This chapter will enable students to:
- Understand the objectives and coverage of the ESI Act, 1948, and the manner of its extension
- Explain the terms ‘wages’, ‘employee’, ‘dependant’ and ‘family’ as defined under the ESI Act, 1948
- Describe the various benefits available under the ESI Act, 1948, along with their nature, scale, rates, duration and eligibility conditions
- Explain the arrangement for the administration of the ESI Scheme
- Understand the limitations of the scheme and its working
The background leading to the enactment of the Employees’ State Insurance Act, (ESI) 1948, has been discussed in detail in Chapter 23 of the book. It has been explained in that chapter that the Act was a direct outcome of the Report of Professor B. P. Adarkar (1943) supplemented by that of Health and Development Committee headed by Joseph Bhore (1943), and preceded as well as followed by prolonged deliberations at various forums. On the basis of the recommendations of Professor Adarkar and the subsequent resolutions of the Indian Labour Conference and Standing Labour Committee, the Workmen’s State Insurance Bill providing for a unified scheme of social insurance was introduced in the Indian Legislative Assembly on 6 November 1946. At the time of introduction of the Bill, the then central labour minister stated that ‘the Bill is a beginning of a scheme of social security on the lines followed in countries much more advanced economically’.1 At the stage of consideration of the Bill by the select committee, the name of the Bill was changed as Employees’ State Insurance Bill, which was passed into an Act of the new name on 2 April 1948 and received the assent of the governor general on 19 April 1948. The Act was amended in 1951, 1966, 1975, 1984, 1989 and 2010.
The amendment of 1966 aimed at removing difficulties encountered in the administration of the Act. The major amendments included: (i) enlargement of the definition of the term ‘employee’ so as to include administrative staff engaged in the sale, distribution and other connected functions, (ii) inclusion of dependent parents of insured female employees in the definition of ‘family’, (iii) enhancement of the wage-limit for coverage from 400 to 500 per month, (iv) introduction of funeral benefit of 100 in the event of the death of an insured employee, and (v) enhancement of the scale of maternity benefit. The amendment of 1975 raised the wage-limit for coverage under the Act to 1,000 per month.
The major amendments introduced by the amending Act of 1984 included: (i) raising the wage-limit for coverage to 1,600 per month, (ii) delinking of employer’s contribution from employee’s contribution, (iii) raising of average daily wage from below 2 to 6 a day for exemption of the payment of employee’s contribution, (iv) unit of contribution changed from ‘a week’ to ‘a wage period’ and (v) revision of the list of occupational diseases.
The amendments of 1989 included: (i) inclusion of children up to 21 years of age and infirm children without any age-restriction in the definition of ‘family’, (ii) increasing the number of representatives of employers and employees from 5 to 10 each in the ESI Corporation, and (iii) making penal clauses more stringent. The Employees’ State Insurance (Amendment) Act, 2010, was enacted on 24 May 2010 and it came into force on the 1 June 2010, except Chapter V-A of the principal Act as it needed framing of rules for its implementation.
The main amendments inserted are as follows: (i) facilitating coverage of smaller factories; (ii) enhancing age-limit of dependent children for eligibility to dependant’s benefit; (iii) extending medical benefit to dependent minor brother or sister in case of insured persons not having family and whose parents are also not alive; (iv) provision of an appellate authority within the ESI Corporation against assessment to avoid unnecessary litigation; (v) continuance of medical benefit to insured persons retiring under Voluntary Retirement Scheme (VRS) scheme or taking premature retirement; (vi) taking commuting accidents as employment injury; (vii) provision of third party participation in the Commissioning and running of hospitals; (viii) opening of medical, dental or nursing colleges to improve quality of medical care; (ix) making an enabling provision for extending medical care to other beneficiaries against payment of user charges to facilitate providing of medical care from under-utilized ESI hospitals to below poverty line (BPL) families covered under the Rashtriya Bima Yojna introduced by the Ministry of Labour; (x) reducing duration of notice period for extension of the Act to new classes of establishments from 6 months to 1 month; (xi) empowering state governments to set up autonomous Corporations for administering medical benefit in the states for bringing autonomy and efficiency in the working.
The amending Act of 2010 has replaced Chapter V-A of the principal Act by a new Chapter V-A which deals with schemes for beneficiaries other than insured employees. The amending Act empowers the central government to frame schemes for other beneficiaries and their family members for providing medical facilities in hospitals established by the ESI Corporation in any area which is underutilized on payment of user charges.
The Employees’ State Insurance Act, 1948, as amended till now establishes an integrated scheme of social insurance providing for medical, sickness, maternity, disablement and dependant’s benefits supplemental by funeral expenses, confinement expenses, vocational and physical rehabilitation and unemployment allowance combined with skill upgradation training. The main provisions of the Act as they stand amended till date are summarized below.
The Act, which extends to the whole of the country, applies in the first instance to all factories (including those belonging to the government) other than seasonal factory. For the purposes of the Act, ‘factory’ means ‘any premises including the precincts thereof whereon 10 or more persons are employed on any day of the preceding 12 months, and in any part of which a manufacturing process is carried on or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952, or a railway running shed’ [Sec. 2(12)]. The Act does not apply to a factory or establishment belonging to or under the control of the government whose employees are the receipt of benefits substantially similar or superior to the benefits provided under this Act.
The central government in consultation with the ESI Corporation, and the state government with the approval of the central government may extend any or all provisions of the Act to any other establishment or class of establishments—industrial, commercial, agricultural or otherwise, but 1 month prior notification in the official gazette is necessary. Where the provisions of the Act have been brought into force in any part of the state, they will stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of that state. A factory or establishment to which the Act applies will continue to be governed by the Act even when the number of persons employed falls below the limit specified under the Act or the manufacturing process ceases to be carried on with the aid of power [Sec. 1].
The Act has been extended to new classes of establishments such as shops, theatres, cinemas, hotels, restaurants, motor transport undertakings and newspaper establishments employing 20 or more persons in a number of states.
Presently, the Act does not apply to employees whose remuneration in the aggregate exceeds 15,000 a month.
Power to Exempt
The appropriate government is empowered to exempt any factory or establishment or class of factories or establishments in any specified area from the operation of the Act for a period not exceeding 1 year, and may from time to time renew the exemption for a period not exceeding 1 year at a time. Similarly, the appropriate government may make exemption in respect of any person or class of persons employed in any factory or establishment or class of factories or establishments from the operation of the Act. In both the cases, a prior notification in the official gazette is necessary. The appropriate government may also notify the conditions subject to which the exemptions may be granted or renewed. However, in granting or renewing an exemption, the appropriate government is required to consider any representation made by the Employees’ State Insurance Corporation [Sec. 87–89].
In case employees in any factory or establishment owned by the government or a local authority are in receipt of benefits substantially similar or superior to the benefits provided under the Act, the appropriate government may make exemptions in respect of such factory or establishment [Sec. 90]. The appropriate government may, in consultation with the Corporation, exempt employees in any factory or establishment from one or more provisions relating to benefits provided under the Act, [Sec. 91].
An exemption granted in any of the cases noted above may take effect either prospectively or retrospectively on such date as specified in the notification [Sec. 91A].
SOME IMPORTANT DEFINITIONS
Some important definitions under the Act are reproduced in Box 26.1.
SOME IMPORTANT DEFINITIONS UNDER THE ESI ACT, 1948
Appropriate government means, in respect of establishments under the control of central government, a railway administration, a major port, a mine or oil-field, the central government; and in all other cases, the state government [Sec. 2(1)].
Factory means any premises including the precincts thereof whereon ten or more persons are employed on any day of the preceding 12 months, and in any part of which a manufacturing process is carried on or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952, or a railway running shed [Sec. 2(12)].
Principal employer means (i) in factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representatives of a deceased owner or occupier and where a person has been named as a manager of the factory under the Factories Act, 1948, the person so named; (ii) in any establishment under the control of a department of government in India, the authority appointed by such government in this behalf or where no authority is so appointed, the head of the department; (iii) in any other establishment, any person responsible for the supervision and control of the establishment [Sec. 2(17)].
Immediate employer in relation to employees employed by or through him means ‘a person who has undertaken the execution on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried on in or incidental to the purpose of any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer and includes a contractor’. [Sec. 2(13)].
Employee means any person employed for wages in or in connection with the work of a factory or establishment covered under the Act and (i) who is directly employed by the principal employer or (ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent, or (iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service. The term ‘employee’ includes any person employed for wages on any work connected with the administration of the factory or establishment or any of its part, department or branch or with the purchase of raw materials for, or the distribution or sale of the products of the factory or establishment and includes an apprentice, but does not include: (i) Any member of the Indian naval, military or air force, (ii) Any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as prescribed by the central government (presently, the maximum wage ceiling is 15,000 a month)
An employee whose wages (excluding remuneration for overtime work) exceed the wages prescribed by the central government at any time after the beginning of the contribution period continues to be covered until the end of the period [Sec. 2(9)].
