Employees’ State Insurance Scheme

Employees’ State Insurance Scheme of India,is a multidimensional social security system tailored to provide socio-economic protection to worker population and their dependants covered under the scheme.

The scheme was inaugurated in Kanpur on 24th February 1952. The comprehensive and multi-pronged social security programme is administered by an apex corporate body called the Employees' State Insurance Corporation.

Employees' State Insurance Act, 1948

The promulgation of Employees' State Insurance Act, 1948 (ESI Act), by the Parliament was the first major legislation on social Security for workers in independent India.

The ESI Act 1948, encompasses certain health related eventualities that the workers are generally exposed to; such as sickness, maternity, temporary or permanent disablement, Occupational disease or death due to employment injury, resulting in loss of wages or earning capacity-total or partial. Social security provision made in the Act to counterbalance or negate the resulting physical or financial distress in such contingencies, are thus, aimed at upholding human dignity in times of crises through protection from deprivation, destitution and social degradation while enabling the society the retention and continuity of a socially useful and productive manpower.

Coverage

Applicability

Under Section 2(12) the Act is applicable to non-seasonal factories employing 10 or more persons.
Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings and newspaper establishments employing 10* or more persons.
Further under section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational institutions employing 10* or more persons in certain States/UTs.
*Note: However the threshold for Coverage of establishments is still 20 Employees in Maharashtra and Chandigarh. The existing wage limit for coverage under the Act is Rs.21,000/- per month (w.e.f. 01/01/2017).

Areas covered
The ESI Scheme is now notified in 526 Districts in 34 States and Union Territories, which include 346 complete District, 95 District Headquarters and in 85 Districts. The scheme is implemented in centers. The scheme is yet to be implemented in Arunachal Pradesh and Lakshadweep.

Finance

ESI Scheme, like most of the Social Security Schemes the world over, is a self financing health insurance scheme. Contributions are raised from covered employees and their employers as a fixed percentage of wages. The State Governments, as per provisions of the Act, contribute 1/8th of the expenditure of medical benefit within a per capita ceiling of Rs. 1500/- per Insured Person per annum. Any additional expenditure incurred by the State Governments, over and above the ceiling and not falling within the shareable pool, is borne by the State Governments concerned.

Contribution

E.S.I. Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer's contribution and employee's contribution at a specified rate. The rates are revised from time to time.

Currently, the employee's contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer's is 4.75% of the wages paid/payable in respect of the employees in every wage period. For newly implemented areas, the contribution rate is 1% of wages of Employee and 3% payable by Employers for first 24 months (w.e.f. 06.10.2016) Employees in receipt of a daily average wage upto Rs.137/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

Collection of Contribution

An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 15 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.

Contribution Period and Benefit Period

There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

Contribution period Corresponding Cash Benefit period

Benefits

The section 46 of the Act envisages following six social security benefits :-

1. Medical Benefit : Full medical care is provided to an Insured person and his family members from the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an Insured Person or his family member. Medical care is also provided to retired and permanently disabled insured persons and their spouses on payment of a token annual premium of Rs.120/- .
2. Sickness Benefit (SB) : Sickness Benefit in the form of cash compensation at the rate of 70 per cent of wages is payable to insured workers during the periods of certified sickness for a maximum of 91 days in a year. In order to qualify for sickness benefit the insured worker is required to contribute for 78 days in a contribution period of 6 months.
• Extended Sickness Benefit (ESB): SB extendable upto two years in the case of 34 malignant and long-term diseases at an enhanced rate of 80 per cent of wages.
• Enhanced Sickness Benefit : Enhanced Sickness Benefit equal to full wage is payable to insured persons undergoing sterilization for 7 days/14 days for male and female workers respectively.
3. Maternity Benefit (MB) : Maternity Benefit for confinement/pregnancy is payable for Twenty Six (26) weeks, which is extendable by further one month on medical advice at the rate of full wage subject to contribution for 70 days in the preceding Two Contribution Periods.
4. Disablement Benefit
   • Temporary disablement benefit (TDB) : From day one of entering insurable employment & irrespective of having paid any contribution in case of employment injury. Temporary Disablement Benefit at the rate of 90% of wage is payable so long as disability continues.
   • Permanent disablement benefit (PDB): The benefit is paid at the rate of 90% of wage in the form of monthly payment depending upon the extent of loss of earning capacity as certified by a Medical Board
5. Dependants Benefit (DB) : DB paid at the rate of 90% of wage in the form of monthly payment to the dependants of a deceased Insured person in cases where death occurs due to employment injury or occupational hazards.
6. Other Benefits :
   • Funeral Expenses : An amount of Rs.15,000/- is payable to the dependents or to the person who performs last rites from day one of entering insurable employment.
   • Confinement Expenses : An Insured Women or an I.P. in respect of his wife in case confinement occurs at a place where necessary medical facilities under ESI Scheme are not available.

In addition, the scheme also provides some other need based benefits to insured workers.

• Vocational Rehabilitation :To permanently disabled Insured Person for undergoing VR Training at VRS.
• Physical Rehabilitation : In case of physical disablement due to employment injury.
• Old Age Medical Care : For Insured Person retiring on attaining the age of superannuation or under VRS/ERS and person having to leave service due to permanent disability insured person & spouse on payment of Rs. 120/- per annum.
• Rajiv Gandhi Shramik Kalyan Yojana : This scheme of Unemployment allowance was introduced w.e.f. 01-04-2005. An Insured Person who become unemployed after being insured three or more years, due to closure of factory/establishment, retrenchment or permanent invalidity are entitled to :-
• Unemployment Allowance equal to 50% of wage for a maximum period of upto Two Years.
• Medical care for self and family from ESI Hospitals/Dispensaries during the period IP receives unemployment allowance.
• Vocational Training provided for upgrading skills - Expenditure on fee/travelling allowance borne by ESIC.
• Incentive to employers in the Private Sector for providing regular employment to the persons with disability :
• Minimum wage limit for Physically Disabled Persons for availing ESIC Benefits is Rs 25,000/-.
• Employerss' contribution is paid by the Central Government for 3 years.

Source : Employees’ State Insurance Scheme of India

Related resources

1. FAQs on ESI scheme