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Employee State Insurance Act, 1948 – An overview
Introduction
The
Employee State Insurance Act, [ESIC] 1948, is a piece of social welfare
legislation enacted primarily with the object of providing certain
benefits to employees in case of sickness, maternity and employment
injury and also to make provision for certain others matters incidental
thereto. The Act in fact tries to attain the goal of socio-economic
justice enshrined in the Directive principles of state policy under part
4 of our constitution, in particular, articles 41, 42 and 43 which
enjoin the state to make effective provision for securing, the right to
work, to education and public assistance in cases of unemployment, old
age, sickness and disablement. The act strives to materialize these
avowed objects through only to a limited extent. This act becomes a
wider spectrum than factory act, in the sense that the factory act is
concerned with the health, safety, welfare, leave etc of the workers
employed in the factory premises only. But the benefits of this act
extend to employees whether working inside the factory or establishment
or elsewhere or they are directly employed by the principal employee or
through an intermediate agency, if the employment is incidental or in
connection with the factory or establishment.
Related Legislations: ESI (Central) Rules, 1950 and ESI (General) Regulations, 1950
Origin
The
Employee State Insurance act was promulgated by the Parliament of India
in the year 1948. To begin with the ESIC scheme was initially launched
on 2nd February 1952 at just two industrial centers in the
country namely Kanpur and Delhi with a total coverage of about 1.20 lakh
workers. There after the scheme was implemented in a phased manner
across the country with the active involvement of the state governments.
Objectives:
The ESI Act is a social welfare legislation enacted with the object of providing certain benefits to employees in case of sickness, maternity and employment injury. Under the Act, employees will receive medical relief, cash benefits, maternity benefits, pension to dependents of deceased workers and compensation for fatal or other injuries and diseases.
The ESI Act is a social welfare legislation enacted with the object of providing certain benefits to employees in case of sickness, maternity and employment injury. Under the Act, employees will receive medical relief, cash benefits, maternity benefits, pension to dependents of deceased workers and compensation for fatal or other injuries and diseases.
According to Section 2 (m) of Factories Act, 1948, Factory
means any premises including the precints thereof - (a) whereon ten or
more persons are employed or were employed for wages on any day of the
preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power or is ordinarily so
carried on, or (b) whereon twenty or more persons are employed or were
employed for wages on any day of the preceding twelve months, and in any
part of which a manufacturing process is being carried on without the
aid of power or is ordinarily so carried on. But does not include a mine
subject to the operation of Mines Act, 1952 or a railway running shed;
According to Section 2 (k) of Factories Act, "manufacturing process"
means any process for - (i) making, altering, repairing, ornamenting,
finishing, packing, oiling, washing, cleaning, breaking up, demolishing,
or otherwise treating or adapting any article or substance with a view
to its use, sale, transport, delivery or disposal, or (ii) pumping oil,
water, sewage or any other substance; or; (iii) generating, transforming
or transmitting power; or (iv) composing types for printing, printing
by letter press, lithography, photogravure or other similar process or
book binding; lra-6 ] [ lra-7 or lra-7 ] (v) constructing,
reconstructing, repairing, refitting, finishing or breaking up ships or
vessels; (vi) preserving or storing any article in cold storage;
According to Section 2 (h) of The Minimum Wages Act, "wages"-
means all remuneration capable of being expressed in terms of money
which would if the terms of the contract of employment express or
implied were fulfilled be payable to a person employed in respect of his
employment or of work done in such employment and includes house rent
allowance but does not include -
(i)
the value of - (a) any house accommodation supply of light water
medical attendance or (b) any other amenity or any service excluded by
general or special order of the appropriate government;
(ii) any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;
(iii) any traveling allowance or the value of any traveling concession;
(iv) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge
Applicability:
- The ESI Act extends to the whole of India.
- It applies to all the factories including Government factories (excluding seasonal factories), which employ 10 or more employees and carry on a manufacturing process with the aid of power and 20 employees where manufacturing process is carried out without the aid of power.