Wages means all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment (express or implied) were fulfilled and includes any payment to an employee with respect to any period of authorized leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding 2 months, but does not include: (i) any contribution paid by the employer to any pension fund or provident fund, or under this Act; (ii) any travelling allowance or the value of any travelling concession; (iii) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; (iv) any gratuity payable on discharge [Sec. 2(22)].
Dependant means any of the following relatives of a deceased insured person, namely: (i) a widow legitimate or adopted son who has not attained the age of 25 years, an unmarried legitimate or adopted daughter or a widowed mother; (ii) if wholly dependent on the earnings of the insured person at the time of his death, legitimate or adopted son or daughter who has attained the age of 25 and is infirm; (iii) if wholly or in part dependent on the earnings of the insured person at the time of his death, (a) parent other than a widowed mother, (b) a minor illegitimate son, an unmarried illegitimate daughter, or a daughter legitimate or adopted or illegitimate if married and a minor or if widowed and a minor, (c) a minor brother or an unmarried sister or a widowed sister if a minor, (d) a widowed daughter-in-law, (e) a minor child of a predeceased son, (f) a minor child of a predeceased daughter where no parent of the child is alive, or (g) a paternal grandparent if no parent of the insured person is alive [Sec. 2(6A)].
Permanent total disablement is such disablement of permanent nature as incapacitates an employee for all work which he was capable of performing at the time of accident resulting in such disablement. Permanent total disablement is deemed to result from every injury specified in Part I of the Second Schedule of the Act or from a combination of injuries specified in Part II of the Schedule where the aggregate percentage of the loss of earning capacity, amounts to 100 per cent or more [Sec. 2(15B)]. The injuries specified in the schedule are the same as specified under the Employees’ Compensation Act, 1923 (see Appendix I of the book).
Permanent partial disablement is such disablement of permanent nature which reduces the earning capacity of an employee in every employment which he was capable of undertaking at the time of the accident resulting in the disablement. Injuries specified in Part II of the Second Schedule of the Act are deemed to result in permanent partial disablement [Sec. 2(15A)] (see Appendix I of the book).
Temporary disablement is a condition resulting from an employment injury which requires medical treatment and renders an employee, as a result of such injury, temporarily incapable of doing the work which he was doing prior to or at the time of the injury [Sec. 2(21)].
Family means all or any of the following relatives of an insured person, namely: (i) a spouse, (ii) a minor legitimate or adopted child dependent upon the insured person, (iii) a child who is wholly dependent on the insured person and who is (a) receiving education till he or she attains the age of 21 years, (b) an unmarried daughter, (iv) a child who is infirm by reason of any physical or mental abnormality or injury and is wholly dependent on the earnings of the insured person, so long as the infirmity continues, (v) dependent parents, whose income from all sources does not exceed such income as may be prescribed by the central government, (vi) in case the insured person is unmarried and his or her parents are not alive, a minor brother or brother or sister wholly dependent upon the earnings of the insured person [Sec. 2(11)].
All Employees to Be Insured
All employees in factories or establishments covered under the Act are to be insured [Sec. 38].
Rates of Contributions and Their Payment
Contributions with respect to both, the employers and employees are to be paid to the Employees’ State Insurance Corporation. Prior to 1989, the rates of contributions payable by the employers and employees were prescribed in the Act itself, but the amending Act of 1989 empowered the central government to prescribe the rates of contributions. The rates of contributions as of now are 1.75 per cent of the wages payable by the employees and 4.75 per cent of the employees’ wages payable by the employers. Employees getting wages up to 70 per day do not have to pay contributions, but they receive benefits as a matter of right. The state governments bear one-eighth of the expenditure on medical benefit within a per capita ceiling of 1,200 per insured person per annum.
The wage period in relation to an employee is to be the unit in respect of which all contributions will be payable under the Act. The contributions payable in respect of each wage period ordinarily falls on the last day of the wage period. Where an employee is employed for part of the wage period or is employed under two or more employers during the same wage period, the contribution will fall due on such days as may be specified in the regulations. If the principal employer does not pay contribution by the due date, he will be liable to pay simple interest at the rate of 12 per cent per annum or at such higher rate as specified in the regulations till the date of its actual payment. The interest is recoverable as an arrear of land revenue [Sec. 39].
Principal Employer to Pay Contributions in the First Instance
The principal employer is required to pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer’s and employee’s contributions. The principal employer is entitled to recover from the employee directly employed by him the employee’s contribution by making deductions from his wages and not otherwise. The employer’s contribution with respect to an employee cannot be deducted from the employee’s wages or recovered from him in any other manner. The principal employer is required to bear the expenses of remitting the contributions to the ESI Corporation [Sec. 40].
The principal employer is entitled to recover the amount of both the employee’s and employer’s contributions paid in respect of an employee employed by or through an immediate employer from the immediate employer. The immediate employer is required to maintain a register of employees employed by or through him [Sec. 41].
Employee’s Contribution Not to Be Paid in Certain Cases
No employee’s contribution is payable in respect of an employee whose average daily wages during a wage period are below such wages as prescribed by the central government. As of now contributions in respect of employees getting wages up to 70 per day are not payable. Both the employer’s and employee’s contributions are payable by the principal employer for each wage period in respect of the whole or part of which wages are payable to him [Sec. 42].
Method of Payment of Contributions
The ESI Corporation is empowered to make regulations relating or incidental to the payment and collection of contributions payable under the Act [Sec. 43].
Determination of Contributions in Certain Cases
In case no returns, particulars or records are submitted, furnished or maintained in accordance with the provisions of the Act [Sec. 44] or any Social Security Officer or other official of the Corporation is prevented by the principal or immediate employer or any other person [Sec. 45], the Corporation may, by order, determine the amount of contribution payable in respect of employees of the factory or establishment concerned. However, before doing so, the Corporation is required to give the principal or immediate employer or the person in charge of the factory or establishment a reasonable opportunity of being heard [Sec. 45A].
Recovery of Contributions
Any contribution payable under the Act is recoverable as an arrear of land revenue [Sec. 45B].
Other Provisions Relating to Contributions
Other provisions of the Act relating to contributions relate to (a) furnishing of returns and maintenance of registers [Sec. 44], (b) certificate to recovery officer and so on, [Secs.45C–45G], and (c) application of certain provisions of the Income Tax Act [Sec. 45H].
Contribution Period and Benefit Period
The ‘Benefit Period’ corresponding to the ‘Contributions Period’ from 1 April to 30 September is 1 January to 30 June of the following year, and ‘Benefit Period’ corresponding to ‘Contribution Period’ from 1 October to 31 March of the following year is 1 July to 31 December.
The Act provides for the following benefits:
- Sickness benefit
- Maternity benefit
- Disablement benefit
- Dependants’ benefit
- Medical benefit
- Funeral expenses
- Confinement expenses
- Vocational rehabilitation
- Physical rehabilitation
- Unemployment allowances and skill-upgradation training
All the above benefits, except the medical benefit, are paid in cash. Medical benefit is payable in the form of medical treatment for and attendance on insured persons. Prior to 1989, the eligibility conditions for entitlement to various benefits, their rates, duration, and others were prescribed in the Act itself. However, as per the amendments introduced in 1989, the power to determine these was vested in the central government.
An important point to be noted here is that, whereas one of the qualifying conditions for the sickness, maternity and medical benefits is that necessary contributions must have been paid during the prescribed preceding period. The disablement and dependants’ benefits and funeral expenses are available without any such qualifying conditions. As the Employees’ Compensation Act provides for the payment of compensation without requiring any contribution from the employees, the Employees’ State Insurance Act, 1948, also does not require the employees to pay contributions for becoming entitled to disablement and dependants’ benefits and funeral expenses.
The details relating to various benefits under the Act are explained below.
Sickness benefit consists of periodical payments in cash to an insured employee in the event of his sickness certified by a duly appointed medical practitioner or by any other person possessing such qualifications and experience as specified by the ESI Corporation [Sec. 46(a)].
An insured employee is entitled to sickness benefit in respect of his sickness during any benefit period, if during the corresponding contribution period, contributions in respect of him were payable for not less than 78 days. A newly appointed employee, who has a contribution period of less than 156 days, is entitled to claim sickness benefit if he pays contribution for not less than half the number of days available for working in such a contribution period.
Rate of Sickness Benefit
Presently, the sickness benefit is payable at 20 per cent more than the ‘standard benefit rate’ corresponding to his daily average wages (see Table 26.1).
