Employee State Insurance Act, 1948
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 while the factory act concerns 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
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.
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 –
- 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
- 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 –
- 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
- pumping oil, water, sewage or any other substance; or;
- generating, transforming or transmitting power; or
- composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; lra-6 ] [ lra-7 or lra-7 ]
- constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels;
- 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 –
- the value of –
- any house accommodation supply of light water medical attendance or
- any other amenity or any service excluded by general or special order of the appropriate government;
- any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;
- any traveling allowance or the value of any traveling concession;
- any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
- any gratuity payable on discharge
- 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.
Important Case laws
- Where by some club not only sporting facilities but a kitchen is also maintained, wherein a big number of members come, it is not necessary that they are participating only in sports activities, they are also entertaining themselves and their guests by partaking beverages and tea served by the club. Activity in the kitchen has a direct connection with the activities carried on in the rest of the club premises. It is necessary that the club be registered under ESI Act as regards all the employees engaged by the club irrespective of the fact in which department they are working. Cricket Club of India satisfies the definition of the term `factory’ under s. 2(12) of the Act hence covered by it.– Cricket Club of India v. ESI Corporation 1994 (69) FLR 19.
- Where in an establishment activities like that of clearing and forwarding is going on, it would fall within the expression “shop” even though clearing of documents is done in customs house meant for export and import of goods. Person involved in such business is catering to the needs of exporters and importers and others wanting to carry the goods further. – AIR 1993 SC 252 .
- Anyone having product may approach advertising agency. The advertising agency will prepare an advertising campaign for him utilising the services of the experts it employs in this behalf. It sells the campaign to the client and receives the price thereof. Indubitably, the price will depend upon the nature of the campaign but that does not make any great difference. Essentially, the advertising agency sells its expert services to a client to enable the client to launch an effective campaign of his products without staining the language, the premises of an advertising agency can be said to be a “shop”–ESI Corporation v. R.K. Swamy 1993 (67) FLR 1145 : 1993 (2) CLR 1068.
- Where a laid-off employee after signing the lay-off register was coming out of the factory premises and when crossing the road was hit by a scooter, injuries sustained by him were taken as covered during the course of employment on the basis of theory of notional extension.– Satya Sharma v. ESI Corporation 1991 (63) FLR 339 .
- If the work by the employee is conducted under the immediate gaze or overseeing of the principal employer or his agent, subject to other conditions as envisaged being fulfilled he would be an employee for the purpose of s. 2(9).– CES Corporation Ltd. v. Subash Chandra Bose 1992 (1) LLJ 475.
- A work that is conducive to the work of the factory or establishment or that is necessary for the augmentation of the work of the factory or establishment will be incidental or preliminary to or connected with the work of the factory or establishment. The casual employees shall also be brought within it and are entitled to the benefits which the Act grants. The casual labour employed to construct additional buildings for expansion of the factory are the employees under the Act.– Regional Director, ESIC v. South India Flour Mills Ltd. 1986 (53) FLR 178.
- Employees engaged for repairs, site clearing, construction of buildings, etc. of the principal employer are employees within the meaning of s. 2(9) of the Act. –Kirloskar Pneumatic Co. Ltd. v. ESI Corporation 1987 (70) FJR 199.
- The expression “employed for wages or in connection with the work of a factory or establishment” is of very wide amplitude and its generality is not in any way prejudiced by the expression and includes any person employed for wages or any work connected with the administration of the factory or establishment or in connection with sale or distribution of the products of the factory or establishments. The word “includes” in the statutory definition of a term is generally used to enlarge the meaning of the preceding words and it is by way of extension and not with restriction. In order to determine whether the employees of the company working at its branch sales offices and carrying on acts of sale and distribution of goods manufactured by the company as well as the goods produced by the foreign company are “employees” what is pertinent is not whether they are “principally” and primarily engaged in sale and distribution of the products of the company but whether the business of sale and distribution either “principally” or “marginally” of the products of the foreign company is being done on behalf of the company. If the main business of the company itself at the branch sales offices, is to sell and distribute products of foreign company and the employees working have been employed by the company basically in connection with this work, it would be difficult to hold that the employees at branch sales offices are not “employees” within the meaning of the term defined in s. 2(9) of the Act notwithstanding the fact that the sale and distribution of the products of the company at such offices are only marginal.– Director General, ESI Corporation v. Scientific Instrument Co. Ltd. 1995 Lab. IC 651 .
