The Employees’ State Insurance Act, 1948

Objective and Scope of the Act

The Employees’ State Insurance Act, 1948 provides for certain benefits to employees in case of
sickness, maternity and employment injury and also makes provisions for certain other matters in
relation thereto.

Definitions
The Act extends to the whole of India
"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;
"dependant" means any of the following relatives of a deceased insured person, namely,-
(i) a widow, a legitimate or adopted son who has not attained the age of 25 years, an unmarried
legitimate or adopted daughter. (2010 amendment) a widowed mother;
(ii) 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 25 years and is infirm; (2010
amendment)
(iii) 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
g) a paternal grand-parent if no parent of the insured person is alive

"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;
"family" means all or any of the following relatives of an insured person, namely,-
(i) a spouse;
(ii) a minor legitimate or adopted child dependent upon the insured person;
(iii) a child who is wholly dependent on the earnings of the insured person and who is-
(a) receiving education, till he or she attains the age of twenty-one years,
(b) an unmarried daughter;
(iv) a child who is infirm by reason of any physical or mental abnormality or injury and is wholly
dependent on the earnings of the insured person, so long as the infirmity continues;
(v) Dependant parents, whose income from all sources does not exceed such income as may be
prescribed by the Central Government;
(vi) in case the insured person is unmarried and his or her parents are not alive, a minor brother
or sister wholly dependent upon the earnings of the insured person. (2010 amendment)

Chapter II:
Corporation, standing committee and medical benefit council

Establishment of employees’ state insurance corporation. [section 3]

The central government establishes the Corporation to be known as the Employees' State
Insurance Corporation.
The corporation shall consist of the following members. [section 4]

a) Chairman, Vice-Chairman to be appointed by the Central Government;

b) not more than 5 persons to be appointed by the Central Government;
c) one person each representing each of the States in which this Act is in force to be
appointed by the State Government concerned;
d) one person to be appointed by the Central Government to represent the 3Union
Territories;
e) 10 persons representing employers to be appointed by the Central Government in
consultation with such organisations of employers.
f) 10 persons representing employees to be appointed by the Central Government in
consultation with such organisations of employees.
g) 2 persons representing the medical profession to be appointed by the Central
Government in consultation with such organisation of medical practitioners.
h) 3 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
i) The Director-General of the Corporation ex-officio.

Term of office of members of the corporation. [section 5]

Members referred to in clauses (f), (g), (h) shall be four years, commencing from the date on
which their appointment or election.

Constitution of standing committee. [section 8]

The Standing Committee of the Corporation shall be constituted from among its members,
consisting of:
a) A Chairman, appointed by the Central Government;

b) three members of the Corporation appointed by the Central Government;

c) three members of the Corporation representing such three State Governments thereon as the
Central Government may, by notification Gazette, specify from time to time;

e) eight members elected by the Corporation as follows-

(ii) 3 members from among the members of the Corporation representing employers;
(iii) 3 members from among the members of the Corporation representing employees;
(iv) 1 member from among the members of the Corporation representing the medical profession;
and
(v) 1 member from among the members of the Corporation elected by Parliament;

(d) the Director General of the Corporation, ex officio

Term of office of members of standing committee. [section 9]

• a member of the Standing Committee shall cease to hold office when he ceases to be a
member of the Corporation.

• the term of office of a member of the Standing Committee, other than a member referred
to in clause (a) or clause (b) or clause (bb) of Section 8, shall be two years from the date
on which his election.

• A member of the Standing Committee referred to in clause (a) or clause (b) or clause (bb)
of Section 8 shall hold office during the pleasure of the Central Government.

Medical benefit council. [section 10](2010 amendment)

(a) the Director General, the Employees' State Insurance Corporation, ex officio as Chairman;

(b) The Director General, Health Services, ex officio as Co-chairman;".

(c) one member each representing each of the States

(d) 3 members representing employers to be appointed by the Central Government in

consultation with such organisations of employers.
(e) 3 members representing employees to be appointed by the Central Government in
consultation with such organisations of employees.

(f) 3 members, of whom not less than one shall be a woman, representing the medical profession,
to be appointed by the Central Government.

Duties of medical benefit council. [section 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.

Cessation of membership. [section 12]

• 3 members of Parliament of whom 2 shall be members of the House of the People (Lok
Sabha) and one shall be a member of the Council of States (Rajya Sabha) shall cease to
be a member of the Corporation when he ceases to be a Member of Parliament.

• Other members Membership of Employees' State Insurance Corporation, Standing

Committee or the Medical Benefit Council will be ended when that person ends
representing such employers, employees, or the medical profession.

Disqualification. [Section 13]

A person shall be disqualified for being chosen as or for being a member of the Corporation, the
Standing Committee or the Medical Benefit Council-

• If he is declared to be of unsound mind by a competent court; or

• If he is an undischarged insolvent; or
• If he has been convicted of an offence involving moral turpitude.

Fees and allowances. [section 15]

Members of the Corporation, the Standing Committee and the Medical Benefit Council shall
receive such fees and allowances as may from time to time be prescribed by the Central
Government.

Chapter III:

Finance and audit

Employees’ state insurance fund. [section 26]

• All contributions paid under this Act and all other moneys received on behalf of the
Corporation shall be paid into a fund called the Employees' State Insurance 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, for
all or any of the purposes of this Act.

• All money received will be paid in to reserve bank of Indian or government approved
bank credited to the account of the Employees’ State Insurance Fund.

• account shall be operated on by such officers as may be authorised by the Standing

Committee with the approval of the Corporation.