Table 26.1 ‘Standard Benefit Rate’ for Various Daily Wages-Groups Under the ESI Act, 1948
|Average daily wages-group||Standard benefit rate ()|
14 or full average daily wage whichever is less
|28 and above but below 32||
|32 and above but below 36||
|36 and above but below 40||
|40 and above but below 48||
|48 and above but below 56||
|56 and above but below 60||
|60 and above but below 64||
|64 and above but below 72||
|72 and above but below 76||
|76 and above but below 80||
|80 and above but below 88||
|88 and above but below 96||
|96 and above but below 106||
|106 and above but below 116||
|116 and above but below 126||
|126 and above but below 136||
|136 and above but below 146||
|146 and above but below 156||
|156 and above but below 166||
|166 and above but below 176||
|176 and above but below 186||
|186 and above but below 196||
|196 and above but below 206||
|206 and above but below 216||
|216 and above but below 226||
|226 and above but below 236||
|236 and above but below 250||
|250 and above but below 260||
|260 and above but below 270||
|270 and above but below 280||
|280 and above but below 290||
|290 and above but below 300||
|300 and above but below 310||
|310 and above but below 320||
|320 and above but below 330||
|330 and above but below 340||
|340 and above but below 350||
|350 and above but below 360||
|360 and above but below 370||
|370 and above but below 380||
|380 and above||
Sickness benefit is payable to an insured person during the period of sickness, but for not more than 91 days in any two consecutive benefit periods.
Situations Under Which Sickness Benefit is Not Payable
Sickness benefit is not payable for any day on which the employee works, remains on leave, holiday or strike, for which he receives wages [Sec. 63]. However, sickness benefit is to be allowed to him for the days on which he remains on strike if: (i) he is receiving medical treatment and attendance as an indoor patient in any ESI hospital or a hospital recognized by the ESI Corporation for such treatment; (ii) he is entitled to receive extended sickness benefit (see sub-head below) for any of the diseases for which such benefit is admissible; or (iii) he is in receipt of sickness benefit immediately preceding the date of commencement of notice of the strike given by the employees’ union to the management of the factory or establishment concerned. Sickness benefit is also not payable for the first 2 days of sickness following at an interval of less than 15 days after the sickness for which sickness benefits were last paid.
Recipients of sickness benefit are required: (i) to remain under treatment at a dispensary, clinic or other institution provided under the Act and carry out the instructions given by the medical officer or medical attendant in-charge; (ii) while under treatment not to do anything which might retard or prejudice his chances of recovery; (iii) not to leave, without the permission of the medical officer, medical attendant or other authority specified for the purpose, the area in which medical treatment provided under the Act is being given; and (iv) to allow himself to be examined by a duly appointed medical officer or other person authorized by the Corporation [Sec. 64].
Enhanced’ Sickness Benefit
The sickness benefit of an insured employee fulfilling the eligibility conditions may be enhanced for a further period of 7 days in case of vasectomy and 14 days for tubectomy on full wages on the basis of medical certificate.
Extended Sickness Benefit
Insured employees suffering from certain specified diseases (presently 34 in number) are entitled to ‘extended sickness benefit’ for an extended period beyond 91 days of sickness benefit. An insured employee is entitled to ‘extended sickness benefit’ if he has been in continuous employment for a period of 2 years and has paid contributions for 156 days in four consecutive contribution periods. The benefit is extended for 124 days in the first instance, but which may be extended for 2 years during a period of 3 years of insurable employment. The rate of extended sickness benefit is 40 per cent more than the standard benefit rate (see Table 26.1) rounded to the next higher multiple of 5 paise in relation to the average daily wages in the contribution period corresponding to the benefit period in which the employment injury occurs.
Maternity benefit is payable to an insured woman in the form of periodical payments in the case of confinement or miscarriage or sickness arising out of pregnancy, confinement, premature birth of child or miscarriage on the certification of an authority specified by the regulations [Sec. 46(b)].
A woman employee is entitled to maternity benefit in a benefit period if contributions in respect of her were payable for at least 70 days in the two immediately preceding contribution periods.
Rate and Duration of Maternity Benefit
Maternity benefit is payable at double the ‘standard benefit rate’ (see Table 26.1). It is payable for all the days on which the woman employee does not work for remuneration during a period of 12 weeks, of which not more than 6 weeks should precede the date of confinement. If the insured woman dies during or after delivery, leaving behind the child, maternity benefit is payable for the whole of that period, that is 12 weeks, of which not more than 6 weeks should precede the date of delivery. In case the child also dies during this period, maternity benefit is payable for the days up to and including the day of the death of the child. In either case, the amount of maternity benefit is payable to a person nominated by the insured woman in a manner specified in the regulations, and if there is no such nominee, to her legal representative.
In case of miscarriage or medical termination of pregnancy, maternity benefit is payable for 6 weeks following the date of miscarriage or medical termination of pregnancy. However, production of a proof of miscarriage or a medical termination of pregnancy is necessary.
In the event of sickness arising out of pregnancy, confinement, premature birth of a child, miscarriage or medical termination of pregnancy, an insured woman is entitled also to an additional maternity benefit for all the days of sickness on which she does not work for remuneration, subject to the maximum of 1 month. In this case also a proof of sickness is required.
As insured woman and an insured man with respect to his wife are entitled to a medical bonus of 2,500 if confinement occurs at a place where necessary medical facilities under the ESI scheme is not available.
Disablement benefit is payable in the form of periodical payments to an insured person suffering from disablement as a result of employment injury sustained as an employee under the Act and for specified occupational diseases, but a certificate of disablement from an authority specified under regulations in necessary [Secs.46(c) 52(A)]. Disablement benefit is payable both for temporary and permanent disablement.
Insured employees are entitled to disablement benefits from the date of their coming into insurable employment, even if no contribution has been paid.
Rate and Duration of Disablement Benefit
The rates, duration and conditions relating to payment of disablement benefit, whether for temporary or permanent disablement, are to be such as prescribed by the central government [Sec. 51]. The existing ‘full rate’ of disablement benefit is about 75 per cent of the wages.
Disablement benefit for temporary disablement [Sec. 2(21)] is payable at full rate after a waiting period of 3 days till the disablement continues.
Disablement benefit for total permanent disablement [Sec. 2(15B)] is payable at about 75 per cent of the wages, for life (see Appendix of this Book and Second Schedule of the Act).
Disablement benefit for partial permanent disablement [Sec. 2(15A)] is such percentage of the full rate as is proportionate to the percentage loss of earning capacity.
Contracting of occupational diseases as specified in the Third Schedule of the Act is also deemed to be employment injury arising out of and in the course of employment and disablement benefit at the ‘full rate’ is payable accordingly. If the government adds any occupational disease in the list of diseases specified in Schedule III of the Employees’ Compensation Act, 1923 (see Appendix 2 of this book and Third Schedule of the Act), it will also be considered as an occupational disease for the purposes of this Act. The ESI Corporation is also empowered to add other occupational diseases and employments to which they are peculiar in the Third Schedule of this Act. Generally speaking, the occupational diseases specified in the Employees’ Compensation Act, 1923, are the same as those specified under this Act [Sec. 52A, Third Schedule and Schedule III of Employees’ Compensation Act, 1923].
Conditions Under Which Disablement Benefit is Not Payable
Like sickness benefit, a person is not entitled to disablement benefit for temporary disablement on any day on which he works or remains on leave or on a holiday in respect of which he receives wages or on any day on which he remains on strike [Sec. 63]. However, he is entitled to receive the benefit on any day on which he remains on strike if (i) he is receiving medical treatment and attendance as an indoor patient in any ESI hospital or a hospital recognized for the purpose by the Corporation, or (ii) he has been in receipt of the benefit immediately preceding the date of the commencement of the notice of strike served by the employees’ union to the management of the factory or establishment concerned.
Observance of Certain Conditions by the Recipients of Disablement Benefit
The recipient of disablement benefit for temporary disablement is also required: (i) to remain under medical treatment in a dispensary, hospital, clinic or other institution provided under the Act and to carry out the instructions given by the medical officer or medical attendant in-charge; (ii) while under treatment not to do anything which might retard or prejudice his chances of recovery; (iii) not to leave the area in which medical treatment is provided without the permission of the medical officer, medical attendant or other specified authority; and (iv) to allow himself to be examined by a duly appointed medical officer or a person authorized by the Corporation [Sec. 64].
The ESI Corporation also provides for vocational and physical rehabilitation allowances. Both allowances are payable in the case of physical disablement resulting from employment injury. Vocational rehabilitation allowance is the amount of the fee actually paid or 123 per day, whichever is higher, and is payable till the completion of training. The physical disablement allowance is payable at the rate of wages of the employee till he is in the artificial limb centre.
Presumption as to Accident Arising in the Course of Employment
For the purposes of the Act, accident arising in the course of an employee’s employment is presumed, in absence of evidence to the contrary, also to have arisen out of employment [Sec. 51A].
