All about the ESI Scheme
Vinod |
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The Employees State Insurance (ESI) Scheme has been formulated by the government with the objective of providing medical treatment and appropriate compensation of remuneration against leave without wages to employees during times of sickness, disablement, maternity and death. The contingencies covered and the nature and duration of benefits etc. are depicted in the table-“BENEFITS AT A GLANCE”. The scheme is vested in a tripartite body at the national level known as the ESI Corporation with representatives of employers, employees, medical professionals, representatives of Central and State Governments and Members of Parliament. While Medical Care is the statutory responsibility of the State Government, the administration of cash benefits is the direct responsibility of the Corporation.

Provisions have been made in the act for implementation of the scheme to establishments & factories. Distinction has been made for coverage on the activity. Different sections are applicable for factories engaged in manufacturing process WITH THE AID OF POWER or WITH OUT THE AID OF POWER. Applicability of the act could also be if the establishment is an independent category of establishment as notified by the appropriate government namely hotels / restaurant, newspaper establishment, cinema, road transport establishment. For any organization to be covered under the said provisions of the scheme it needs to satisfy the following tests:

1. The establishment or the factory needs to fall under the description of the notification.

2. The requisite number of persons should have been employed for wages.

Provisions have been amended to provide that once covered, the establishment will continue to be covered whether the number of employees falls below the statutorily required numbers or power ceases to be used in the manufacturing process. The following chart explains the coverage of any establishment or factory

 

CATEGORY OF ESTABLISHMENT

1) FACTORY engaged in manufacturing process WITH THE AID OF POWER

2) FACTORY engaged in manufacturing process WITHOUT THE AID OF POWER

3) Independent category of establishment as notified by the government from time to time namely hotels / restaurant, newspaper establishment, cinema, road transport establishment.

PREREQUISITE CONDITIONS

1) 10 or more employees on any day of the preceding 12 months

2) 20 or more employees on any day of the preceding 12 months

3) 20 or more employees on any day of the preceding 12 months

Once it is certain the organization comes under the provisions of the act the next issue would be who are “Employees” to be covered under the Act and what does the definition of employee mean. As defined under the act, employee means any person employed for wages or salary in or in connection with the work of a factory or establishment to which the Act applies and whose remuneration does not exceed Rs. 6,500/-(Excluding overtime)

As the definition of employee has a wide scope in all enactment’s, definition under the ESI Act has also a wide connotation. So long as a person satisfies the definition of the term “Employee” he is covered. As the definition is very wide and a large category of employees is involved, some clarification is necessary to have a clear idea of the definition of “Employee”:

Employee should be a directly employed by the principal employer.
Employees employed by the contractor under the supervision of the principal employer.
Employees engaged for any work for administration or sale or any part, department or branch thereof.

 

The act does not apply to:

1. Members of the Indian navy, military or airforce.

2. Employees whose salary / wages exceed Rs 6,500/-

3. Employees employed at sites / locations where ESI Act is not applicable.

 

NOTE:

Considerable note needs to be taken of the fact that the overtime payment have no bearing in deciding the coverage of an employee as he will remain covered even if the wages exceeds Rs. 6,500/- a month after taking into account the overtime wages.

Any employee drawing salary-exceeding Rs. 6,500/- pm during the beginning of the contribution period (April or October) & which subsequently decreases, such employee will be covered from the month his wages drops to Rs.6,500/- or less.

Any employee drawing salary lesser than Rs 6,500/- pm during the beginning of the contribution period (April or October) and which subsequently due to revision of salary / wages exceeds Rs 6,500/-, such employee shall be covered under the Act and shall pay contribution on the actual salary/wages. This is applicable even if the revision is effective retrospectively from April or October.

Scope of wages has as wide a definition as that of an employee in the ESI Act. Wages as defined under the Act means “all remuneration paid or payable in cash to an employee, if the terms of the contract of employment express or implied…” The definition of wages has however some component for a clear reading.

1. The said remuneration should be payable to employee if the terms of the contract of employment, express or implied, were fulfilled.

2. If any additional payment is made at intervals not exceeding two month.

The Supreme Court, to be more clear on the definition of wages, in a few cases has clarified on the second part of the definition which speaks of additional remuneration only if the payment is at intervals not exceeding two months is not wages. But any other allowance paid quarterly under an agreement, which forms part of the contract of employment, is deemed as wages.

IMPORTANT INFORMATION ON MATTERS OF

1. Contributions.

2. Returns.

3. Some important Benefits under the Act.

DESCRIPTION

CONTRIBUTION

Employees  Employers
 1.75% on Gross Earnings excluding allowances 4.75% on Gross Earnings excluding allowances

 



Note:  
1. Employees drawing < or = Rs.6500/- after deducting conveyance allowance from the gross earnings are coverable under the act. If the employees drawings is > Rs.6500/-, they are exempted and are not coverable under the ESI Act.
2. The total monthly contributions are to be remitted to the designated accound in this The State Bank of India within 21 days from the close of the Wage Period
 
RETURNS
 Half yearly returns : Due date :

Period ending March of every year

Period ending September of every year 

Within 42 days from the end of every contribution period to which it relates
 






BENEFITS AT A GLANCE
 Types of benefits Contributory conditions Duration Daily Rate of Payment
 SICKNESS BENEFIT On payment of contribution for not less than half the number of days in the relevant contribution period  91 days in any two consecutive benefit period 50% of the wages(approx)
 Extended Sickness Benefit (For Specified long diseases) Continuous employment for a period of two years. 

124 days which may be extended upto 2years

on medical advice during a period of 3 years.    

70% of the wages (approx)
 Enhanced Sickness Benefit (For Tubectomy/Vasectomy) Same as above  14 days for tubectomy and 7 days for vasectomy extendable on medical advice Full Wages
 DISABLEMENT BENEFIT No conditions  As long as temporary disablement last, and for life in case of permanent disablement. To each legitimate or adopted son until eighteen years of age, to the wido for life or until her marriage, to each legitimate or adopted unmarried daughter until she attains 18 yrs of age or until marriage whichever is earlier. 

Full wages (approx)

70% of wages (approx)

Proportionate rate based on 70% of the wages (approx) 

 MATERNITY BENEFIT Payment of contribution for 80 days in preceding one or two consecutive contribution periods 12 weeks in case of normal delivery. 6 weeks for mis-carriage. Additional one month for sickness araising our of Pregnancy/Confinement  Full Wages (approx) 
  MEDICAL BENEFIT : Insured persons/family members eligible from the date of entry into insurable employments.  Till the temporary disability / disease lasts  Full medical care for insured persons & their families including super specialty treatment.

 

Medical Benefit is also available on payment of contribution of Rs.10/- p.m for 1 yr in advance.

i. Insured persons with a minimum of 5 yrs service in insurable employment

ii. To permanently disabled insured persons (due to employment injury) 

 

Period for which contribution is paid

Period for which contribution is paid till attaining the age of superannuation.

Period for which contribution is paid till attaining the age of superannuation. 

 

Available for Insured persons and their spouses

Available for insured persons and their spouses

Available for insured persons and their spouses

 
The author of the article is Vinod Kumar, Director of VISBIN associates, a Bangalore-based company. Considering the legal complexities, the reader is advised to treat this article for reference purpose only and not to act solely on the article, in so far as the subject matter is concerned. More information can be had by mailing visbin@businessgyan.com
 
Issue BG9 Dec01