Rajkumar Adukia
Last updated: 12 May 2020
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About the author
Rajkumar S. Adukia is a highly acclaimed academician and an eminent and experienced Chartered Accountant. An active member of various professional bodies, he is a member of the Central Council of the Institute of Chartered Accountants of India and numerous committees of the Institute of Chartered Accountants of India and is actively involved in their working. He is also an advisor to many industries. He has conducted about 500 seminars & workshops on topical issues relating to Trade & industry and the profession and regularly contributes through articles and column in journals, business newspapers and magazines. He has authored books on numerous topics, including Internal Audit, Bank Audit, Special Economic Zones (SEZ), CARO, Prevention of Money Laundering, Anti-dumping, Real Estate, Export, Import etc.
He has a wide range of experiences over a career spanning more than two decades and has always shared his experiences of working in close contact with the industry and trade bodies from different forums.
The author welcomes suggestions and comments at:
1/3 Meridien Apartments,
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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.
Definitions
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:
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.
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:-
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:
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
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
