MODULE 32

SOCIAL SECURITY LEGISLATIONS I:

THE EMPLOYEE STATE INSURANCE ACT 1948
Role Name Affiliation
Principal Prof. Ipshita Bansal Department of Management
Investigator Studies
BPSMV, KhanpurKalan, Sonipat
Paper Coordinator Dr Ajay Solkhe Sr. Assistant Professor, University
School of Management,
Kurukshetra University,
Kurukshetra.
Content Writer Dr Ajay Solkhe Sr. Assistant Professor, University
(CW) School of Management,
Kurukshetra University,
Kurukshetra.
Content Reviewer
(CR)
Language Editor
(LE)
Items Description of Module
Subject Name HUMAN RESOURCE
Paper Name INDUSTRIAL RELATIONS AND LABOUR LEGISLATIONS
Module Title SOCIAL SECURITY LEGISLATIONS I:
THE EMPLOYEE STATE INSURANCE ACT 1948
Module Id Module -32
Pre- Requisites Understanding the significance of labour legislations in present times.

Objectives Upon completion of the chapter, the students should be able to

understand:
 The constitution of ESI Corporation, term of its members, the
members eligibility etc
 Constitution of standing committee, Medical benefit council, their
tenure, rules regarding their disqualification, their power and
duties
 The Employees State Insurance Fund, the purposes behind its
creation and its utility
 Rules and general provisions regarding Contributions to be made
by employer
 Social security officers, their functions and duties
 Various offences and penalties for contravention of any of the
provision of this act.
Keywords Employee State Insurance , Commission, Fund, etc.
 QUADRANT 2
Module 2:SOCIAL SECURITY LEGISLATION: I
THE EMPLOYEE STATE INSURANCE ACT 1948
IMPORTANT LEGAL PROVISIONS OF ESI ACT 1948
3.1. OBJECTIVES
3.2. DEFINITIONS
3.3. IMPORTANT CASE LAWS
3.4. AREAS COVERED
3.5. ADMINISTRATION OF THE ACT
3.6. REGISTRATION
3.7. IDENTITY CARD
3.8. EMPLOYERS’ / EMPLOYEES’ CONTRIBUTION
3.9. CERTIFICATION OF RETURN OF CONTRIBUTION BY AUDITOR
3.10. BENEFITS UNDER THE SCHEME
3.11. RESTRICTION ON BENEFITS
3.12. PROTECTION
3.13. OBLIGATIONS OF EMPLOYEES
3.14. RECORDS TO BE MAINTAINED FOR INSPECTION BY ESI AUTHORITIES
3.15. EMPLOYEES INSURANCE COURT
3.16. PENALTIES AND DAMAGES
3.17. IMPORTANT FORMS TO BE SUBMITTED UNDER THE ACT
Objectives of ESI Act 1948
• The ESI Act is a social welfare legislation
enacted with the object of providing certain
benefits to employees in case of sickness,
maternity and employment injury.
• Under the Act, employees will receive medical
relief, cash benefits, maternity benefits,
pension to dependents of deceased workers
and compensation for fatal or other injuries
and diseases.
 APPLICABILITY OF THE ACT
• Under Section 2(12) The Act is applicable to
the “Factories” employing 10 (Ten) or more
persons irrespective of whether power is used
in the process of manufacturing or not.
• Under Section 1(5) of the Act, the Scheme has
been extended to Shops, Hotels, Restaurants,
Cinemas including preview Theatre, Road
motor transport undertakings and Newspaper
establishment employing 20 (Twenty) or more
persons.
• Further, u/s 1(5) of the Act, the Scheme has
been extended to Private Medical Institution
and Educational Institutions employing 20
(Twenty) or more persons in certain States .
• The existing wage-limit for coverage under the
Act, is Rs. 15,000/- per month (excluding
remuneration for overtime) w. e. f:- May 01,
2010.
 AREAS COVERED
• The ESI Scheme is being
implemented area-wise by
stages.
• The Scheme is being
implemented in almost all
union territories and states
except Nagaland, Manipur,
Tripura, Sikkim, Arunachal
Pradesh and Mizoram.
 ADMINISTRATION OF THE ACT
• The provisions of the Act are administered by the
Employees State Insurance Corporation.
• It comprises members representing employees,
employers, the central and state government, besides,
representatives of parliament and medical profession.
• A standing committee constituted from amongst the
members of the corporation, acts as an executive body.
• The medical benefit council, constituted by the central
government, is another statutory body that advises the
