) three members of Parliament of whom two shall be members of the
House of the People (Lok Sabha) and one shall be a member of the
Council of States (Rajya Sabha) elected respectively by the
members of the House of the people and the members of the
Council of States; and
(h) the Director General of the Corporation, ex officio.
Benefits under this act
1) Sickness Benefit: At the rate of 7/12th of the daily average wage
is given to the employee for a maximum period of 91 days in one
year. In diseases like tuberculosis, leprosy, fracture, malignancy etc,
the sickness benefits are extended to one year at half the rate of
sickness benefits.

2) Maternity Benefit: At the rate of full wages for a period of 84 days

in case of pregnancy and 6 weeks in case of miscarriage or MTP.

3) Disablement Benefit: In cash, 72% of the wages is given to the

temporary disabled person during the period of disablement. In case
of permanent disablement, the payment is made at the same rate
for the whole of his life in the form of pension.
Benefits-Contd

4) Dependent Benefit: Widow or legitimate or adopted child (up to

the age of 18 years or till the daughter get married) of the diseased
person gets the cash payment may be in the form of pension.

5) Funeral Benefit: An amount of Rs. 2500 is paid to the eldest

surviving member for the funeral purpose.

6) Medical Benefit: All member of the worker gets the medical cover
including the Outdoor treatment, domiciliary treatment facilities by
the panel system, specialist services, ambulance services, and
indoor services.
 Employees' Provident Funds &
Miscellaneous Provisions Act, 1952
Objective
The Employees Provident fund and Miscellaneous Provisions Act,1952 is a
social security measure aimed at:

 Promoting and securing the well being of the employees by way of provident
fund, family pension and insurance to them.

 Inculcating a habit of saving amongst workers.

 Providing a steady workforce to the employers and

 Assisting the government by providing funds of considerable magnitude for

utilization on various projects meant for promoting economic and social
development of the country and the well being of its people.
Applicability
The Act shall apply to:

 every establishment which is a factory

 engaged in any industry mentioned in schedule I of the Act and

 employing 20 or more persons or

 any other establishment employing twenty or more persons or

Contd…..
 Such other establishment as the central Government
may notify.

 All employees in such factory or establishment including

contract labour, but excluding casual labour and
receiving wages up to Rs.6,500/- per month will be
regulated by the provisions of the Act. Trainee and
apprentices are also not included in determination of the
numerical strength.
Contributions
 Employees Provident fund scheme takes care of the
members at the time of retirement, medical care,
housing, family obligations, education of children, finance
of insurance policies. etc. In terms of the Act, the
employee may contribute 12 or 10 %, as the case may
be, of the basic wages, dearness allowance including the
cash value of any food concession and retaining
allowance.

 An allowance paid to an employee for retaining his

services when the establishment is not working is
retaining allowance.
Rate of contribution
The rate of contribution shall be 10% in the case of
certain establishments:

 any covered establishment with less than 20 employees;

 any sick industrial company

 any establishment which has at the end of the financial year

accumulated losses equal to or exceeding its entire net worth;

 any establishment in the business of jute, beedi, brick, coir.

 If the employee so desires, he may opt to contribute a
higher rate also. However, employer does not have to
match the voluntary contribution over and above the
statutory rate.

 The employer’s contribution of the 12% or 10% shall be

up to 8.33% of the basic wages, dearness allowance and
retaining allowance towards Employees’ Pension
Scheme and the balance 1.67%/ 3.67% towards the
provident fund.

 The employer’s contribution to the Employees deposit

linked insurance scheme shall be 0.5 % of the basic
wages, dearness allowance, retaining allowance.
 In addition, the employer has to pay @ 1.10% of ‘pay’
Contribution and .01% towards administrative charges of
fund and insurance scheme respectively.

 The employee does not have to make any contribution to

the pension fund account. These amounts must be paid
within 15 days from close of every month with the PF
commissioner into the respective accounts maintained
with the State bank of India.

 If the amount is not paid, employer is liable to pay

“damages”. In addition, criminal prosecution can also be
launched.
Filing of returns
 The employer shall within 15 days of the applicability of the Act send
the particulars of all branches, departments, owners, occupiers,
director, partners or any other person in charge of and responsible
for the conduct of business, in form (Return of ownership), in
duplicate, to the commissioner.

 In the event of any change, the same too should be intimated within
15 days to the regional commissioner.

 The commissioner shall on receipt of the return of ownership verify

the particulars submitted therein and after having been satisfied allot
an establishment code No.

 This code shall be mentioned on all forms, challans, statements,

returns and all future correspondence.
 A return in the prescribed form5 in respect of employees
qualifying to be members of the fund for the first month
during the preceding month shall be filed within 15 days
of the close of every month be sent to the CPFC.

 A monthly return of contributions in the prescribed form 6

has to be filed with the commissioner within 25 days of
the close of the month.