- The act also applies to shops and establishments. Generally, shops and establishments employing more than 20 employees are covered by the Act. “Shop” according to the Delhi Shops and Establishment Act, 1954 means any premises where goods are sold either by retail or wholesale or where services are rendered to customers, and includes an office, a store-room, godown, warehouse or workhouse or work place, whether in the same premises or otherwise, used in or in connection with such trade or business but does not include a factory or a commercial establishment. “Establishment” means a shop, a commercial establishment, residential hotel, restaurant, eating-house, theatre or other places of public amusement or entertainment to which this Act applies and includes such other establishment as Government may, by notification in the Official Gazette, declare to be an establishment for the purpose of this Act. According to the Delhi Shops and Establishment Act, 1954, “Commercial Establishment” means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto is carried on and includes a society registered under the Societies Registration Act, 1860, and charitable or other trust, whether registered or not, which carries on any business, trade or profession or work in connection with, or incidental or ancillary thereto, journalistic and printing establishments, contractors and auditors establishments, quarries and mines not governed by the Mines Act, 1952, educational or other institutions run for private gain, and premises in which business of banking, insurance, stocks and shares, brokerage or produce exchange is carried on, but does not include a shop or a factory registered under the Factories Act, 1948, or theatres, cinemas, restaurants, eating houses, residential hotels, clubs or other places of public amusements or entertainment. Form 01 – Employers’ Registration Form also requires a copy of the registration certificate or licence obtained under the Shops and Establishment Act to be attached along with this form. From this it is quite evident that ESI Act will be applicable to shops and establishments. Again the definition of shops and establishment will vary from state to state depending on the shops and establishment act of that particular state.
- The act does not apply to any member of Indian Naval, Military or Air Forces.
- All employees including casual, temporary or contract employees drawing wages less than Rs 10,000 per month are covered. The ceiling limit has been raised from Rs.7500 to Rs.10000 with effect from 01.10.06.
- Apprentices covered under the Apprenticeship Act are not covered under this Act. According to Apprenticeship Act 1961, “apprentice” means a person who is undergoing apprenticeship training in pursuance of a contract of apprenticeship.
- The apprentices under any scheme as the name suggests come to learn the tricks of the trade and may not count much so far as the output of the factory is concerned, with that end in view, the apprentices are exempted from the operation of laws relating to labour unless the State Government thought otherwise.-- Regional Director ESIC v. M/s Arudyog 1987 (1) LLJ 292.
- A factory or establishment, to which this Act applies, shall continue to be governed by its provisions even if the number of workers employed falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power subsequently.
- Where a workman is covered under the ESI scheme,
- Compensation under the Workmen's Compensation Act cannot be claimed in respect of employment injury.
- No benefits can be claimed under the Maternity Benefits Act.
Areas Covered
The
ESI Scheme is being implemented area-wise by stages. The Scheme is
being implemented in almost all union territories and states except
Nagaland, Manipur, Tripura, Sikkim, Arunachal Pradesh and Mizoram.
Administration of the Act
The
provisions of the Act are administered by the Employees State Insurance
Corporation. It comprises members representing employees, employers,
the central and state government, besides, representatives of parliament
and medical profession. A standing committee constituted from amongst
the members of the corporation, acts as an executive body. The medical
benefit council, constituted by the central government, is another
statutory body that advises the corporation on matters regarding
administration of medical benefit, the certification for purposes of the
grant of benefits and other connected matters.
Registration
The
employer should get his factory or establishment registered with the
ESI Corporation within 15 days after the Act becomes applicable to it
and also obtain the employer’s code number. Application should be made
in Form 01 and after having being satisfied with the application form,
the regional office will allot a code number to the employer, which must
be quoted in all documents and correspondence.
Identity Card
An
employee is required to file a declaration form upon employment in
factory or establishment to show that he is covered under the Act.
On
registration every insured person is provided with a ‘temporary
identification certificate’ which is valid ordinarily for a period of
three months but may be extended, if necessary, for a further period of 3
months. Within this period, the insured person is given a permanent
‘family photo identity card’ in exchange for the certificate. The
identity card serves as a means of identification and has to be produced
at the time of claiming medical care at the dispensary / clinic and
cash benefit at the local office of the corporation. In the event of
change of employment, it should be produced before the new employer as
evidence of registration under the scheme to prevent any duplicate
registration. The identity card bears the signature/thumb impression of
the insured person. Since medical benefit is also available to the
families of Insured persons, the particulars of family members entitled
to medical benefit are also given in the identity card affixed with a
postcard size family photo. If the identity card is lost, a duplicate
card is issued on payment as prescribed.
Like
most of the social security schemes, the world over, ESI scheme is a
self-financing health insurance scheme. Contributions are raised from
covered employees and their employers as a fixed percentage of wages.
Presently covered employees contribute 1.75% of the wages, whereas as
the employers contribute 4.75% of the wages, payable to the insured
persons. Employees earning less than and up to Rs. 50 per day are
exempted from payment of contribution.
The
contribution is deposited by the employer in cash or by cheque at the
designated branches of some nationalized banks. The responsibility for
payment of all contributions is that of the employer with a right to
deduct the employees share of contribution from employees’ wages
relating to the period in respect of which the contribution is payable.