Accidents While Acting in Breach of Regulations
An accident is deemed to arise out of and in the course of an employee’s employment notwithstanding that he was at the time of the accident acting in contravention of the provisions of any law applicable to him, or of any orders given by or on behalf of his employer or that he was acting without instructions from his employer, if (a) the accident would have been deemed so to have arisen had the Act not been done in contravention of the provisions of law or without instruction from his employer, and (b) the Act was done for the purpose of and in connection with employer’s trade or business [Sec. 51B].
Accidents While Travelling in Employer’s Transport
An accident happening while an employee was travelling as a passenger by any vehicle to or from his place of work with the expressed or implied permission of his employer arises out of and in the course of employment (notwithstanding that he is under no obligation to his employer to travel by that vehicle) if the following conditions are satisfied:
- If the accident would have been deemed so to have arisen had he been under such obligation.
- If, at the time of the accident, the vehicle
- was being operated by or on behalf of his employer or some other person by whom it was provided in pursuance of arrangements made with his employer, and
- was not being operated in the ordinary course of public transport service [Sec. 51C].
Accidents While Meeting Emergency
An accident happening to an employee in or about any premises at which he is for the time being employed for his employer’s trade or business arises out of and in the course of his employment, if it happens while he is taking steps, on an actual or supposed emergency at those premises, to rescue, succour or protect persons who are or are likely to be injured or imperilled or to avert or minimize serious damage to property [Sec. 51D].
Commuting Accidents as Employment Injuries
An accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty is deemed to have arisen out of and in the course of employment if nexus between the circumstances, time and place in which the accident occurred and the employment is established [Sec. 51E].
All questions pertaining to accidents resulting in permanent disablement, assessment of the loss of earning capacity, and period of operation of the provisional assessment are to be decided by a medical board constituted in accordance with the regulations. The Corporation is required to refer every case of permanent disablement to the medical board for determination. Where an assessment has been made provisionally, it is to be referred again to the board before the expiry of the period of operation of the provisional assessment.
An appeal against the decision of the medical board lies with a Medical Appeal Tribunal with a further right of appeal to the Employees’ Insurance Court. An appeal against the decision of the medical board may also be filed directly to the Employees’ Insurance Court.
A decision of a medical board or Medical Appeal Tribunal may be reviewed if it shows that the earlier decision was given in consequence of non-disclosure or misrepresentation of a material fact. An assessment regarding extent of disablement may also be reviewed if there has been a substantial and unforeseen aggravation of the results of the inquiry since the making of the last assessment. Except with the leave of a Medical Appeal Tribunal, an assessment is to be reviewed only if an application has been made within 5 years of a final assessment and 6 months from the date of provisional assessment, as the case may be [Secs.54,54A,55].
Dependants’ benefit is payable in the form of periodical payments of an insured person who dies as a result of employment injury sustained as an employee under the Act [Sec. 46(d)].
The dependants’ benefit is payable to: (i) a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted daughter; (ii) a widowed mother, and (iii) if wholly dependent on the earnings of the insured person at the time of his death, a legitimate son or daughter who has attained the age of 25 years and is infirm. In case there are no such dependants, the benefit is payable to other dependants [Sec. 2(6A)(i)(ia)(ii), and for other dependants Sec. 2(6A),(iii), Sec. 52].
Dependants’ benefit is payable to the dependants of the deceased employee even when he has paid no contribution during his insurable employment.
Rate and Duration of Dependants’ Benefit
Dependants’ benefit is payable at such rates and for such period and subject to such conditions as may be prescribed by the central government [Sec. 52]. It is paid for life to the widow or till her remarriage, to the dependent children till the age of 25 years and to the dependent parents for life. The benefit is shareable in fixed proportion. The full rate of the benefit is about 75 per cent of the wages.
Review of Dependants’ Benefit
Any decision awarding dependants’ benefit may be reviewed at any time by the Corporation if it is satisfied that the decision was given in consequence of non-disclosure or misrepresentation by the claimant or any other person of a material fact or that the decision is no longer in accordance with the Act due to any birth or death or due to marriage, re-marriage or end of infirmity or attainment of the age of 25 years by the claimant. On the basis of the review, the Corporation may direct that dependants’ benefit be continued, increased, reduced or discontinued, depending on the nature of the case [Sec. 55A].
Medical benefit is payable in the form of medical treatment for and attendance on insured persons. The Corporation may, at the request of the appropriate government and subject to conditions laid down in the regulations, extend the medical benefit to the family of an insured person also [Secs.46(e),(2)].
An insured person or a member of his family (where the benefit has been extended to the family) is entitled to the medical benefit if his condition requires medical treatment and attendance. A person is entitled to the benefit during any period for which contributions are payable in respect of him or in which he is qualified to claim sickness benefit or maternity benefit, or is in receipt of such disablement benefit which does not disentitle him to medical benefit under the regulations. However, a person in respect of whom contribution ceases to be payable under the Act may be allowed medical benefit for such period and of such nature as may be provided under the regulations [Sec. 56(1),(3)].
An insured person who ceases to be in insurable employment on account of permanent disablement will continue to receive medical benefit till the date on which he would have vacated the employment on attaining the age of superannuation had he not sustained such permanent disablement, but he has to fulfil the contributory and other conditions as prescribed by the central government. An insured person who has attained the age of superannuation, a person who has retired under a voluntary retirement scheme or takes premature retirement and his spouse are also eligible to receive medical benefits, subject to the payment of contribution and such other conditions as prescribed by the central government [Sec. 56(3)].
Presently, a superannuated person who has been in insurable employment continuously for 5 years before reaching the age of superannuation and a disabled person are entitled to medical care for himself and spouse on payment of 10 as monthly contribution.
Form of Medical Benefit
Medical benefit may be given in the form of out-patient treatment and attendance in a hospital or dispensary, clinic or other institution or by visits to the home of the insured person or treatment as in-patient in a hospital or other institution [Sec. 56(2)].
Scale of Medical Benefit
An insured person and, where extended, the family members are entitled to receive medical benefit only of such kind and on such scale as may be provided by the state government or by the Corporation. They do not have the right to claim any medical treatment other than that provided by the dispensary, hospital, clinic or other institute to which they are allotted or that is provided by the regulations. An insured person or a member of his family is not entitled to claim reimbursement from the Corporation for any expenses incurred in respect of any medical treatment, except that authorized under the regulations [Sec. 57].
Provision of Medical Treatment by State Government
The state government is required to provide for medical, surgical and obstetric treatment for the insured persons, and their families (where the benefit has extended to the families). The state government may, with the approval of the Corporation, arrange for their medical treatment at clinics of medical practitioners on an agreed scale. In case the incidence of sickness benefit payment to insured persons in any state is found to exceed the all-India average, the amount of such excess is to be shared between the Corporation and the state government in a proportion fixed by agreement between them. The Corporation may, however, waive the recovery of the whole or any part of the share which is to be borne by the state government.
The Corporation may enter into agreement with a state government with regard to the nature and scale of the medical treatment to be provided to the insured persons and their families and for sharing of cost of the same. In the event of violation of the agreement, the sharing is to be determined by an arbitrator (who is or has been a judge of the High Court) appointed by the Chief Justice of India. The award of the arbitrator will be binding.
The state government may, in addition to the ESI Corporation with the previous approval of the central government, establish organization to provide certain benefits to employees in case of sickness, maternity and employment injury. Any reference to the state government under the Act will also include a reference to the organization. The organization shall have prescribed structure and shall discharge functions, exercise powers and undertake such activities as may be prescribed [Sec. 58].
Establishment and Maintenance of Hospitals and Dispensaries by the Corporation
The Corporation may, with the approval of the state government, establish and maintain in a state, hospitals, dispensaries and other medical and surgical services for the benefit of the insured persons and their families. Similarly, the Corporation is empowered to enter into agreement with any local authority, private body or individual in regard to the provision of medical treatment and attendance for insured persons and their families in any area and sharing the cost. The ESI Corporation may also enter into agreement with any local authority, local body or private body for Commissioning and running ESI hospitals through third party participation for providing medical treatment and attendance to insured persons and to their families [Sec. 59].
Provision of Medical Benefit by the Corporation in Lieu of the State Government
The Corporation is empowered to undertake the responsibility for providing medical benefit to insured persons or their families in consultation with the state government concerned. In such a case, the state government is to share the cost of the benefit in a proportion agreed upon between them [Sec. 59A].
Establishment of Medical Colleges and Institutes
The ESI Corporation may establish medical colleges, nursing colleges and training institutes for its para-medical staff and other employees with a view to improving the quality of services provided under the ESI scheme [Sec. 59B].
Funeral expenses comprise payment towards the expenditure on the funeral of an insured person who has died. It is payable to the eldest surviving member of the deceased person’s family. Where the insured person did not have a family or was not living with his family, the benefit is payable to the person who actually incurs the expenditure of the funeral.