corporation on matters regarding administration of
medical benefit, the certification for purposes of the grant
of benefits and other connected matters.
 REGISTRATION
• The employer should get his factory or
establishment registered with the ESI Corporation
within 15 days after the Act becomes applicable
to it and also obtain the employer’s code number.
• Application should be made in Form 01 and after
having being satisfied with the application form,
the regional office will allot a code number to the
employer, which much be quoted in all
documents and correspondence.
 IDENTITY CARD/SMART CARD
• An employee is required to file a
declaration form upon employment
in factory or establishment to show
that he is covered under the Act.
• On registration every insured
person is provided with a
‘temporary identification
certificate’ which is valid ordinarily
for a period of three months but
may be extended, if necessary, for a
further period of 3 months.
• Within this period, the insured person is given a
permanent ‘family photo identity card’ in
exchange for the certificate.
• The identity card serves as a means of
identification and has to be produced at the
time of claiming medical care at the
dispensary / clinic and cash benefit at the local
office of the corporation.
• In the event of change of employment, it
should be produced before the new employer
as evidence of registration under the scheme to
prevent any duplicate registration.
• The identity card bears the signature/thumb
impression of the insured person.
• Since medical benefit is also available to the
families of Insured persons, the particulars of
family members entitled to medical benefit
are also given in the identity card affixed with
a postcard size family photo. If the identity
card is lost, a duplicate card is issued on
payment as prescribed.
 EMPLOYERS’ / EMPLOYEES’
CONTRIBUTION
• Like most of the social security schemes, the world over,
ESI scheme is a self-financing health insurance scheme.
• Contributions are raised from covered employees and
their employers as a fixed percentage of wages.
• Presently covered employees contribute 1.75% of the
wages, whereas the employers contribute 4.75% of the
wages, payable to the insured persons.
• If the employee is drawing upto Rs.70/- as daily average
wage, he is exempt from the payment of his share of
contribution. The employer is however to pay employer's
share of 4.75% of the salary received by the employee.
• The amount of contribution (Employee’s and
Employer’s share) is to be deposited with the
authorized bank (State Bank Of India) through
Online Generated Challan, on or before 21st
day of the Succeeding month, of month
following the calendar month.
• Contribution can also be submitted Online, by
selecting Online Payment Option during
Payment of the contribution, the process will
take you the Payment page of SBI corporate
banking login to complete the payment &
same will be competed in few minutes.
• The State Govt. bears one-eight share of
expenditure on medical benefits with in the
per capita ceiling of Rs. 1200/- per I.P. family
per annum & all additional expenditure
beyond the ceiling.
• The responsibility for payment of all
contributions is that of the employer
• There are two contribution periods each of
six months duration and two corresponding
benefit periods. Cash benefits under the
scheme are generally linked with
contribution paid.
Employers covered under the Act, are required
to Pay the Contribution towards the scheme on
a Monthly basis.
There are two contribution periods each of Six
months and two corresponding benefit periods
also of Six months duration as under.
Contribution Period Benefit Period

1st April to 30th Sep. 1st Jan to 30th June

(of the following year )

1st Oct to 31st March 1st July to 31st Dec.

** At an average the ESI Corporation makes 40 lacs

individual payments each year amounting to about
Rs. 300 crores as cash benefits.
 SOCIAL SECURITY BENEFITS UNDER ESIC

