EMPLOYEES' STATE INSURANCE ACT, 1948

The Employees' State Insurance Act, 1948 is devised so as to provide social protection to workers in contingencies such as illness, long term sickness or any other health risk due to exposure to employment injury or occupational hazards. ESI Act is the first of its kind in India as it introduces the compulsory insurance of a specified class of wage earners against certain inevitable risk and to uphold the human dignity of fellow feelings in contingencies, such as death, disease or physical disability. Employees' State Insurance Corporation i.e. ESIC is a Government body formed by the Ministry of Labour and Employment, India which dedicatedly operates under this Act

APPLICABLITY

• This Act is extended in area wise to factories using power and employing 10 or more persons and non-power using manufacturing units and establishments employing 20 or more person upto Rs 21,000.00 per month w.e.f. 1st January 2017
• It has also been extended upon shops, hotel, restaurants, roads, motor transport undertaking, equipment maintenance staff in hospitals
• The factories and establishments shall continue to be administered by this Act despite the number of persons employed therein at any time falls below the aforesaid limit
• Employees employed by a contractor are directly covered under ESI Act and the Schemes thereto

Coverage

The ESI Act covers employees earning wages upto Rs. 21000.00 per month, engaged either directly or through contractor

Benefit

Therapeutic, sickness, extended illness for certain disease, enhanced sickness, old age care dependents, maternity, beside funeral expenses, rehabilitation allowance, medical advantage to insured person and his or her spouse, medical bonus & Physical Aids

Rate of contribution of the wages

• Employers' 3.25%
• Employees' 0.75%

Contribution period

• 1st April to 30th September
• 1st October to 31st March

The esi scheme today (as on 31. 3. 2009)

• State/Union Territories covered 29
• No. of implemented Centers 782>
• No. of Employers covered 1.25 crore
• No. of Insured Person 1.29 crore
• No. of Beneficiaries 5 crore
• No. of ESI Hospitals 145

Manner and time limit for makinf 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 or before 21st of month following the calendar month in which the wages fall due

Benefit peirod

If a person joined insurable employment for the first time, say on 5th January, his first contribution period will be from 5th January to 31st March and his corresponding first benefit will be from 5th October to 31st December

Wages for esi contribution

To be deemed as:

• Basic pay
• Dearness allowance
• City compensatory allowance
• Overtime wages (but not take into account for determining the coverage of an employee)
• Payment for day of rest
• Production incentive
• Bonus other than statutory bonus
• Night shift allowance
• Heat, Gas & Dust allowance
• Payment for un-substituted holidays
• Meal/foods allowances
• Suspension allowance
• Lay-off Compensation
• Children education allowance(not being reimbursement for actual tuition fee)

Not to be deemed as wages

• Contribution paid by the employer to any pension/provident fund or under ESI Act
• Sum paid to defray special expenses entailed by the nature of employment Daily allowance paid for the period spent on tour
• Gratuity payable on discharge
• Pay in lieu of notice of retrenchment compensation
• Benefits paid under the ESI Scheme
• Encashment of leave
• Payment of Inam which does not form a part of the terms of employment
• Washing allowance for livery
• Conveyance

Penalties

Different punishment have been prescribed for different types of offences as follows

In terms of Section 85: (i) (six months imprisonment and fine Rs.5000), (ii) (one year imprisonment and fine)

In terms of Section 85-A: Imprisonment upto five years imprisonment and but not less to 2 years

Section 85-C (2) of the ESI Act, which are self explanatory. Besides these provisions, action also can be taken under section 406 of the IPC in cases where an employer deducts contributions from the wages of his employees but does not pay the same to the corporation which amounts to criminal breach of trust.