The amount of funeral benefit is not to exceed the amount prescribed by the central government. The maximum amount of funeral expenses is presently 5,000. A claim for payment of funeral expenses must be made within 3 months of death of the insured person or within such an extended period as allowed by the Corporation or an officer or authority of the Corporation authorized to do so [Sec. 46(1)].
Unemployment Allowance (Rajiv Gandhi Shramik Kalyan Yojna)
The scheme, which was adopted in 2005, provides for payment of unemployment allowance to those insured employees who cease to continue in the insurable employment on account of closure of establishment, retrenchment or permanent invalidity due to non-employment injury. The qualifying conditions for eligibility to the benefit are: (i) having remained insured prior to the loss of insurable employment, (ii) having paid contribution for 3 years preceding the date of loss of employment, and (iii) having been entitled to sickness benefit for the period corresponding to the immediately preceding four contribution periods. The daily rate of unemployment allowance is the ‘standard benefit rate’ corresponding to the average daily wage of the insured employee during four contribution periods preceding the date of unemployment. It is payable to a maximum period of 12 months during lifetime. Unemployment allowance cannot be combined with sickness benefit, maternity benefit or disablement benefit for temporary disablement. The scheme also provides for skill-upgradation training for a maximum period of 6 months. The insured employee and his or her dependent family members are also entitled to medical care for a period of 1 year from the date of unemployment.
The ESI (Amendment) Act, 2010, also contains provisions relating to schemes for beneficiaries other than insured employees. The Act empowers the central government to frame schemes for other beneficiaries and their family members for providing medical facilities for them in hospitals managed by the ESI Corporation in any area which is underutilized on payment of user charges [Secs.73A–73F].
MISCELLANEOUS PROVISIONS PERTAINING TO BENEFITS
Benefits Not to Be Combined
An insured person is not entitled to receive for the same period (a) both sickness benefit and maternity benefit; or (b) both sickness benefit and disablement benefit for temporary disablement; or (c) both maternity benefit and disablement benefit for temporary disablement. In case a person is entitled to more than one of the benefits noted above, he is entitled to choose the benefit which he wants to receive [Sec. 65].
Persons Not Entitled to Benefits in Certain Cases
A person is not entitled to sickness benefit or disablement benefit for temporary disablement in respect of any day on which he works and receives wages [Sec. 63].
Benefit Payable Up to and Including the Day of Death
Where a person dies during any period in which he is entitled to cash benefit under the Act, the amount of the benefit up to and including the day of his death is to be paid to any person nominated by the deceased person in writing. In case there is no such nomination, it is to be paid to the heir or legal representative of the deceased person [Sec. 71].
Benefit Not Assignable or Attachable
The right to receive payment of any benefit under the Act is neither transferable nor assignable. No cash benefit payable under the Act is liable to attachment or sale in execution of any decree or order of any court [Sec. 60].
Bar of Benefits Under Other Enactments
In case a person is entitled to any of the benefits provided by the Employees’ State Insurance Act, he is not authorized to receive any similar benefit admissible under the provisions of any other enactment [Sec. 61]. Thus, a person is not authorized to get compensation under the Employees’ Compensation Act, 1923, or a maternity benefit under a Maternity Benefit Act, 1961, if he or she is entitled to relevant benefits under the Employees’ State Insurance Act.
Persons Not to Commute Cash Benefits
No person is entitled to commute for a lump sum any disablement benefit except in a manner provided under the regulations [Sec. 62].
Repayment of Benefit Improperly Received
Where a person has received a benefit or payment under the Act without being legally entitled to the same, he is liable to repay to the Corporation the value of the benefit or the amount of such payment. In case of the death of the person, his representative is liable to repay the same from the assets of the deceased in his hands. The value of the benefits other than cash payments is to be determined by an authority specified in the regulations. The amount may be recovered as an arrear of land revenue [Sec. 70].
Liability of Owner or Occupier of Factories, and Others for Excessive Sickness Benefit
The owner or occupier of a factory or establishment is liable to pay to the Corporation an amount of extra expenditure incurred as sickness benefit if, on inquiry, it is shown that incidence of sickness among insured persons is due to his default or neglect in observing statutory health regulations or maintaining sanitary working conditions. An owner of tenements or lodgings occupied by insured persons is also liable to pay the amount for a similar default or neglect under any enactment [Sec. 69].
Employer Not to Reduce Wages, and so forth
An employer is not authorized, directly or indirectly, to reduce the wages of an employee by reason only of his liability for any contribution payable under the Act. He is also not allowed to discontinue or reduce benefits payable to the employee under the conditions of his service even if the benefits are similar to those conferred by the Act, except in accordance with the regulations [Sec. 72].
Employer Not to Dismiss or Punish Employee During Period of Sickness, Leave, and so on
An employer is not allowed to dismiss, discharge or reduce, or otherwise punish an employee during the period the employee is in receipt of sickness benefit or maternity benefit. Besides, except as provided under regulations, he is not authorized to inflict a similar punishment on an employer during the period he is in receipt of disablement benefit for a temporary disablement or is under medical treatment for sickness or is absent from work as a result for illness duly certified in accordance with the regulations to arise out of pregnancy or confinement rendering the employee unfit for work. A notice of dismissal or discharge to reduction thus given to the employee during such a period is neither valid nor operative [Sec. 73].
Extension of Medical Care of Families of Insured Persons
The ESI Corporation, when its funds so permit, may provide or contribute towards the cost of medical care for the families of insured persons [Sec. 99].
The administration of the Employees’ State Insurance Scheme primarily vests in the Employees’ State Insurance Corporation appointed by the central government. The Employees’ State Insurance Corporation is a body corporate having perpetual succession and a common seal and can sue by that name. [Sec. 3]. Besides, the Act also provides for the constitution of a standing committee of the Corporation and a medical benefit council, and appointment of principal officers, inspectors and adjudication authorities.
Employees’ State Insurance Corporation
The composition of the ESI Corporation is shown in Box 26.2.
COMPOSITION OF THE ESI CORPORATION
The ESI Corporation consists of the following members:
A chairman, appointed by the central government
A vice-chairman, appointed by the central government
Not more than five persons appointed by the central government
One person each representing each of the states in which the Act is in force appointed by the state government concerned
One person appointed by the central government to represent the union territories
Ten persons representing employers appointed by the central government in consultation with employers’ organizations recognized for the purpose by the central government
Ten persons representing employees appointed by central government in consultation with employees’ organizations recognized for the purpose by the central government
Two persons representing the medical profession appointed by the central government in consultation with organizations of medical practitioners recognized for the purpose by the central government
Three members of parliament (two from the Lok Sabha and one from Rajya Sabha), elected by the members of the houses concerned
The Director General of the Corporation (ex-officio) [Sec. 4].
Term of Office
The term of office of members of the Corporation, except of those referred to in clauses (a), (b), (c), (d), (e), and ex-officio member (j), is 4 years from the date of the notification of their appointment or election. An out-going member of the Corporation is eligible for re-appointment or re-election, as the case may be [Secs.5.6].
The central government, in consultation with the ESI Corporation, is empowered to appoint the Director General of the Corporation and the financial Commissioner. The director general will be the chief executive officer of the Corporation. Both the director general and financial Commissioner are whole-time officers of the Corporation and are to hold office for a period not exceeding 5 years, but they are eligible for re-appointment. They will receive such salaries and allowances as prescribed by the central government. The central government may remove the director general or the financial Commissioner from office any time, and is required to do so if their removal from office is recommended by a resolution of the Corporation passed at a special meeting called for the purpose and supported by the votes of not less than two-thirds of the total strength of the Corporation [Sec. 16].
The director general and the financial Commissioner are to exercise such powers and discharge such duties as may be prescribed. They are also required to perform such other functions as specified in the regulations [Sec. 23].
The ESI Corporation may employ other officers and staff for the efficient transaction of its business, but for the creation of any post carrying salary exceeding the amount prescribed by the central government, the sanction of the central government will be necessary [Sec. 17].
Powers and Duties of the Corporation
As said earlier, the administration of the scheme vests in the Corporation. The Corporation has extensive powers to make regulations for the administration of its affairs and for carrying into effect the provisions of the Act [Sec. 97]. In addition to the scheme of benefits specified in the Act, the Corporation may also promote measures for the improvement of the health and welfare of insured persons and for the rehabilitation and re-employment of insured persons who have been disabled or injured [Sec. 19]. As already said, the Corporation may also enhance the scale of any benefit admissible under the Act if its funds so permit. The Act also confers upon the Corporation wide powers in financial matters, that is, accepting grants, donations and gifts, holding property, raising loans, and making investments [Secs.26,29]. The Corporation is empowered to appoint its officers and staff, other than the principal officers [Sec. 17].
The Corporation may appoint regional boards, local committees, and regional and local medical benefit councils in areas specified under the regulations, and may also delegate to them specified powers and functions [Sec. 25]. Accordingly, regional boards, local committees and local medical benefit councils have been set up in different parts of the country.
