Employee State Insurance Act 1948

Employees’ State Insurance (abbreviated as ESI) is a self-financing social security and health insurance scheme for Indian workers. The fund is managed by the Employees’ State Insurance Corporation (ESIC) according to rules and regulations stipulated in the ESI Act 1948. ESIC is a Statutory and an Autonomous Body under the Ministry of Labour and Employment, Government of India.

Constitution of Corporation

The composition of the ESIC is defined in Section 4, and it is as follows:

• The Director-General.
• Chairman, appointed by the Central Government.
• Vice-Chairman appointed by the Central Government.
• Not more than 5 persons nominated by the Central Government.
• 1 person to represent each state.
• 1 person representing the Union Territories.
• 10 persons representing employers.
• 10 persons representing employees.
• 2 persons representing the medical profession.
• 3 members of parliament (2: Lok Sabha and 1: Rajya Sabha).

Application and scope of the Act

The Employees’ State Insurance Act, 1948 (ESI), enables the financial backing and support to the working class in times of medical distress such as:

• Sickness
• Maternity Leave.
• Disorders (mental or physical).
• Disability
• Death

Benefits

• Medical benefit
• Sickness benefit
• Maternity benefit
• Disablement benefit
• Dependants benefit
• Funeral expenses
• Rehabilitation allowance

For all employees earning ₹21,000 or less per month as wages, the employer contributes 3.25% and the employee contributes 0.75%, total share 4%. This fund is managed by the ESI Corporation (ESIC) according to rules and regulations stipulated there in the ESI Act 1948, which oversees the provision of medical and cash benefits to the employees and their family. ESI scheme is a type of social security scheme for employees in the organised sector.

The employees registered under the scheme are entitled to medical treatment for themselves and their dependents, unemployment cash benefit in certain contingencies and maternity benefit in case of women employees. In case of employment-related disablement or death, there is provision for a disablement benefit and a family pension respectively. Outpatient medical facilities are available in 1418 ESI dispensaries and through 1,678 registered medical practitioners. Inpatient care is available in 145 ESI hospitals and 42 hospital annexes with a total of 19,387 beds. In addition, several state government hospitals also have beds for the exclusive use of ESI Beneficiaries. Cash benefits can be availed in any of 830 ESI centres throughout India.

Recent years have seen an increasing role of information technology in ESI, with the introduction of Pehchan smart cards as a part of Project Panchdeep.] In addition to insured workers, poor families eligible under the Rashtriya Swasthya Bima Yojana can also avail facilities in ESI hospitals and dispensaries. ESI Corporation also runs medical, nursing and paramedical schools in some ESI hospitals across India.

New Amendment

The Employees’ State Insurance Corporation (ESIC) raised the monthly wage limit to Rs. 21,000 from the existing Rs. 15,000, for coverage with effect from 1 January 2017 The rate of contribution was reduced from 6.5% to 4% ( employer’s share 3.25% and employee’s share 0.75%) effective from 1 July 2019.

Constitutionality of the Act

The ESI Act serves as a constitutional instrument because of its practice of providing insurance and medical insurance. While the ESI Act is mostly executed through the ESI Corporation, the Central Government takes control of most of the proceedings.

This control by the Central Government largely contributes to the constitutionality of the Act, because Insurance, be it public or private, is listed in the Seventh Schedule of the Indian Constitution as a Union List subject i.e., it can only be legislated by the Central Government.

Term of office of members of the Corporation

Via Section 5, the following members are appointed for up to a 4 year period:

• Director-General.
• Chairman
• Vice-Chairman.
• The 5 people nominated by Central Government.
• The members representing each state.
• The members representing each Union Territory.

Supersession of the Corporation and Standing Committee

The supersession of the Corporation and the Standing Committee occurs when there is a persistent failure to perform the duties prescribed to both parties. In such a case, the Central Government, via a notification in the Official Gazette, can take the place of the corporation, or with the consultation of the corporation, can take the place of the Standing Committee.

The supersession of the corporation will take place by rendering all of the seats of the corporation, previously occupied by the members, as vacant.

In the case of the Standing Committee, a new one shall be constituted immediately as per Section 8 of the ESI Act.

Duties of the Medical Benefit Council

The Medical Council’s functions are as follows:

• Advise the other two ESIC bodies on matters relating to the implementation that would be beneficial in the medical field. It acquires certification for the grant of medical benefits.
• Investigate against complaints lodged against medical practitioners with relevance to the medical relief offered.

Employees’ State Insurance Fund

The Employees’ State Insurance Fund is the primary monetary source for the ESIC to perform its functions. All contributions paid under this Act and all other money received on behalf of the Corporation shall be paid into this fund to be held and administered by the Corporation.

These could be in the form of grants, donations or gifts by the government.