• Employees covered under the scheme are

entitled to medical facilities for self and
dependants.
• Various benefits that the insured employees
and their dependants are entitled to, the
duration of benefits and contributory
conditions thereof are as under
 Social Security Benefits of ESIC:
The following benefits are provided under Section
46.
• Medical benefit
• Sickness benefit
• Maternity benefit
• Disablement benefit
• Dependents benefit
• Funeral expenses
• Others Benefits
 Medical Benefits
• The ESI Scheme provides full range of Medical Care to all
Insured person and thier family, through a network of ESI
Dispensaries, Hospitals & Panel Clinics, Diagnostic Centers &
Super Speciality.
• Super-Speciality treatment such as:- Open Heart Surgery,
Neuro Surgery, Bone Marrow Transplant, Kidney Transplant or
specialized investigations like CAT scan, MRI, Angiography etc.
• Eligibility for MB:- An employee who is covered under the
Scheme for the first time is eligible for medical care for a
period of three months. If employee contributes atleast for 78
days in a contribution period the eligibility is there upto the
end of the corresponding benefit period.
• Claim form under ESI Act:- Form - 09
 SICKNESS BENEFITS
• Sickness Benefits represents periodical cash payments
made to an IP during the period of certified sickness
occurring in a benefit period when IP requires medical
treatment and attendance with abstention from work on
medical grounds.
• Eligibility for SB:- Minimum 78 days contribution in one
contribution period.
• The daily rate of Sickness Benefit is 50% of the daily wages.
• Max. Duration:- Maximum period of 91 days in any two
consecutive benefit periods.
• Claim form under ESI Act:- Form - 09
• Extended Sickness Benefit: Extended Sickness
Benefit is a Cash Benefit paid for prolonged illness
due to any of the 34 specified diseases as per
(Annexure – A).
• Eligibility for Extended SB:- Continuous
employment for a period of 2 years and should have
contributed for atleast 156 days in 4 preceding
contribution periods. The daily rate of Extended
Sickness Benefit is 40% more than SB rate.
Maximum Duration of ESB:- Including
Sickness Benefit payable for 91 days the
ESB is payable upto a further period of
124/309 days that can be extended
upto 2 years in special circumstances
on recommendation of competent
authority.
 Enhanced Sickness Benefit
• This cash benefit is payable to insured persons
in the productive age group for undergoing
sterilization operation, viz., vasectomy /
tubectomy.
• The contribution is the same as for the normal
sickness benefit.
• Enhanced sickness benefit is payable for 14
days for tubectomy and for seven days in case
of vasectomy.
Maternity Benefit

Maternity Benefit consists of

periodical cash payments in case
of confinement or miscarriage or
sickness arising out of pregnancy,
confinement, premature birth of
child or miscarriage, to an insured
woman as certified by a duly
appointed medical officer or mid
wife.
• Eligibility for MB:- The
contribution condition is
the same as for Sickness
Benefit.
• The daily benefit rate is
double the Sickness Benefit
rate and is thus roughly
equivalent to the full
wages. Benefit is paid for
Sundays also.
The Benefit is paid as follows:-
a) For Child Delivery:- For a total period of 12
weeks beginning not more than 6 weeks
before the expected date of child birth.
b) For Miscarriage:- For a period of 6 weeks
following the date of miscarriage.
c) For Sickness arising out of pregnancy,
confinement, premature birth of child or
miscarriage:- For an additional period of
upto 04 weeks.
Claim form under ESI Act:- Form – 09 & 19
(Notice of Work)
Medical Bonus:- Medical Bonus is lump sum
payment made to an insured woman or the
wife of an insured person in case she does not
avail medical facility from an ESI hospital at the
time of delivery. The amount of Bonus is Rs.
2500/-.
 DISABLEMENT BENEFIT
Disablement Benefit is admissible for
disablement caused by employment
injury.
At the first instance, temporary
disablement benefit is payable as long
as the temporary disability lasts.
If the employment injury results in
partial or total/permanent disability,
permanent disablement benefit is
payable till the death of the insured
person.
• The Daily benefit rate for Permanent and
Temporary Disablement is roughly equivalent
to about 100% of the wage rate.
• For permanent partial disablement, the rate of
benefit is proportionate to the percentage of
loss of earning capacity. The benefit is paid
for Sundays also.
Claim form under ESI Act:
For Temporary Disablement:- Form – 09
For Permanent Disablement:- Form – 14
DEPENDANT BENEFITS
Dependents benefit is paid
as family pension to the
dependants of a deceased
insured person in the event
of death due to
employment injury or
occupational disease and is
equivalent to about 70% of
the wages.
Eligible Members:
• A widow can receive this benefit on monthly basis
for life or till her Re-Marriage.
• A son or daughter can receive this benefit till (25)
twenty five years of age.
• Other dependants like parents including a widowed
mother etc. can also receive this benefit under
certain conditions.
• The first installment is payable within a maximum
of three months following the death of an insured
person and therefore, on a regular monthly basis.