Supersession of the Corporation
The Act empowers the central government to supersede the Corporation if, in its opinion, the Corporation persistently makes default in performing its statutory duties or abuses its power. An order of supersession is to be made by notification in the official gazette. However, before issuing a notification superseding the Corporation, the central government is required to give a reasonable opportunity to the Corporation to show cause why it should not be superseded and to consider the explanation or objections of the Corporation. All members of the Corporation are deemed to have vacated their offices from the date the notification of supersession is published. On superseding the Corporation, the central government is required to submit a report of action taken before the parliament not later than 3 months from the date of the notification superseding the Corporation. When the Corporation is superseded, the central government is required to constitute immediately a new Corporation in accordance with the provisions of the Act [Sec. 21].
Employees’ State Insurance Fund
The Act provides for the creation of the Employees’ State Insurance Fund consisting of contributions and grants, donations or gifts from the central or state government, local authority or any private body or individual. The fund is to be held and administered by the Corporation. The account is to be operated by such officers as authorized by the standing committee with the approval of the Corporation. The Act specifies the purposes for which the fund may be expended. These are shown in Box 26.3.
PURPOSES FOR WHICH ESI FUND MAY BE SPENT
Payment of benefits and provision of medical treatment and attendance
Payment of fees and allowances to members of the Corporation, standing committee, medical benefit council, regional boards, local committees, and regional and local medical benefit council
Payment of salaries and allowances, gratuity, pensions and contributions to provident or other benefit fund for the officers and staff of the Corporation
Establishment and maintenance of hospitals, dispensaries or other institutions for provision of medical and other ancillary services
Payment of contributions to state government, local authority or any private body or individual towards the cost of medical treatment or attendance
Defraying the cost of auditing the accounts of the Corporation and the valuation of its assets and liabilities
Defraying the cost of the Employees’ Insurance Courts set up under the Act
Payment of any sum under any contract entered into by the Corporation, the standing committee, or duly authorized officer
Payment of any sum under any decree, order or award of any court or tribunal against the Corporation or its officers or staff for any Act done in the execution of duty or under a compromise of settlement of any suit or legal proceeding or claim instituted or made against the Corporation
Defraying the cost and other charges of instituting or defending any civil or criminal proceedings arising out of any action taken under the Act
Defraying expenditure on measures for the improvement of the health and welfare of insured persons and for the rehabilitation and re-employment of insured persons who have been disabled or injured
Such other purposes as may be authorized by the Corporation with the previous approval of the central government [Secs.26,28].
The Act also provides for the constitution of a standing committee of the Corporation consisting of the following members:
- A chairman appointed by the central government.
- Three members of the Corporation appointed by the central government.
- Three members of the Corporation representing three state governments specified from time to time by the central government.
- Eight members elected by the Corporation in the following manner
- Three members from among the members of the Corporation representing employers
- Three members from among the members of the Corporation representing employees
- One member from among the members of the Corporation representing the medical profession
- One member from among the members of the Corporation elected by Parliament
- The Director General of the Corporation (ex-officio) [Sec. 8].
The term of office of the elected members is two years from the date on which the election is notified. Appointed members remain in office during the pleasure of the central government [Sec. 9].
Subject to the general superintendence and control of the Corporation, the standing committee administers the affairs of the Corporation and may exercise any of the powers and perform any of the functions of the Corporation. It is, however, required to submit all cases and matters specified in the regulations for the consideration and decision of the Corporation. The standing committee may, in its discretion, submit any other matter for decision of the Corporation [Sec. 18]. The standing committee may be superseded in the same manner as the Corporation [Sec. 21].
The composition of the Medical Benefit Council is shown in Box 26.4.
COMPOSITION OF THE MEDICAL BENEFIT COUNCIL
The Director General, the ESI Corporation ex-officio as chairman
The Director General, Health Services ex-officio as co-chairman
The Medical Commissioner of the Corporation (ex-officio)
One member representing each of the states in which the Act is in force by the state government concerned
Three members representing employers appointed by the central government in consultation with such organizations of employers as recognized for the purpose by the central government
Three members representing employees appointed by the central government in consultation with such organizations of employees as recognized for the purpose by the central government
Three members (of whom not less than one must be a woman), representing the medical profession, appointed by the central government in consultation with such organizations of medical practitioners as recognized for the purpose by the central government.
The term of office of members other than those in clauses (1) to (4) is 4 years from the date on which their appointment is notified. The Deputy Director General Health Services, and members representing the state governments hold office during the pleasure of the government appointing them [Sec. 10].
The duties of the medical benefit council are as follows:
- To advise the Corporation and standing committee on matters relating to the administration of medical benefit, the certification for purposes of the grant of benefits and other connected matters
- To make investigation, in the prescribed manner, in relation to complaints against medical practitioners in connection with medical treatment and attendance
- To perform such other duties in connection with medical treatment and attendance as specified in the regulations [Sec. 22].
The ESI Corporation is empowered to appoint social security officers for enquiring into the correctness of particulars furnished in the returns submitted by employers and for ascertaining the compliance of the provisions of the Act. The social security officer is empowered to (i) require the employer to furnish necessary information; (ii) enter the office, establishment or other premises of the employer and require the production of relevant documents and examine them; (iii) examine the employer, agent or other persons in the establishments; (iv) take copies of registers, account books or other documents and their extract; and (v) exercise such powers and perform such duties as prescribed by the Corporation [Sec. 45].
ADJUDICATION OF DISPUTES AND CLAIMS
The state government is required to constitute an Employees’ Insurance Court for a specified area. The number of judges to be appointed in a court is to be decided by the state government. The Act specifies in detail the powers and functions of the court, institution of proceedings and their commencement, and appearance of the parties. The decision of the court in regard to the matters specified in the Act is final, but an appeal from an order of the court will lie with the High Court if it involves a substantial question of law. The ESI court, on its own, may also submit any question of law for the decision of the High Court [Secs.74–83].
- Knowingly making false statement or false representation for the purpose of (a) causing any increase in payment or benefit or (b) causing any payment or benefit not permissible under the Act or (c) avoiding any payment required under the Act or (d) enabling any other person to avoid such payment is punishable with imprisonment up to 6 months or with fine up to 2,000 or with both. If an insured person is convicted for this offence, he is not entitled to any cash benefit under the Act for a period prescribed by the central government [Sec. 84].
- Failure to pay employees’ contribution deducted by him from employees’ wages is punishable with imprisonment from one to 3 years and a fine of 10,000. Failure to pay any other contribution is punishable with imprisonment from 6 months to 3 years and fine of 5,000 [Sec. 85(a)].
- The following offences are punishable with imprisonment up to 1 year or with fine which may extend to 4,000 or with both:
- Deduction from employee’s wages the employer’s contribution
- Reduction of wages or any privilege or benefits admissible to an employee [Sec. 72]
- Wrongfully dismissing, discharging, reducing or otherwise punishing an employee [Sec. 73]
- Failing or refusing to submit return required by regulations or making false return
- Obstructing an inspector or other official of the Corporation in the discharge of his duties
- Contravention of or non-compliance with any requirements of the Act, rules, or regulations in respect of which no special penalty is provided [Sec. 85].
- If a person, who has been convicted of an offence under the Act, commits the same offence, he is punishable with imprisonment up to 2 years or with fine of 5,000, for every such subsequent offence, and where the offence is the failure by employer to pay any contribution, he is punishable with imprisonment from two to 5 years and a fine of 25,000 for every such subsequent offence [Sec. 85A].
Power of Central Government to Make Rules
The central government, after consultation with the ESI Corporation, may make rules for the purpose of giving effect to the provisions of the Act, but these are not to be inconsistent with its provisions. The Act specifies a number of matters on which the central government can make rules [Sec. 95].
Power of State Government to Make Rules
The state government is also empowered to make rules on certain specified matters, for instance, constitution of Employees’ Insurance Courts and related matters, establishment of hospitals, dispensaries, and others, the scale of medical benefit; and conditions of service of the staff in hospitals, dispensaries, and so on [Sec. 96].
Power of Corporation to Make Regulations
The Act empowers the ESI Corporation to make regulations in relation to a number of matters specified in the Act [Sec. 97].
