EMPLOYEE STATE INSURANCE:

Employees’ State Insurance Corporation (“ESIC”) is a statutory corporate body set up under
the ESI Act 1948, which is responsible for the administration of ESI Scheme. The ESI
scheme is a self-financed comprehensive social security scheme devised to protect the
employees covered under the scheme against financial distress arising out of events of
sickness, disablement or death due to employment injuries.
The ESIC has its headquarters at New Delhi besides 23 regional offices, 26 sub-regional
offices in the states and over 800 local offices throughout the country to support the
implementation of ESI scheme. In addition, the Medical Benefit Council, a specialized body
that advises the ESIC on the administration of Medical benefit is functioning.

HISTORY:
In March 1943, Prof. B.N.Adarkar was appointed by the Government of India to create a
report on the health insurance scheme for industrial workers. The report became the basis for
the Employment State Insurance (ESI) Act of 1948. The promulgation of Employees’ State
Insurance Act, 1948 envisaged an integrated need based social insurance scheme that would
protect the interest of workers in contingencies such as sickness, maternity, temporary or
permanent physical disablement, death due to employment injury resulting in loss of wages
or earning capacity. The Act also guarantees reasonably good medical care to workers and
their immediate dependents. Following the promulgation of the ESI Act the Central Govt. set
up the ESI Corporation to administer the Scheme. The Scheme thereafter was first
implemented at Kanpur and Delhi on 24 February 1952. The Act further absolved the
employers of their obligations under the Maternity Benefit Act, 1961 and Workmen’s
Compensation Act 1923. The benefits provided to the employees under the Act are also in
conformity with ILO conventions.
The act was initially intended for factory workers but later became applicable to all
establishments having 10 or more workers. As on 31 March 2016, the total beneficiaries are
82.8 million.

APPLICABILITY OF EMPLOYEE STATE INSURANCE:

The ESI scheme is applicable to all factories and other establishments as defined in the Act
with 10 or more persons employed in such establishment and the beneficiaries’ monthly wage
does not exceed Rs 21,000 are covered under the scheme. Whether the employer has
employed 10 or more employees, all employees employed by the employer, agnostic of the
salary are reckoned. The scheme under the act also supports restaurants, motor road
transports, newspaper establishments and undertakings, movies and purview theatres, hotels,
shops.
FEATURES OF THE SCHEME:
Complete medical care and attention are provided by the scheme to the employee registered
under the ESI Act, 1948 at the time of his incapacity, restoration of his health and working
capacity. During absenteeism from work due to illness, maternity or factories accidents which
result in loss of wages complete financial assistance is provided to the employees to
compensate for the wage loss. The scheme provides medical care to family members also. As
on 31 March 2017, 2.93 crore employees are covered under this scheme with the total
number of beneficiaries summing up to 12.40 crores. Broadly, the benefits under this scheme
are categorized under two categories,
A) Cash benefits (which includes sickness, maternity, disablement (temporary and
permanent), funeral expenses, rehabilitation allowance, vocational rehabilitation and medical
bonus) and,
B) Non-cash benefits through medical care.

A) CASH BENEFITS:
1. Sickness Benefit:
Insurable employees under the Act can draw some cash compensation in case they fall sick. This
compensation is generally 70% of their wages during the period of sickness for a maximum of
91 days in a year.
In order to avail this sickness benefit, a worker must pay his contribution for 78 days out of 6
months. Hence, he cannot seek this benefit if he contributes for less than 78 days.

2. Maternity Benefit:
All female insurable employees can avail maternity benefits under the Act in cases of pregnancy
or confinement.
Confinement, in this case, means labour which results in the birth of a living child. It can also
mean birth after 26 weeks of pregnancy, whether the child is living or not.
This maternity benefit is generally payable to employees for three months. It may, however, be
extendable for one more month depending on medical advice.
The compensation amount in such cases is the full wage amount of the employees. This is
payable only if the employee makes a contribution for 70 days in the preceding year.

3. Dependants Benefits:
ESI benefits extend not only to the employees but to their dependents as well in case of the
employee’s death. Such death, however, must occur in the course of an employment injury or an
occupational hazard.
This compensation is generally 90% of the dead employee’s wages in the form of monthly
payments
4. Disablement Benefits:
In case an employee suffers some disablement due to an employment injury, he can seek
disablement benefits. Such disablement may be either temporary or permanent.
In the case of temporary disablement, the compensation is generally 90% of the wage amount
until the disablement continues. The employee can claim this benefit irrespective of whether or
not he paid his contribution.
As far as permanent disablement is concerned, the compensation amount depends on the extent
of the injury. The Medical Board first determines the extent of the employee’s loss of earning
capacity and then decides it.