- Where the work of fixing the marble is extended to a contractor by a marble manufacturing company, duty of the contractor is only to complete the work while marble, cement etc., is supplied by the manufacturing company, workers employed by the contractor would be the employees of the factory as under s. 2(9) of the Act.– 1992 (2) CLR 881. There is no such difference as that of casual or temporary or permanent employee for the expression “employee” as defined under s. 2(9) of the Act. It is so wide as to include even a casual employee who is employed just for a day for wages. The test being whether the person is employed for wages on any work which is connected with the work of a factory or establishment which bears the application of the Act except those exempted by the definition.– ESI Corporation v. Suvarna Saw Mills 1980 (57) FJR 154.
- Where a department of publication and press run by the university concerned is engaged in the printing of text books, journals, registers, forms, etc., that would amount to manufacturing process.– Osmania University v. ESI Corporation 1986 (1) LLN 72 .
- Where there was no manufacturing of articles nor the hotel was manufacturing any article with the aid of power except maintaining one refrigerator to preserve milk and curd, and as there was no using of power in the kitchen for making the eatables and the refrigerator had been kept only for preservation of milk and curd, there was no manufacturing process.—Ritz Hotel v. ESI Corpn. 1995 (1) Mah. LJ 63.
- Wages paid for the holidays are wages as defined.– D., ESI Corporation v. Raj Keshaw Co. 1991 Lab. IC 1991 Lab. IC 1989.
- Overtime wages could not be treated as “wages” for the purpose of contribution under the Act.– Hind Art Press v. ESI Corporation 1990 (1) LLJ 195.
- The ESI Corporation is conferred with the power to recover arrears of contributions from the employer along with damages/interest on the contribution that remained due. Correspondingly it is under an obligation to pay with interest the arrears of benefits to the insured employees or his dependents.– ESI Corporation v. Bhag Singh 1989 (2) LLJ 126.
- Section 53 of the ESI Act (Bar against receiving or recovery of compensation or damages under any other law) does not bar the remedy under s. 110A of the Motor Vehicles Act, 1939.– Deputy General Manager KSRTC v. Gopal Mudaliar 1983 (46) FLR 194.
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.
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.
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.
Employers’ / Employees’ Contribution
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 dependents. 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 dependents are entitled to family pension. Various benefits that the insured employees and their dependents are entitled to, the duration of benefits and contributory conditions thereof are as under:
- Medical benefits
- From day one of entering insurable employment for self and dependents such as spouse, parents and children own or adopted.
- For self and spouse on superannuation subject to having completed five years in insurable employment on superannuation or in case of having suffered permanent physical disablement during the course of insurable employment.
- Sickness benefits
- Sickness benefit is payable to an insured person in cash, in the event of sickness resulting in absence from work and duly certified by an authorised insurable medical officer/ practitioner.
- The benefit becomes admissible only after an insured has paid contribution for at least 78 days in a contribution period of 6 months.
- Sickness benefit is payable for a maximum of 91 days in two consecutive contribution period.
- Extended sickness benefit
- Extended sickness benefit is payable to insured persons for the period of certified sickness in case of specified 34 long-term diseases that need prolonged treatment and absence from work on medical advice.
- For entitlement to this benefit an insured person should have been in insurable employment for at least 2 years. He/ she should also have paid contribution for a minimum of 156 days in the preceding 4 contribution periods or say 2 years.
- ESI is payable for a maximum period of 2 years on the basis of proper medical certification and authentication by the designated authority.
- Amount payable in cash as extended sickness benefit is payable within 7 days following the submission of complete claim papers at the local office concerned.
- Enhanced sickness benefit
- This cash benefit is payable to insured persons in the productive age group for undergoing sterilization operation, viz., vasectomy/ tubectomy.
- The contribution is the same as for the normal sickness benefit.
- Enhanced sickness benefit is payable for 14 days for tubectomy and for seven days in case of vasectomy.
- Maternity benefit
- Maternity benefit is payable to insured women in case of confinement or miscarriage or sickness related thereto.
- For claiming this an insured woman should have paid for at least 70 days in 2 consecutive contribution periods i.e. 1 year.
