There has been an ever-growing need to protect the interests and lives of employees against the effect of sickness, physical disability, and death due to the nature of work. Promulgation of the Employee State Insurance Scheme as defined under the Employees’ State Insurance Act, 1948, accomplished this need. This was the first major legislation passed by Parliament to provide social security to workers in independent India.
People are prone to health-related eventualities more so the workers who are exposed to sickness, a physical disability that is either temporary or permanent in nature, maternity periods, and death. Such eventualities due to occupational hazards will result in loss of wage that is partial or loss of full earning capacity. The Act provides a counterbalance to such eventualities and hopes to uphold human dignity and value in times of such crises. This Act protects the worker from deprivations, destitution, and social degradation and gives a life of dignity and value.
Who does it apply to?
The ESI Scheme applies to factories and other establishments like Road Transport, Shops, Cinema Halls, Restaurants, Hotels, Educational Institutions, and Medical Institutions employing 10 or more persons. The Employees’ State Insurance Corporation which administers the scheme has enhanced the wage limit for coverage of employees under the ESI Act. Accordingly, employees of these organizations drawing wages up to Rs:21,000/- a month are entitled to social security cover under the ESI Act.
How do Finances work?
Social Security Schemes of his nature are usually self-financing. The ESI scheme is a self-financing scheme with contributions from the covered employees and their employers. As per the provisions of the Act, the state government meets 1/8th of the expenditure of medical benefits capped at Rs:1500/- per insured person per annum.
How do they contribute?
The ESI Scheme benefits all the employees in the factories and establishments coming under its purview. Both the employee and the employer as per the rate fixed by the Employees’ State Insurance Corporation make the contributions. The ESIC makes revision to these rates from time to time.
The prevailing rate of employee contribution is 0.75% of the wages and 3.25% of the wages payable by the employer for the first 24 months. Employees drawing an average daily wage of Rs:137/- are exempted from contributing. However, the employer has to contribute his part of the share in respect of these employees.
How the contribution is collected?
The employer has to pay his part of the contribution in respect of every employee and also the employee contribution deducted from the wages within the 15th of every month in which they fall due. The ESIC has authorized 65 Banks to collect these contributions.
Contributing period and Benefit period
The Scheme provides 2 contributing periods in a year and a corresponding 2 Benefit periods with duration of 6 months.
1st April to 30th September
1st January to 30th June of the following year
1st October to 31st March
1st July to 31st December of the following year
Benefits to Insured
The ESI Scheme provides the following benefits to the insured person. Section 46 of the ESI Act provides the insured person the opportunity to avail these 6 benefits.
- Medical Benefits
- Sickness Benefits
- Maternity Benefits
- Dependent’s Benefits
- Disablement Benefits
- Other Benefits
- Medical Benefits: This is a benefit that starts from day one of insurable employment. Full medical benefit is provided to an insured person and his family members. The Act also covers Medical Care to retired and permanently disabled persons and their spouses on payment of a token annual premium of Rs:120/-. This benefit does not have any ceiling on expenditure incurred on the treatment.
- Sickness Benefits: A cash compensation of 70% of wages is payable to the insured worker during the period of certified medical care, subject to a maximum of 91 days in a year. The insured worker requires to have been working for 78 days in a 6 months contribution period. Other benefits under this include:
- Extended Sickness Benefit (ESB): Here the sickness benefit is extendable up to two years in case the insured person is suffering from any of the 34 malignant and long-term diseases detailed therein, at an enhanced rate of 80% of the wages.
- Enhanced Sickness Benefit: In the event of the insured person undergoing sterilization for 7 days/14 days for male and female workers respectively, they are liable to get Enhanced Sickness Benefit equal to full wages.
- Maternity Benefit: Female employees can avail of Maternity Benefit during confinement/pregnancy. They are eligible for 26 weeks Maternity benefit at the rate of full wage subject to contributing for 70 days in the preceding 2 contributing periods.
- Disablement Benefit: These are of 2 types.
- Temporary Disablement Benefit (TDB): This is payable at the rate of 90% of the wage as long as the disability continues. A person is eligible for the benefit from day one of entering insurable employment and this is irrespective of having paid any contribution for employment injury.
- Permanent Disability Benefit (PDB): This benefit is payable at the rate of 90% of wage every month depending upon the extent of loss of earning capacity as certified by a Medical Board.
- Dependent’s Benefit: Where death occurs due to occupational hazard or injury during employment, Dependent’s Benefit is payable at the rate of 90% of wage as a monthly payment to the dependents of the deceased.
- Other Benefits:
- Funeral Expenses: An amount of Rs:15,000/- is payable to the dependents or the person performing the last rites in the event of the death of the insured employee. The eligibility is from day one of entering insurable employment.
- Confinement Expenses: This is a benefit for pregnant employees who are not able to avail of maternity services of ESIC Hospitals due to unavoidable reasons and are forced to take treatment in other hospitals. The amount has been enhanced to Rs:7,500/- and these are paid for two deliveries only.
- Vocational Rehabilitation Benefit: This benefit is eligible for a permanently disabled insured person for undergoing VR training at VRS.
- Physical Rehabilitation Benefit: This is paid to the insured in case of physical disablement due to injury suffered during employment.
- Old Age Medical Care: For an insured employee who has retired or attained the age of superannuation or under VRS/ERS or leaving service due to permanent disability. The insured person or spouse is aid Rs:120/- per annum.
- Rajiv Gandhi Shramik Kalyan Yojana (01-04-2005) and Atal BeemitVyakti Kalyan Yojana (18-09-2018): These two schemes provide social security to the insured person who becomes unemployed due to: 1. Retrenchment. 2. Closure of Factory/Establishment. 3. Permanent disablement of at least 40% due to non-employment injury.
ESI Scheme – a great way to support the employee
The ESI Scheme has provided succor to a large section of employees and their dependents that have passed through a traumatic period in life due to sickness, confinement/pregnancy, and disability due to occupational hazard or death. As of 3-03-2020, there are 3.41 crore insured persons under the scheme.