EMPLOYEE’S STATE

INSURANCE ACT 1948

Object of the Act

Preamble of the Act:

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

As the name suggests, it is basically an ‘insurance’

scheme i.e. employee gets benefits if he is sick or
disabled.
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Contd…
1. (a) The Act provides for payment of maternity, sickness, disablement,
dependents, and medical benefits to the employee(Chap. 5)
(b) for giving benefits, an Employees’ State Insurance Fund has been
statutorily created by:
(i) statutory contributions from employees & employers (Chap.4)
(ii) grants, donations, etc. (Sec 26).
(c) The ESI Fund is held and the Scheme of benefits is administered
by the Employees’ State Insurance Corporation (Sec. 3) through its
executive called “Standing Committee” (Sec.8) with the assistance ,
advice and expertise of Medical Benefits Council, etc., via Regional
and Local Boards and Committees.(Chap. 2 & 3)
(d) the Corporation collects and recovers the contributions from the
employers( Chap. 4 and 5A) and pays the benefits directly to the
employees and /or dependents, in accordance with a Scheme called
Employees’ State Insurance Scheme.

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APPLICABILITY
Short title, Extent, Commencement and Application :

This Act may be called the Employees' State Insurance Act, 1948.
It extends to the whole of India.
It shall apply, in the first instance, to all factories (including
factories belonging to the government) other than seasonal
factories:

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Coverage
The ESI Act 1948, in the first instance, applies to all
non-seasonal factories employing 10 or more persons
in its premises or precincts. The provisions of the Act
are implemented area-wise in stages.

The Act contains an enabling provision under which

an “Appropriate Government” is empowered to extend
the provisions of the Act to other classes of
establishments-industrial, commercial, agricultural or
otherwise.

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 Under these provisions most of the State Governments
have extended the provisions of the ESI Act to the
following classes of establishments.
i) Shops, hotels, restaurants, cinemas including preview
theatres, road motor transport agencies and newspaper
establishments, etc. employing 20 or more persons.
ii) ii) Beedi manufacturing units in the implemented
areas employing 10 or more persons.
iii) iii) Slate pencil manufacturing units employing one or
more employees have also been brought under the
coverage of the Act in a few States.
iv) iv) Private Medical/educational institutions,
employing 20 or more persons.

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Employees of the aforesaid factories and establishments
in receipt of wages not exceeding Rs. 15,000/- per month
(w.e.f. 01.05.2010) are covered under the Act.

Disabled persons, working in factories and establishments

where ESI Act applies, drawing wages upto Rs. 25,000/-
per month are also coverable under ESI Act w.e.f.
01.04.2008.

About 4.06 Lakh factories and establishment in 787

industrial centres have been brought under the coverage
of the ESI Act benefitting about 1.43 Crore insured persons
and their dependant family members.
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Definitions (sec 2)
“Appropriate Government" (1) 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;

“Confinement“(3) means labour resulting in the issue

of a living child or labour after twenty-six weeks of
pregnancy resulting in the issue of a child whether
alive or dead;

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Contd…
“Contribution" (4) 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;

"Corporation“(6) means the Employees' State

Insurance Corporation set up under this Act;

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Contd…
 “Dependant" (6A) means any of the following relatives of a deceased insured person,
namely,--
(i) a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted
daughter;
(ia) 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 eighteen years and
is infirm;
(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;

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Contd…
“Employment injury“(8) 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;

“Seasonal factory" (19A) means a factory which is exclusively engaged in

one or more of the following manufacturing processes, namely, cotton
ginning, cotton or jute pressing, decortication of groundnuts, the
manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or
any manufacturing process which is incidental to or connected with any of
the aforesaid processes and includes a factory which is engaged for a period
not exceeding seven months in a year--
(a) in any process of blending, packing or repacking of tea or coffee; or
(b) in such other manufacturing process as the Central Government may,
by notification in the Official Gazette, specify;
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Coverage
Drawing wages up to Rs. 15000/- per month engaged
either directly or through contractor

Rate of Contribution of the wages:

 Employer’s 4.75%

 Employee’s 1.75%

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Manner & Time Limit for making
Payment of Contribution

The total amount of contribution (employee’s share

and employer’s share) is to be deposited with the
authorized bank through a challan in the prescribed
form in quadruplicate on ore before 21st of the month
following the calendar month in which the wages fall
due.