Claim form under ESI Act:- Form – 15 & 16

 Funeral Expenses
• Funeral Expenses are in the nature of a lump
sum payment of Rs. 10000/- (revised from @ 5000/-
w.e.f:- April 2011) made to defray the expenditure
on the funeral of deceased insured person.
• The amount is paid either to the eldest
surviving member of the family or, in his
absence, to the person who actually incurs the
expenditure on the funeral.
Claim form under ESI Act:- Form – 22
Other Benefits
• Rehabilitation Allowance:- Rehabilitation in case of
disabled insured persons under 45 years of age with 40
percent or more disablement.
• Free Supply:- Free Supply of physical aids and appliances
such as crutches, wheelchairs, dentures, spectacles and
other such physical aids.
• Old Age Medical Care:- Old age Medical care for self and
spouse at a nominal contribution of Rs. 120/- per annum.
• Rajiv Gandhi Shramik Kalyan Yojana:- Unemployment
Allowance is payable to those workers facing involuntary
unemployment due to closure of factory or non-
employment injury. Benefit rate which is just above 50%
of the daily wages for max 01 year.
 RESTRICTION ON BENEFITS
• When a person is entitled to any of the benefits
provided under this act, he shall not be entitled to
receive any similar benefit under any other enactment.
• An insured person will not be entitled to receive for the
same period.
– Both sickness benefit and maternity benefit; or
– Both sickness benefit and disablement benefit for
temporary disablement; or
– Both maternity benefit and disablement benefit for
temporary disablement.
• Where a person is entitled to more than one of the
benefits, he has an option to select any one of them.
 PROTECTION
• The employer cannot dismiss, discharge or
otherwise punish an employee during the period
– he/she is in receipt of sickness benefit or maternity
benefit,
– or of disablement benefit,
– or is under medical treatment for sickness,
– or is absent from work as a result of illness which arises
out of pregnancy or confinement.
• Any notice of dismissal, discharge or reduction
during the period specified above is invalid and
inoperative.
 OBLIGATIONS OF EMPLOYEES
• The employer should get his factory or
establishments registered with the ESI Corporation
within 15 days after the Act becomes applicable to
it, and obtain the employers Code Number.
• The employer should obtain the declaration form
from the employers covered under the Act and
submit the same along with the return of
declaration forms, to the ESI office.
• He should arrange for the allotment of Insurance
Numbers to the employees and their Identity
Cards/Smart Cards.
• The employer should deposit the employees’
and his own contributions to the ESI Account
in the prescribed manner, whether he has
sufficient resources or not, his liability under
the Act cannot be disputed. He cannot justify
non-payment of ESI contribution due to non-
availability of finance.
• The employer should furnish a Return of
Contribution alongwith the challans of
monthly payment, within 30days of the end of
each contribution period.
• The employer should not reduce the wages of an
employee on account of the contribution payable by
him (employer).
• The employer should cause to be maintained the
prescribed records / registers namely the register of
employees, the inspection book and the accident
book.
• The employer should report to the ESI authorities of
any accident in the place of employment, within 24
hours or immediately in case of serious or fatal
accidents. He should make arrangements for first aid
transportation of the employee to the hospital. He
should also furnish to the authorities such further
information and particulars of an accident as may be
required.
• The employer should inform the local office and
the nearest ESI dispensary/ hospital, in case of
death of any employee, immediately.
• The employer must not put to work any sick
employee and allow him leave, if he has been
issued the prescribed certificate.
• The employer should not dismiss or discharge
any employee during the period he/she is in
receipt of sickness/maternity/temporary
disablement benefit, or is under medical
treatment, or is absent from work as a result of
illness duly certified or due to pregnancy or
confinement.
 RECORDS TO BE MAINTAINED FOR
INSPECTION BY ESI AUTHORITIES
• Attendance Register / Muster Roll
• Salary / Wage Register / Payroll
• EC (Employee’s & Employer’s Contribution) Statement
• Employees’ Register
• Accident Book
• Return of Contribution
• Return of Declaration Forms
• Receipted Copies of Challans
• Books of Account viz. Cash/Bank, Expense Register,
Sales/Purchase Register, Petty Cash Book, Ledger,
Supporting Bills and Vouchers, Delivery Challans (if any).
• Form of annual information on company
 EMPLOYEES INSURANCE COURT
• Any dispute arising under the ESI Act will be