5. Other Benefits:
Apart from these five basic ESI benefits, an insurable employee can avail the following
miscellaneous benefits also:
a) Funeral Expenses: The dependents of a deceased employee receive Rs. 10,000 to perform
his last rites.
b) Vocational/Physical Rehabilitation: This is generally payable to permanently disabled
employees. They can avail of this benefit for undergoing vocational and physical rehabilitation.
c) Old Age Medical Care: This is payable for employees retiring on superannuation or under
VRS/ERS. Even persons who leave employment after suffering a permanent injury and their
spouses can avail this benefit. The compensation amount here is generally Rs. 120 per month.

B) NON CASH BENEFITS:

Medical Care:
Every insurable employee under the Act gets medical benefits the day he becomes an employee.
This benefit extends to his family members as well. This medical benefit has no ceiling in terms
of expenditure on healthcare.
Hence, the ESI Corporation takes care of all treatment expenses as per its rules.
Apart from general healthcare benefits, retired and permanently disabled workers also get an
annual premium of Rs. 120. This benefit extends to the spouses of the workers as well.

CALCULATION OF ESI:
ESI contributions (from the employee and employer) are calculated on the employee’s gross
monthly salary.
Gross salary is described as the total income earned by the employee, while working in their
job, before any deductions are made for health insurance, social security and state and federal
taxes.
For ESI calculation, the salary comprises of all the monthly payable amounts such as
  Basic pay,
 Dearness allowance,
 City compensatory allowance,
 House Rent Allowance (HRA),
 Incentives (including sales commissions),
 Attendance and overtime payments,
 Meal allowance,
 Uniform allowance and
 Any other special allowances.
The gross monthly salary, however, does not include Annual bonus (such as Diwali bonus),
Retrenchment compensation, and Encashment of leave and gratuity.

COLLECTION OF ESI CONTRIBUTION:

It is the employers responsibility to contribute to the ESI fund by deducting the employees’
contribution from wages and combining it with their own contribution.
An employer is expected to deposit the combined contributions within 15 days of the last day
of the Calendar month. The payments can be made online or to authorized designated
branches of the State Bank of India and some other banks.

ESI CALCULATIONS:
The rates of contribution, as a percentage of gross wages payable to the employees, is
explained in the table below
Percentage of Example Gross Contributions
Gross Pay Salary
Employee 0.75% Rs 15,000 15,000 * 0.75% = 112.50
Deduction
Employer 3.25% Rs 15,000 15,000 * 3.25% = 487.50
Contribution
Total Contributions for this employee 112.50 + 487.50 = Rs 600.00

RECENT AMMENDMENTS IN EMPLOYEE STATE INSURANCE:

The government has reduced the contribution under the Employees’ State Insurance (ESI)
Act to 4% from 6.5%, a move expected to increase the takehome salary of workers as well as
reduce the financial burden of employers. The decision will benefit 36 million workers and
1.28 million employers.

This includes a reduction of 1.5% in employers’ contribution to 3.25% from 4.75% and 1%
reduction in employees’ contribution to 0.75% from 1.75%, the labour ministry said in a
statement on Thursday. ..

“The reduced rate of contribution will bring about a substantial relief to workers and will
bring more and more workforce into the formal sector.”
Similarly, it said, a reduction in the share of contribution of employers will reduce the
financial liability of the establishments, leading to improved viability of these establishments,
and also lead to enhanced ease of doing The ESI Act 1948 under the labour ministry covers
employees with salary up to Rs 21,000. Aiming to increase the country’s formal workforce,
the government had raised the wage ceiling in December 2016 to Rs 21,000 from Rs 15,000.

The government’s move to raise the wage ceiling for coverage under the scheme has resulted
in an increase in enrolments under the scheme. The ESI Act provides for medical, cash,
maternity, disability and dependent benefits to the insured persons funded by the
contributions made by the employers and the employees. The Employees’ State Insurance
Corporation, under labour ministry, administers the scheme.
These efforts resulted in substantial increase in the number of registered employees i.e.
Insured Persons and employers and also a quantum jump in the revenue income of the ESIC.
The figures are as under: –

year No of employers No of insured Total contribution

persons(crores) received(Rs crores)
2015-16 783786 2.1 11455
2016-17 898138 3.1 13662
2017-18 1033730 3.4 20077
2018-19 1285392 3.6 22279

The Government of India is committed to the cause of welfare of employees as well as

employers. It is also committed to improve the quality of medical services & other benefits
being provided under the ESI scheme.
Labour ministry data shows 36 million workers were insured under the scheme in 2018-19,
with a contribution of Rs 22,279 crore.