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Wages for ESI Contributions
To be deemed as Wages:
Basic Pay
Dearness Allowance
House Rent Allowance
City Compensatory Allowance
Overtime Wages
Payment for day of rest
Production Incentive
Bonus other than statutory bonus
Night Shift Allowance
Payments for un substituted Holidays
Meal/Food Allowance
Suspension Allowance
Lay off Compensation
Children Education Allowance
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 Not to be Deemed as Wages:
Contribution paid by employer to any pension/provident
fund or under ESI Act
Gratuity payable on discharge
Pay in lieu of notice of retrenchment
Benefits paid under ESI Scheme
Leave Encashment
Washing Allowance
Conveyance Amount towards reimbursement for duty
related journey.
Daily Allowance for period spent on tour.

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Benefits
 MEDICAL-BENEFITS
Insured persons and their dependants are entitled to full medical
care from day one of taking up employment in any factory or
establishment covered under the ESI Act 1948. The comprehensive
package includes primary medical care, specialist and diagnostic
services, in-patient care with provision for all super specialist
facilities subject to fullfilment of certain conditions
 SICKNESS-BENEFITS
Sickness Benefit is paid in cash to the insured persons to
compensate their loss of wages in the event of sickness certified by
an authorized medical officer. It is admissible for 91 days in an year
and the cash benefit is equal to 70% of the wages.

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 (b) Enhanced Sickness Benefit (for vasectomy /
tubectomy) 100% of the average daily wages is payable
for 14 days for tubectomy and 7 days for vasectomy
extendable on medical advice.

(c) The Extended Sickness Benefit is admissible at the

rate of 80% the average daily wages for 124 days during a
period of two years, extendable up to two years on
medical advice.

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  MATERNITY-BENEFITS
Maternity Benefit is admissible to insured women in the event of
confinement or miscarriage etc. for 12 weeks at the rate of about 100
percent of the wages

 DISABLEMENT-BENEFITS
Temporary Disablement benefit is paid in cash till the incapacity lasts due
to employment injury at the rate of 90% of the wages. In case of permanent
physical disablement due to employment injury or occupational disease,
disablement benefit is paid for life at a rate proportionate to loss of earning
capacity as determined by the medical board.

DEPENDANTS-BENEFITS
Dependants benefit is paid as family pension to the dependants of a
deceased insured person in the event of death due to employment
injury or occupational disease and is equivalent to about 90% of the
wages.
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 Old Age Medical Care
When an insured person who leaves the insurable employment on
attainment of the age of superannuation or retires under a
voluntary Retirement Scheme or takes premature retirement, after
being an insured person for not less than 5 years, shall be eligible
to receive medical benefit for himself and his spouse subject to
production of proof thereof, and payment of a nominal
contribution of ` 120 (rupees one hundred and twenty only) for
one year.

In case, the insured person expires, his spouse is entitled to the

medical benefit for the remaining period for which the
contribution was made, and she can continue to receive the
medical benefit on payment of the contribution of ` 120 (rupees
one hundred and twenty only) per annum for further period.
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Other Benefits
Funeral Expenses
Funeral expenses on death of an I.P subject to a maximum of Rs. 10000
payable at the Branch Office.  

Rehabilitation Allowance
Rehabilitation in case of disabled insured persons under 45 years of age with
40 percent or more disablement.

Free Supply
Free Supply of physical aids and appliances such as crutches, wheelchairs,
dentures, spectacles and other such physical aids.

Preventive health care

Preventive health care services such as immunization, family welfare services,
HIV/AIDS detection, treatment etc.

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 Confinement Expenses
Confinement Allowance @ Rs. 2500/- is paid to an insured woman or in
respect of the wife of an insured person in case she does not avail medical
facilities of the scheme for child delivery.