- The benefit is normally payable for 12 weeks, which can be further extended up to 16 weeks on medical grounds.
- The rate of payment of the benefit is equal to wage or double the standard sickness benefit rate.
- The benefit is payable within 14 days of duly authenticated claim papers.
- Disablement benefit
- Disablement benefit is payable to insured employees suffering from physical disablement due to employment injury or occupation disease.
- Dependents benefit [family pension] is payable to dependents of a deceased insured person where death occurs due to employment or occupational disease.
- A widow can receive this benefit on a monthly basis for life or till remarriage.
- A son or daughter can receive this benefit till 18 years of age.
- Other dependents like parents including a widowed mother can also receive the benefit under certain condition.
- The rate of payment is about 70% of the wages shareable among dependents in a fixed ratio.
- The first installment is payable within a maximum of 3 months following the death of an insured person and thereafter, on a regular monthly basis.
- Other benefits like funeral expenses, vocational rehabilitation, free supply of physical aids and appliances, preventive health care and medical bonus.
Obligations Of Employers
- 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.
- 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.
- 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.
- 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.
- The employer should not reduce the wages of an employee on account of the contribution payable by him (employer).
- The employer should cause to be maintained the prescribed records/registers namely the register of employees, the inspection book and the accident book.
- 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.
- The employer should inform the local office and the nearest E.S.I. dispensary/hospital, in case of death of any employee, immediately.
- The employer must not put to work any sick employee and allow him leave, if he has been issued the prescribed certificate.
- 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. It shall adjudicate on the following disputes and claims.
Disputes as to:
- Whether an employee is covered by the Act or whether he is liable to pay the contribution, or
- The rate of wages or average daily wages of an employee, or
- The rate of contribution payable by the employer in respect of any employee, or
- The person who is or was the principle employer in respect of any employee, or
- The right to any benefit and the amount and duration thereof, or
- Any direction issued by the Corporation on a review of any payment of dependents benefit, or
- Any other matter in respect of any contribution or benefit or other due payable or recoverable under the Act.
Claims as to
- Recovery of contributions from the principal employer,
- Recovery of contributions from a contractor,
- Recovery for short payment or non-payment of any contribution under section 68,
- Recovery of the value or amount of benefits received improperly under section 70,
- Recovery of any benefit admissible under the Act
No dispute shall be admitted unless the employer deposits with the Court 50% of the amount due from him as claimed by the Corporation.
An appeal will lie to the High Court within 60 days against an order of the Employees Insurance Court if it involves a substantial question of law.
Important Forms to be submitted under the Act
Form 01 : Employers’ Registration Form
Form 01(A) : Form of Annual Information on Factory/Establishment
Form 1 : Declaration Form
Form 1A : Family Declaration Form
Form 1B : Changes in Family Declaration Form
Form 3 : Return of Declaration Forms
Form 4 : Identity Card
Form 4(A) : Family Identity Card
Form 5 : Return of Contributions
Form 6 : Register of employees
Form 8 : Special Intermediate Certificate
Form 10 : Abstention verification in r/o Sickness Benefit/Temporary Disablement Benefit/MB
Form 12 : Sickness of Temporary Disablement Benefit
Form 12A : Maternity Benefit for Sickness
Form 13 : Sickness or Temporary disablement or maternity benefit for sickness
Form 13A : Maternity benefit for sickness
Form 14 : Sickness or temporary disablement or maternity benefit for sickness
Form 14A : Maternity Benefit for Sickness
Form 16 : Accident report from employer
Form 17 : Dependent’s or funeral benefit (Death Certificate)
Form 18 : Dependent’s Benefit (Claim Form)
Form 18A : Dependent’s Benefit (Claim for periodical payments)
Form 19 : Maternity Benefit (Notice of Pregnancy)
Form 20 : Maternity Benefit (Certificate of Pregnancy)
Form 21 : Maternity Benefit (Certificate of expected confinement)
Form 22 : Claim for Maternity Benefit
Form 23 : Maternity Benefit (Certificate of confinement or miscarriage)
Form 24 : Maternity Benefit (Notice of work)
Form 25 : Claim for Permanent Disablement Benefit
Form 26 : Certificate for permanent disablement benefit
Form 27 : Declaration and certificate for dependent’s benefit