Expenses of the fund

The ESI Fund is responsible for maintaining the expenses of ESIC, which are as follows:

• Payment of benefits and provision of medical treatment and attendance to insured persons and their families, if required.
• Payment of fees and allowances to members of the Corporation, the Standing Committee and the Medical Benefit Council, the Regional Boards, Local Committees and Regional and Local Medical Benefit Councils.
• Payment of salaries, leave and joining time allowances, travelling and compensatory allowances, gratuities and compassionate allowances, pensions, etc.
• Establishment and maintenance of hospitals, dispensaries, and other institutions and the provision of medical and other ancillary services for the benefit of insured persons and their families, if required.
• Payment of contributions to any State Government, local authority or any private body or individual, towards the cost of medical treatment and attendance provided to insured persons and their families, if required.

Contributions

All employees to be insured

All employees employed in the factories which meet ESIC prescribed rules (under Section 2) are insured for all the benefits offered by it.

Contribution

• The contribution is a determinable amount of money payable by both the employer and the employee, as per the situation, to the corporation.
• The rates, while usually prescribed by the government, are not set in stone, and are subject to change. Rates defined by the government are mostly set as the unit standard for the contribution payable by the employer.
• In the case of the employee’s contribution, the wage period in relation to the respective employee shall be held as a unit to determine the compensation payable, and are normally due on the last day of the wage period.
• Failure to pay contributions by the employer will make him liable to pay an interest rate of 12%.

Principal employer to pay contribution in the first instance

• The primary employer has to collectively pay the contribution, both his own and that of his employees, regardless of whether they are directly employed under him or are working through an immediate employer.
• If a directly employed employee fails to pay his contributions, then the employer can recover that contribution only by deducting the wages of said employee.
• The employer bears all the transfer costs of the payment to the Corporation.

Recovery of contribution from the immediate employer

In the case of an employee who is indirectly employed under the principal employer, via an immediate employer, the principal employer shall be entitled to recover the payment made on behalf of an indirect employee, from the immediate employer, as a debt payable to him.

The immediate employer also has to prepare a list of all the employees under him and submit the same to the principal employer, before paying his dues.

General provisions as to payment of contribution

In case an employee’s wage falls below the prescribed wage range prescribed by the Central Government, the employee shall not be liable for his contribution and it shall not be payable.

Method of payment of contributions

The manner for payments which the Act provides regulations for, has been elaborated in the following conditions:

• The nature and time of contribution being paid.
• Payment which involves the usage of stamps or other adhesives fixed upon the books of accounts, or any other documents.
• The evidence of the contributions, which reaches the Corporation, is to be dated.
• The different entries in the books of accounts along with the details of the insured persons.
• The replacement of documents which have been lost, destroyed or defaced.

Social Security Officers and their functions

ESIC has the power to appoint persons as Social Security Officers. Their functions are mostly to serve a role in inspecting the function of the corporation.

• If required, he can acquire any information from any employer as he sees fit.
• He can enter any corporation at any time and can get all the accounts, books and other employment documents presented to him without any due notice. This can include information like wages, expenses, etc.
• He can inspect and look into any matter regarding the employers and employees as and when required under the jurisdiction of the court.
• He can make copies or take extracts from any register or account back as per his discretion.

Determination of Contribution in certain cases

A Social Security offer is restricted from exercising his functions and discharging his duties, if the accounting statements of the factory/establishment are not submitted, or not maintained in accordance with Section 44 of the ESI Act. As such, the Corporation may, with the available information, determine the contribution (defined under Section 39) amount payable to employees. However, this procedure will not take place until after the person in charge has been given a reasonable opportunity to be heard regarding the absence of such records.

Appellate Authority

In the scenario specified in Section 45A, once the employer in charge is heard, and he is not satisfied with the verdict given by the corporation, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of the verdict. He must also pay a sum of 25% of his calculated contribution, in order to file the appeal. In case he is successful, the corporation will also refund the contribution paid by him.

Recovery of contributions

Any and all contributions which are payable under the provisions of ESI Act, can be recovered, termed as ‘arrears of land revenue’.

Issue of certificate to the Recovery Officer

In lieu of Section 45B, where the contribution is to be recovered, an authorised officer of the corporation issues a certificate bearing his signature and the amount to be recovered, to a Recovery Officer, who then proceeds to recover the amount specified from the factory where the default took place. He does this via:

• Attachment or sale of the property of the factory, or the employer, as per the situation.
• The arrest of the employer and getting him detained in prison.
• Appointing a receiver for the management of the property acquired, be it from the factory or the employer.

Recovery Officer to whom the certificate is to be forwarded

For the contribution certificate to be forwarded to the Recovery Officer, the factory employer must be under the jurisdiction of the Officer in the following ways:

• The location where the employer carries on his business and where the factory is located.
• The location where the employer resides or he has any personal property situated within the Officer’s jurisdiction.
• The inability to recover the amount solely through the sale of property alone.