The employees’ state insurance fund shall be expended only for the following purposes.
[section 28]

Payment of benefits and provision of medical treatment.

• Payment to insured persons.

• Payment of medical benefits to insured person families.

• 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.

• 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.

• meeting the expenditure in respect of offices and other services set.

• establishment and maintenance of hospitals, dispensaries and other institutions.

 • Payment of contributions to any State Government, local authority or any private body or
individual, towards the cost of medical treatment.

• Payment of expenses of auditing the accounts of the Corporation and of the valuation of
its assets and liabilities.

• Payment of expenses of the Employees’ State Insurance Courts set up under this Act.

• Payment of sums under any order or award of any Court or Tribunal against the
Corporation.

• Payment of the cost and other charges of instituting or defending any civil or criminal
proceedings arising out of any action taken under this Act;

• Payment of 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.

Accounts. [section 33]

The Corporation should maintain correct accounts of its income and expenditure in such form
and in such manner as may be prescribed by the Central Government.

Audit. [section 34]

The accounts of the Corporation should be audited annually by the Comptroller and Auditor-
General of India and any expenditure incurred by him in connection with such audit shall be
payable by the Corporation to the Comptroller and Auditor-General of India.

• He has the right to demand the production of books, account, connected vouchers and
other documents and papers and to inspect any of the offices of the Corporation.
• Audit report thereon should be forwarded to the Corporation which shall forward the
same to the Central Government along with its comments on the report of the
Comptroller and Auditor General.

Annual report. [section 35]

The Corporation shall submit to the Central Government an annual report of its work and
activities.
Chapter IV:
Contributions
All employees to be insured. [section 38]

Factory or establishment having more than 10 employees should be insured under the Employee
State Insurance Act

The existing wage limit for coverage under the Act is Rs 15,000 to Rs 21,000 (w.e.f.
01/10/2016)

Contribution. [section 39]

• Employer and employee liable for payment of the contribution to the Employee State
Insurance Corporation.
• There are two contribution periods each of six months duration

• The rate of contribution paid by employer and employee will be decided by the central
government.
• Currently, the employee's contribution rate (w.e.f. 01.07.2019) is 0.75% of the wages
and that of employer's is 3.25% of the wages paid/payable in respect of the employees in
every wage period.

• If wage is received every month by employee, the Contribution to the ESI Corporation
should be made by employer and employee every month without fail.

• @ 12% of interest per year should be paid If employer delays in payment of the
contribution to ESI corporation

Principal employer to pay contributions in the first instance. [Section 40]

• Employer should pay the contribution to ESI Corporation of behalf of his employee.
• Employer may deduct employee contribution from employee wage for payment of
contribution to ESI Corporation.
• Employer may recover the employee contribution paid from the wage of the employee
which should not exceed the amount equivalent to employer contribution.
• Employer will become responsible for the payment to the ESI contribution after
deduction of the employee contribution from the employee wage
• Employer should bear the expenses occurred in payment of contributions to the
Corporation.

General provisions as to payment of contributions. [Section 42]

 • No employee's contribution shall be payable by or on behalf of an employee whose
average daily wages during a wage period are below such wages as may be prescribed by
the Central Government.
• Employees in receipt of a daily average wage upto Rs.176/- are exempted from payment
of contribution.

Employers to furnish returns and maintain registers in certain cases. [Section 44]

Every principal and immediate employer should submit to the Corporation or to such officer of
the Corporation as it may direct such returns in such form and containing such particulars
relating to persons employed by him.

Every principal and immediate employer shall maintain such registers or records in respect of his
factory or establishment

Chapter V

Benefits

The following are some ESI benefits that employees can avail under the ESI Act

• Medical benefit

• Sickness benefit

• Maternity benefit

• Dependants benefits

• Disablement benefits

• Other benefits

1. Medical benefit

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.
2. 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.

3. 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.

4. 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.

5. 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 0n the extent
of the injury. The Medical Board first determines the extent of the employee’s loss of earning
capacity and then decides it.

6. 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.

Chapter VII:

Penalties

SECTION REASON PENALITY

84 • Whoever, for the purpose of causing
any increase in payment
• Whoever, for the purpose of causing
any payment or benefit to be made
where no payment
• Whoever, for the purpose of
avoiding any payment to be made by
himself under this Act
punishable with imprisonment for
a term which may extend to 6
months, or with fine not exceeding
2000/- rupees, or with both.
PROVIDED that where an
insured person is convicted under
this Section, he shall not be entitled
for any cash benefit under this Act
 • Whoever, enabling any other person
to avoid any such payment,
knowingly makes
• Whoever, made any false statement
or false representation,
for such period as may be
prescribed by the Central
Government.

85 fails to pay any contribution which under this imprisonment for a term which
Act he is liable to pay may extend to 3 years but which
shall not be less than one year,
in case of failure to pay the employee's fine of 10,000/- rupees and
contribution which has been deducted by imprisonment which shall not be
him from the employee's wages less than six months
• fails or refuses to submit any return Imprisonment for a term which
required by the regulations, or may extend to one year or with fine
makes a false return, which may extend to 4000/-
• deducts or attempts to deduct from rupees, or with both.
the wages of an employee the whole
or any part of the employer's
contribution,
• obstructs any Inspector or other
official of the Corporation in the
discharge of his duties,

85A Repeated failure by the employer to pay any Imprisonment for a term which
contribution which under this Act he is liable may extend to 5 years but which
to pay, shall not be less than 2 years and
shall also be liable to fine of
25,000/- thousand rupees.