Position of Expansion of the Scheme
Initially implemented in the cities of Kanpur and Delhi (24 February, 1952), the Act was gradually applied to other cities of the country. The coverage of the Act expanded substantially during the course of time. The number of centres, factories and establishments, employees and beneficiaries covered under the Employees’ State Insurance Scheme from 1962 to 2007 is shown in Table 26.2
Table 26.2 Number of Centres, Factories and Establishments, Employees and Beneficiaries Covered Under the ESI Scheme (1962–2007)
Source: Government of India, Ministry of Labour. Various issues of Pocket Book of Labour Statistics; ESI Corporation, Annual Reports; http://labourbureau.nic.in
CHART 26.1: Number of Insured Employees and Beneficiaries Under the ESI Scheme (1998–2007)
The figures in Table 26.2 show that the number of centres covered under the scheme has continuously been on increase. In 1962, the scheme covered only 132 centres, but in 2007, the number of centres covered was 737, thus recording more than five times increase. The number of factories or establishments covered was about 14,000 in 1962, which increased to about 141,000 in 1992, stood at above 200,000 during 1997–2007, crossing 300,000 marks in 2006 and 2007. Originally, the Act applied only to factories employing 20 or more persons, but later it started covering factories using power and employing 10 or more persons. An amendment of the Act in 2010 has extended its application to every factory, whether using power or not, and employing 10 or more persons. In exercise of the powers vested in the government to extend its application to other classes of establishments, the Act has been applied to a number of other establishments such as shops, theatres, cinemas, hotels, restaurants, motor transport undertakings and newspaper establishments employing 20 or more persons in a few states.
The number of employees covered was about 19 lakh in 1962, which increased to about 40 lakh in 1972 and more than 63 lakh in 1982. Since then it has varied between 60 lakh and 92 lakh. Between 1982 and 2007, there have been fluctuations in the number of employees covered. The decline has been due mainly to crossing the wage limit coverage by a number of employees, closures of factories, retirements and quitting of jobs by employees. With the enlargement of the applicability of the Act, more and more employees will be coming within the fold of the scheme. The number of insured employees has always been a little more than that of employees covered. This has been the result of extending medical benefit to superannuated and infirm employees on payment of prescribed contributions.
The number of beneficiaries has appreciably increased during the course of years. In 1962, the number of beneficiaries was a little over 65 lakh, but it increased to over 3.5 crores in 1998 and varied between 3 and 3.5 crores during 1999–2006. In 2007, it substantially increased to about 4 crores.
Although the coverage of the ESI scheme has expanded since its adoption more than 50 years ago, the progress cannot be said to be satisfactory in view of the needs of millions of employees even in the organized sector, who are still outside the purview of the Act, not to speak of those in the unorganized sector.
Expenditure on Various Benefits
The figures relating to expenditure on various benefits under the scheme from 1984 to 2007 have been given in Table 26.3.
Table 26.3 Amount of Various Benefits Paid Under the ESI Scheme and Their Percentages of Total Amount Paid (1984–2007)
Source: Compiled on the basis of data published in Government of India, Ministry of Labour. Various issues of Pocket Book of Labour Statistics; ESI Corporation, Annual Reports; http://labourbureau.nic.in
CHART 26.2: Expenditure on Various Benefits Under the ESI Scheme (1997, 2007)
Table 26.3 shows that expenditure on medical benefit has constituted a major proportion of total expenditure on benefits. This is natural as the ESI scheme is primarily a health insurance scheme. In 1984 and 1988, expenditure on medical benefit accounted for around 50 per cent of the total expenditure on the benefits, but since 1990 onwards, it substantially increased generally varying between 65 and 74 per cent of the total expenditure on benefits. This increase has mainly been due to extension of the medical benefit to superannuated employees and the family members of the insured ones. The amending Act of 2010 envisages further expansion of medical benefit by way of establishment of medical and nursing colleges and training institutes and empowering the central government to frame schemes making medical services available to others and their family members in underutilized areas on payment of user charges. Such facilities have been made available since 2000 to below poverty line families covered under the Rashtriya Swasthya Bima Yojana.
Of the total expenditure on cash benefits, sickness benefit accounted for the maximum expenditure, being nearly 30 per cent in 1984 and 23 per cent in 1988 and which varied between 10 and 15 per cent between 1990 and 2004, and declined to less than 9 per cent during 2005–07. The percentage would be higher if expenditure on extended sickness benefit is also taken into account, which has generally constituted about 2 per cent of the total expenditure on benefits.
Next in order has been expenditure on benefit for total permanent disablement (between 7 and 10 per cent), benefit for temporary disablement (between 3 to 8 per cent), dependants’ benefit (between 3 to 5 per cent), and maternity benefit (remaining less than 3 per cent in all the years under reference). The amount of maternity benefit paid per confinement has been lower than that paid per claim under the Maternity Benefit Act, 1961 (see Chapter 25, Table 25.2). However, under the ESI scheme, women employees are entitled to medical benefit in addition, but no such facility is available under the Maternity Benefit Act.
The Act, which originally applied to certain categories of factories was subsequently extended to factories using power and employing 10 or more persons and those not using power and employing 20 or more persons. Only in 2010 was the Act made applicable to factories employing two or more persons, whether they use power or not. The government has been empowered to extend the application of the Act to any other establishments—industrial, commercial, agricultural or otherwise. A few states have extended the Act to a few categories of establishments. However, even till today, the Act has not been applied to many other establishments or industries such as mining, plantations and various other categories of employments. The Act has empowered the central government to prescribe the wage-ceiling for entitlement of the benefits under the Act. Presently, this ceiling is 15,000 per month. Many employees have crossed this wage limit and as such they are deprived of the benefit of the scheme. The progress regarding application of the Act enforced more than half a century ago has so far been slow and sporadic, thus, depriving a large section of workers of the benefit of the integrated scheme.
Burden on Small Employers
The Act applies even to factories employing 10 or more persons, and once it becomes applicable to such a factory, it is to continue to be covered despite a decrease in the number of employees. The contributory and other conditions apply to small and big employers alike. Very often, the small employers find it difficult to pay their own and employees’ contributions whereas the big employers bear the burden without much difficulties. As such, there is a case for establishing graduated contributory system based on slabs of size and paying capacity of different categories of establishments. As many employers owning establishments similar to those in which the Act has been applied are outside the purview of the requirements of the Act, the employers covered under the Act find themselves in a disadvantageous position. To reduce this disparity, there is the desirability of establishing a national fund under the Employees’ Compensation Act, 1923, and Maternity Benefit Act, 1961 (see Chapters 24 and 25), to which both the employers and employees should be obligated to pay certain percentage of wages as contributions.
The cost of the medical benefit is shared by the ESI Corporation and the state governments in a specified proportion which is one-eighth of the expenditure at present and the implementation of the scheme is primarily the responsibility of the state governments. Variations are observed in the implementation of the scheme, for instance, strength of medical and para-medical personnel, areas covered by ESI dispensaries, number of patients attended, availability of medicines and release of states’ share of the cost, and so on. All these have resulted in disparities in the quality and scale of medical benefits in different states.
Possibility of Misuse of Sickness Benefit
Although the sickness benefit under the scheme compensates the wage loss suffered by insured employees the extend of only 50 per cent, a liberal implementation of the scheme combined with inadequate medical facilities has often led to its misuse. There have been numerous instances where employees get sickness benefit for harvesting, marriage and for other personal work. The frequency of sickness benefit is substantially high during harvesting and marriage seasons and on the occasions of festivals leading to increase in absenteeism. This has an adverse effect on production. The scheme has further been liberalized with the introduction of the ‘extended sickness benefit’ which can extend up to two years, and enhanced sickness benefit on full wages, for vasectomy and tubectomy.
Complex Administrative Arrangement
The major responsibility for the administration of the Act lies with the ESI Corporation, but other bodies, personnel and even the central and state governments are potently involved in its administration. Apart from the ESI Corporation, the standing committee, medical benefit council, the director general of the Corporation, insurance Commissioner, medical Commissioner, inspectors, (now Social Security Officers) regional and other committees have also to play active roles. The recent amendments of the Act have conferred upon the central government wide powers in various areas such as determination of the rates and duration of benefits, appointment of the members of the Corporation, other bodies and principal officers, application of the Act to new areas and establishments, fixation of wage ceiling for entitlement to the benefits, and so forth. Similarly, the state governments have also to play important roles relating to the constitution of Employees’ Insurance Courts, provision of medical benefit and extension of the Act to new establishments. All these have resulted in complex administrative system which often tells upon the effectiveness of the operation of the scheme.
Low Standards of Benefits
Except the funeral expenses, all other cash benefits under the scheme are linked to employees’ wages which are low in many establishments covered under the Act. As such, the scales of the benefits are bound to be low. As shown in Table 25.2 (Chapter 25) average maternity benefit paid under the scheme has been lower than that under the Maternity Benefit Act, 1961. On calculation, it is also found that in many cases the disablement and dependants’ benefits paid under the scheme have been less favourable than the amount of compensation paid under the Employees’ Compensation Act, 1923.
RECOMMENDATIONS OF THE FIRST NCL (1969)
After studying the working of the Act, the first National Commission on Labour made the following recommendations:
- Full-fledged medical colleges should be started at places where there are large and well-equipped ESI hospitals, either directly by the ESI Corporation or by the state with help from the Corporation. In case the Corporation contributes financially to medical training, the trainees should be under an obligation to serve the ESI scheme for a specified period. The ESI hospitals should also be utilized for the training of nurses and other para-medical staff.