decided by the Employees Insurance Court
and not by a Civil Court. It is constituted by
the State Government for such local areas as
may be specified and consists of such number
of judges, as the Government may think fit. It
shall adjudicate on the following disputes and
claims.
• Disputes as to:
– Whether an employee is covered by the Act or whether
he is liable to pay the contribution, or
– The rate of wages or average daily wages of an
employee, or
– The rate of contribution payable by the employer in
respect of any employee, or
– The person who is or was the principle employer in
respect of any employee, or
– The right to any benefit and the amount and duration
thereof, or
– Any direction issued by the Corporation on a review of
any payment of dependents benefits, or
– Any other matter in respect of any contribution or benefit
or other due payable or recoverable under the Act.
• Claims as to
– Recovery of contributions from the principal
employer,
– Recovery of contributions from a contractor
– Recovery for short payment or non-payment of any
contribution under section68
– Recovery of the value or amount of benefits
received improperly under section 70,
– Recovery of any benefit admissible under the Act
• No dispute shall be admitted unless the
employer deposits with the Court 50% of the
amount due from him as claimed by the
Corporation.
• An appeal will lie to the High Court within 60
days against an order of the Employees
Insurance Court if it involves a substantial
question of law.
 PENALTIES AND DAMAGES
• Under Section 84 Punishment for False Statement
• Whoever, for the purpose of causing any increase or
benefit under this Act, or for the purpose of causing any
payment or benefit to be made where no payment or
benefit is authorized by or under this Act, of for the
purpose of avoiding any payment to be made by himself
under this Act or enabling any other person to avoid any
such payment, knowingly makes or causes to be made
any false statement or false representation, shall be
punishable with imprisonment for a term which may
extend to six months or with fine not exceeding two
thousand rupees or with both.
 Section 85: Punishment for failure to pay
contributions, etc.
• If any person –
– fails to pay any contribution which under this Act he is
liable to pay,
• he shall be punishable –
• where he commits an offence with imprisonment
for a term which may extend to three years but –
– which shall not be less than one year, in case of failure to
pay the employee’s contribution which has been
deducted by him from the employee’s wages and shall
also be liable to fine of ten thousand rupees;
– which shall not be less than six months, in any other case
and shall also be liable to fine of five thousand rupees;
• If any person –
– deducts or attempts to deduct from the wages of an employee
the whole or any part of the employer’s contribution, or
– in contravention of section 72 reduces the wages or any privileges
or benefits admissible to an employee, or
– in contravention of section 73 or any regulation dismisses,
discharges, reduces or otherwise punishes an employee, or
– fails or refuse to submit any return required by the regulations or
makes a false return, or
– obstructs any Inspector or other official of the Corporation in the
discharge of his duties, or
– is guilty of any contravention of or non-compliance with any of
the requirements of this Act or the rules or the regulation sin
respect of which no special penalty is provided,
• he shall be punishable with imprisonment for a term which
may extend to one year or with fine which may extend to
four thousand rupees, or with both.
 Section 85b
Power to Recovery Damages
Where an employer fails to pay the amount due
in respect of any contribution or any other
amount payable under this Act, the Corporation
may recover from the employer by way of
penalty such damages not exceeding the
amount of arrears as may be specified in the
regulations.
 Section 86
Prosecutions
• No prosecution under this Act shall be instituted except
by or with the previous sanction of the Insurance
Commissioner or of such other officer of the
corporation as may be authorized in this behalf by the
Director General of the Corporation.
• No court inferior to that of a Metropolitan Magistrate or
Judicial Magistrate of the First Class shall try any offence
under this Act.
• No court shall take cognizance of any offence under this
Act except on a complaint made in writing in respect
thereof.
Section 86A Offences by Companies
• If the person committing an offence under this
Act is a company, every person, who at the
time the offence was committed was in charge
of, and was responsible to, the company for
the conduct of the business of the company,
as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be
proceeded against and punished accordingly.