 Annual return of contributions in form 6 A reflecting the

employer and employees contribution in respect of each
employee is to be submitted within one month of the
close of the period of currency to the commissioner.
Modes of recovery
The recovery officer shall proceed to recover the
amounts in any one or more of the modes given below.
 attachment and sale of moveable or immoveable
property of the establishment or employer

 arrest of the employer and his detention in prison or

 appointing a receiver for the management of the

moveable or immoveable properties of the establishment
or employer
Offences by Companies
 In case of an offence by a company, every person who
at the time of the offence was committed was

- in charge of the company and

- was responsible for the conduct of business of the
company as well as the company itself shall be deemed
to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly.
Unless a person fulfills both the requirements i.e being in
charge as well as responsible to the company for the
conduct of its business, no prosecution shall lie against
him. The words ‘deemed’ is significant as the company is
an artificial person and the person in charge of the
company and responsible for the conduct of business
bears a vicarious liability for being prosecuted in respect
of the offence committed by the company.
 However, the person prosecuted can take the defence
that the offence was committed without his knowledge or
that he had exercised all due diligence to prevent the
commission of the offence. if, however, it is proved that
the offence was committed with the consent or
connivance or is attributable to any neglect on the part of
any director, manager, secretary or any other officer of
the company then such director, manager, secretary or
any other officer shall be deemed to be guilty of that
offence and shall be liable to be punished.
Payment of Gratuity Act,1972
Gratuity - Meaning

 Gratuity is a lump sum payment made by

the employer as a mark of recognition of
the service rendered by the employee
when he retires or leaves service.
Applicability
 The Act is applicable to every factory, shop or an establishment, in
which ten or more persons are employed.

 or were employed on any day of the proceeding twelve months.

Every employee irrespective of his salary will be entitled to gratuity.

 Once the Act becomes applicable, it shall continue to be governed

by the provisions notwithstanding that the number of persons
employed therein have fallen below ten.
Eligibility
An employee is eligible for receiving gratuity payment only after he
has completed five years of continuous service. He is said to be in
continuous service when he has provided uninterrupted service
during that period.

 on super annuation or
 on his retirement or resignation or
 death or disablement due to accident or disease.
 This condition of five years is not necessary if the termination of the
employment of an employee is due to death or disablement.
However, interruption on account of sickness, accident, leave, lay-
off, strike, lockout, cessation of work not due to any fault of the
employee will not be considered as a break in service.
Amount Payable
 Gratuity is payable @ 15 days wages for every year of
completed service or part thereof in excess of six
months. In case of seasonal establishment, gratuity is
payable @ 7 days wages for each season. Wages will
include basic and D.A. The daily wages in respect of
piece rated employees are to be computed on the
average of the total wages received by an employee for
a period of three months. The maximum amount of
Gratuity payable is Rs. 3.5 lakhs.
Amount - When payable
 Any person to whom the gratuity amount is payable shall
make a written application to the employer. The
employer is required to determine the amount of gratuity
payable and give notice in writing to the person to whom
the same is payable and to the controlling authority
thereby specifying the amount of gratuity payable.
 The employer is under obligation to pay the gratuity
amount within 30 days from the date it becomes
payable. Simple interest at the rate of 10% p.a. is
payable on the expiry of the said period.
 If there is a dispute as regards the amount of gratuity
payable or with regards the person to whom it is
payable, the employer shall deposit the said amount
payable with the controlling Authority.

 If the gratuity is not paid within the prescribed time, the

controlling authority shall after due inquiry determine the
amount payable and direct the employer to deposit the
said amount. If an employer agrees to provide more
benefits than the benefits flowing from the Act, he can
always have a private scheme.
Nomination
Every employee who completes one year of service is
eligible to file nomination in Form - F in duplicate to the
employer. In case of death of employee, a nominee or
legal heir shall submit the application in Form J or K for
claim amount. The employer shall pay the gratuity within
30 days of the receipt of the application. If no nomination
has been made, it shall be paid to the legal heirs of the
deceased employee or if the heirs are minor, the share
of such minor shall be deposited by the controlling
authority with a bank till he attains majority.
Forfeiture
 Gratuity can be forfeited for any employee whose
services have been terminated for any act, willful
omission or negligence causing damage or destruction
to the property belonging to the employer. It can also be
forfeited for any act which constitutes an offence
involving moral turpitude. Where services have not been
terminated on any of the above grounds, the employer
cannot withhold gratuity due to the employee. Where the
land of the employer is not vacated by the employee,
gratuity cannot be withheld.
Obligation of the Employer
 The employer is usually required to submit a notice of opening of an
establishment to the controlling authority of the area in form A
containing names and addresses of the establishment, employer,
number of persons employed, nature of business etc.
 The employer shall display conspicuously a notice at or near the
main entrance of the establishment in bold letters in English and in a
language understood by the majority of employees.
 It is the duty of the employer to determine the amount of gratuity as
soon as it becomes payable. Failure to do so shall render him liable
to pay the interest at the prevailing rate from time taken.
 To obtain insurance in the prescribed manner for his liability for
payment of gratuity under the Act or establish approved gratuity
fund in the prescribed manner.
Penalties
 If any person makes a false statement for the purpose of
avoiding any payment to be made by him under this Act
he shall be punishable with imprisonment for a term
which may extend to six months, or with fine which may
extend to ten thousand rupees or with both. If an
employer contravenes any provision of the Act, he shall
be punishable with imprisonment for a term which shall
not be less than three months but which may extend to
one year or with a fine, which may vary from ten
thousand rupees to twenty thousand rupees.
 No court shall take cognizance of any offence punishable
under this Act save on a complaint made by or under the
authority of the appropriate Government :
 Provided that where the amount of gratuity has not been
paid, or recovered, within six months from the expiry of
the prescribed time, the appropriate Government shall
authorise the controlling authority to make a complaint
against the employer, whereupon the controlling
authority shall, within fifteen days from the date of such
authorisation, make such complaint to a Magistrate
having jurisdiction to try the offence.
 No court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any offence
punishable under this Act.