- Surplus beds, if any, in ESI hospitals may be made available for the use of the general public, on payment by state governments.
- The wage limit for exemption from payment of employees’ contribution should be raised.
- A scheme of ‘no-claim bonus’ for insured persons who do not claim any benefit during a year should be evolved.
- The constitution of regional boards should be amended for giving increased representation to employers and employees and for nomination by the ESI Corporation of chairman of the boards by rotation. The boards should be given adequate powers to enable them to exercise effective control on the working of the scheme in the respective regions.
- The ESI Corporation should make a suitable contribution to the National Safety Council as part of its programme of integrated preventive and curative services.2
The Employees’ State Insurance (Amendment) Act, 2010, has incorporated some of the recommendations of the Commission, especially in regard to the establishment of hospitals, medical colleges and training institutes, and extending medical services to the public on payment of charges.
RECOMMENDATIONS OF THE SECOND NCL (2002)
The recommendations of the second NCL (2002) in regard to ESI Scheme have been mentioned in some detail in Chapter 23. The important recommendations of the Commission in this area are: (i) the ESI Corporation should take a decision to delink employment injury and maternity benefits from the medical benefits; (ii) immediate steps should be taken to extend employment injury and maternity benefits throughout the country; (iii) casual and contract workers may be covered for limited benefits at reduced rates; (iv) the management of the ESI scheme should be professionalized; and (v) payment of funeral expenses should be substituted by the term ‘emergency expenses’ so as to include care of the sick and elderly member.3
The implementation of the recommendations of the Commission is still being awaited.
- The ESI Act, 1948, is mainly the outcome of the recommendations of Professor Adarkar’s Committee and the deliberations at the Indian Labour Conference. The Act marks the beginning of an integrated scheme of social insurance, covering such contingencies as health hazards, sickness, disablement, death and maternity with primary emphasis on health insurance. The Act has been amended several times since its adoption in 1948. A major amendment was introduced in 2010.
- The Act applies to factories employing 10 or more persons, but the government is empowered to extend the application of the Act to other industrial, commercial, agricultural or other categories of establishments. In pursuance of this power, the government has extended its application to hotels, restaurants, cinemas, road motor transport, newspaper establishments and primary educational institutions employing 20 or more persons in certain states. The existing wage limit for coverage under the Act is 15,000 per month.
- The ESI scheme is primarily a self-financing health insurance scheme, the fund which is raised from the contributions of the employees covered and their employers as fixed percentage of wages. Presently, the insured employees contribute 1.75 per cent of their wages, and their employers 4.75 per cent of the wages of the insured employees. Employees drawing wages up to 70 a day are exempted from paying any contribution. The bulk of the finance is raised by the ESI Corporation, but the state governments are required to contribute one-eighth of the expenditure on medical benefit within a per capita ceiling of 1,200 per insured person per annum.
- The scheme provides for medical benefit, sickness benefit, extended sickness benefit, maternity benefit, disablement benefit, dependants’ benefit, confinement and funeral expenses, unemployment allowance and rehabilitation benefits. Of these, all the benefits, except medical benefit, is paid in cash. Medical benefit has been progressively extended to superannuated employees and the family members of the insured employees. The scheme lays down in detail, the eligibility conditions, nature, scale and rate and duration of various benefits.
- The administration of the Act is primarily the responsibility of the ESI Corporation. The Standing Committee of the Corporation, the Medical Benefit Council and the principal officers including the director general, the financial Commissioner and the medical Commissioner also play important roles in the administration of the scheme. The ESI Corporation, which is a tripartite body, has its regional, sub-regional and divisional offices in various parts of the country. The ESI Corporation discharges its functions under the overall control of the central government. The major responsibility for the implementation of medical benefit rests with the state governments.
- Certain deficiencies and limitations observed in the course of operation of the scheme are: (i) inadequate coverage, (ii) burden on small employers, (iii) disparities in the scale of medical benefit in the states, (iv) frequent misuse of sickness benefit, (v) complexity of administration and (iv) low standard of benefits.
QUESTIONS FOR REVIEW
- Explain the objectives and scope of the ESI Act, 1948. How are the schemes under the Act financed?
- Describe the cash benefits available under the ESI Scheme along with the eligibility conditions, rates and duration of the benefits.
- Explain the nature, scale and duration of medical benefit under the ESI Act, 1948, along with eligibility conditions and persons entitled to the benefit.
- Explain the composition, powers and functions of (i) ESI Corporation, (ii) Standing Committee and (iii) Medical Benefit Council.
- Compare the provisions of the ESI Act, 1948, relating to disablement and dependants’ benefits with those of the Employees’ Compensation Act, 1923, in regard to compensation for disablement and death.
- In what ways the provisions of the ESI Act, 1948, and those of the Maternity Benefit Act, 1961, are similar and dissimilar? Explain.
- Present an assessment of the ESI Scheme and suggest measures for improvement.
Is ex-gratia payment for the period of suspension of work covered under the definition of ‘wages’ under the ESI Act, 1948?
In Sree Chandrodaya Mills Ltd., Davangere, work was suspended due to certain reasons and the management did not pay wages to the workmen for the period of suspension of work. Subsequently, a settlement was reached between the management and the workmen under which the management agreed to make ex-gratia payment in lieu of wages for the period of suspension and made payment accordingly.
The ESI Corporation then asked the company to make contribution on the ex-gratia payment, but the company challenged the demand before the ESI court which held that ex-gratia payment does not form a part of wages as defined in the ESI Act, 1948.
Aggrieved by the decision of the ESI court, the ESI Corporation challenged it before the Karnataka High Court. The High Court held that in this case the ex-gratia payment forms a part of wages as defined under the ESI Act for the following reasons:
- The ex-gratia payment is not an excluded payment under the term ‘wages’ defined under the Act. The court, cited the judgement of the Supreme Court in the case Indian Drugs and Phamaceuticals Ltd., and Others v ESIC and Others [1997 I CLR 193 SC=1997 II LLJ 700 SC] which ruled ‘except what has been excluded specifically by clauses (a) to (d) under Section 2(22) of the Act, other remuneration received by the employees comes within the meaning of the word “wages”’.
- The ex-gratia payment made by the management in terms of settlement under the Industrial Disputes Act, 1947, was the payment made to workmen in lieu of wages, and not in addition to wages, which the company had claimed.
- In view of the law laid down by the Supreme Court, there can be no hesitation to hold that the payment made to the workmen by the company, styling it as ex-gratia payment cannot take away such payment from the category of the word ‘wages’ defined under the ESI Act, 1948. [Employees’ State Insurance Corporation, Sub-Regional Office, Hubli v Sree Chandrodaya Mills Ltd., Davangere, 2003 III CLR 669].
What payments are excluded from the definition of ‘wages’ under the ESI Act, 1948?
Is ex-gratia payment on the occasion of festival covered under the definition of ‘wages’ under the ESI Act, 1948?
What payments are specified for coverage under the ESI Act, 1948?
Is over-time payment included under the definition of ‘wages’ under the ESI Act, 1948?
Case Study 2
Can employees of establishments doing job-work for a separate company be treated as employees of the company?
Bihar Rubber Company Ltd. is a limited company engaged in the manufacturing of rain wears, air pillows, rubber canvas foot-wear and so on in its industrial unit. It is covered under the provisions of the ESI Act, 1948. The company offloads various works on piece-rate basis to other units for stitching buttons, hole-fixing, taping, pasting and so on. Such units are independent and they do the job work of the petitioner as well as others at their own premises. The regional office of the ESI Corporation, Patna asked the company to pay contributions even in respect of employees employed by these units. The company challenged the order of the ESI Corporation in a writ petition before the Patna High Court.
The High Court observed that the company did not have any connection or control whatsoever on the said units. It had also got no supervisory control over the day-to-day execution of work of the units. The said units submit their bills against such work and payments are made by cheque.
The High Court held that a company manufacturing rain wears and air-pillows and covered under the ESI Act, outsourcing various jobs on piece-rate basis to other units, will not be liable to pay ESI contributions in respect of the employees of these units, as their job is neither supervised nor controlled by the company. The demand raised by the ESI authorities is misconceived and hence liable to be quashed. The court set aside the order of ESI Corporation and allowed the writ petition [Bihar Rubber Company Ltd., v Employees’ State Insurance Corporation, Patna and Others, 2008, LLR 64 (Patna High Court)].
Are employees of a factory engaged in the manufacturing process without the use of power and employing 15 persons covered under the ESI scheme?
Can employees of a hotel employing 25 persons be covered under the ESI scheme?
Has the state government any power to extend the provisions of the ESI Act, 1948, to a commercial establishment?