Rajiv Gandhi Shramik Kalyan Yojana

Unemployment Allowance named as Rajiv Gandhi Shramik Kalyan Yojana, is
payable to those workers facing involuntary unemployment due to closure of
factory/establishment; retrenchment or permanent invalidity arising out of
non-employment injury. The daily rate of unemployment Allowance is at par
with the standard sickness Benefit rate which is just above 50% of the daily
wages. This allowance is payable for a maximum period of twelve months
either in one spell or in different spells of not less than one month's duration.

Vocational Training in case of physical disablement due to employment

injury for which the actual fee charged or Rs 123 per day, whichever is higher
is paid as long as the vocational training lasts

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Establishment of Employees' State
Insurance Corporation Sec.3
There shall be established, for the administration of
the scheme of employees' state insurance in
accordance with the provisions of this Act a
Corporation to be known as the Employees' State
Insurance Corporation.

The Corporation shall be a body corporate by the

name of Employees' State Insurance Corporation
having perpetual succession and a common seal and
shall by the said name sue and be sued.

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Constitution of Corporation Sec. 4

The Corporation shall consist of the following members, namely:--
(a) a Chairman to be appointed by the Central Government;
(b) a Vice-Chairman to be appointed by the Central Government;
(c) not more than five persons to be appointed by the Central Government,
(d) one person each representing each of the States in which this Act is in force to be appointed
by the State Government concerned;
(e) one person to be appointed by the Central Government to represent the Union Territories;
(f) ten persons representing employers to be appointed by the Central Government in
consultation with such organisations of employers as may be recognised for the purpose by the
Central Government;
(g) ten persons representing employees to be appointed by the Central Government in
consultation with such organsations of employees as may be reorganised for the purpose by the
Central Government;
(h) 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 [* * *] ;
(i) 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
(j) the Director-General of the Corporation ex-officio.

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 Organization Chart ESIC
Chairman

Vice Chairman

Central All State UT Director

Employer’ Employee’ Medical Represe
Governme Governme Appointee
s s Profession General
nt nt by Central
Represent Represent Represent ntative
Appointee’ Appointee Governme Ex-
atives (10) atives (10) atives (2) MPs (3) officio
s (5) ‘s (1each) nt (1)

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Constitution of Standing Committee
Sec 8.
A 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;
(bb) three members of the Corporation representing such three State Governments
thereon as the Central Government may, by notification in the Official Gazette, specify
from time to time;
(c) (eight) members elected by the Corporation as follows--
(ii) three members from among the members of the Corporation representing employers;
(iii) three members from among the members of the Corporation representing employees;
(iv) one member from among the members of the Corporation representing the medical
profession; and
(v) one member from among the members of the Corporation elected by Parliament;
(d) the Director General of the Corporation, ex officio.

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 Organization Chart
Standing Committee

Chairman

State
Central
Government Elected Director General
Government
Representatives Reprentatives (8) Ex Officio
Appointee’s (3)
(3)

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Medical Benefit Council Sec 10
(1) The Central Government shall constitute a Medical Benefit Council consisting of--
(a) the Director General, Health Services, ex officio, as Chairman;
(b) a Deputy Director General, Health Services, to be appointed by the Central
Government;
(c) the medical commissioner of the Corporation, ex officio;
(d) one member each representing each of the States (other than Union Territories) in
which this Act is in force to be appointed by the State Government concerned;
(e) three members representing employers to be appointed by the Central Government
in consultation with such organisations of employers as may be recognised for the
purpose by the Central Government;
(f) three members 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; and
(g) three members, of whom not less than one shall be a woman, 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.
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The ESI Scheme Today
Coverage(As on 31st  March, 2016)
All the States except Manipur, Sikkim, Arunachal Pradesh and
Mizoram
No. of Insured Person family units 2,03,00,000
No. of employees 1,79,00,000
Total No. of Beneficiaries 7,89,00,000  
No. of insured women 33 lacs
No. of Employers, etc 7.23 lacs

The Corporation, with its Central Headquarters at New Delhi,

operates through a network of 830 centres supervised by 61
Regional, Sub- Regional and Divisional Offices located in various
States.
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