There
are two contribution periods each of six months duration and two
corresponding benefit periods. Cash benefits under the scheme are
generally linked with contribution paid.
Contribution
period - 1st April to 30th September, its corresponding Cash Benefit
period is 1st January to 30th June of the following year.
Contribution
period - 1st October to 31st March, its corresponding Cash Benefit
period is 1st July to 31st December of the following year.
Certification of Return of Contribution by Auditor
Regulation
26 of Employees’ State Insurance (General) Regulations, 1950 was
amended by Notification No.N-12/13/1/2008-P&D to include certain
details to be mentioned in the Return of Contribution to be submitted by
employers. The salient features of amendments made in the Returns of
Contribution are as under:-
- Self-declaration by Employers regarding maintenance of records and registers, submission of Declaration Forms, employees engaged directly or through immediate employers and wages paid to the workers.
- All the Employers employing 40 and more employees shall have to append a certificate duty certified by a Chartered Accountant, in the revised format of Returns of Contribution.
- The Employers employing less than 40 employees will have to provide self- certification without any certification from the Chartered Accountants in Return of Contribution.
The Chartered Accountant should certify that he has verified the return from the records and registers of the company.
This notification has come into force with effect from 01-04-2008.
Benefits under the Scheme
Employees
covered under the scheme are entitled to medical facilities for self
and dependants. They are also entitled to cash benefits in the event of
specified contingencies resulting in loss of wages or earning capacity.
The insured women are entitled to maternity benefit for confinement.
Where death of an insured employee occurs due to employment injury or
occupational disease, the dependants are entitled to family pension.
Various benefits that the insured employees and their dependants are
entitled to, the duration of benefits and contributory conditions
thereof are as under:
- Medical benefits
- Sickness benefits
- Extended sickness benefit
- Enhanced sickness benefit
- Maternity benefit
- Disablement benefit
- Dependants benefit
- Other benefits like funeral expenses, vocational rehabilitation, free supply of physical aids and appliances, preventive health care and medical bonus.
Obligations Of Employers
1. The
employer should get his factory or establishments registered with the
E.S.I. Corporation within 15 days after the Act becomes applicable to
it, and obtain the employers Code Number.
2. The
employer should obtain the declaration form from the employees covered
under the Act and submit the same along with the return of declaration
forms, to the E.S.I. office. He should arrange for the allotment of
Insurance Numbers to the employees and their Identity Cards.
3. The employer should deposit the employees’ and
his own contributions to the E.S.I. Account in the prescribed manner,
whether he has sufficient resources or not, his liability under the Act
cannot be disputed. He cannot justify non-payment of E.S.I. contribution
due to non-availability of finance.
4. The
employer should furnish a Return of Contribution along with the
challans of monthly payment, within 30 days of the end of each
contribution period.
5. The employer should not reduce the wages of an employee on account of the contribution payable by him (employer).
6. The
employer should cause to be maintained the prescribed records/registers
namely the register of employees, the inspection book and the accident
book.
7. The
employer should report to the E.S.I. authorities of any accident in the
place of employment, within 24 hours or immediately in case of serious
or fatal accidents. He should make arrangements for first aid and
transportation of the employee to the hospital. He should also furnish
to the authorities such further information and particulars of an
accident as may be required.
8. The
employer should inform the local office and the nearest E.S.I.
dispensary/hospital, in case of death of any employee, immediately.
9. The employer must not put to work any sick employee and allow him leave, if he has been issued the prescribed certificate.
10. The
employer should not dismiss or discharge any employee during the period
he/she is in receipt of sickness/maternity/temporary disablement
benefit, or is under medical treatment, or is absent from work as a
result of illness duly certified or due to pregnancy or confinement.
Records To Be Maintained For Inspection By ESI authorities
- Attendance Register / Muster Roll
- Salary / Wage Register / Payroll
- EC (Employee’s & Employer’s Contribution) Statement
- Employees’ Register
- Accident Book
- Return of Contribution
- Return of Declaration Forms
- Receipted Copies of Challans
- Books of Account viz. Cash/Bank, Expense Register, Sales/Purchase Register, Petty Cash Book, Ledger, Supporting Bills and Vouchers, Delivery Challans (if any).
- Form of annual information on company
Employees Insurance Court
Any
dispute arising under the ESI Act will be decided by the Employees
Insurance Court and not by a Civil Court. It is constituted by the State
Government for such local areas as may be specified and consists of
such number of judges, as the Government may think fit.
Important Forms to be submitted under the Act
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